Effect of Funding Structure on Financial Sustainability of Micro Finance Banks (MFBS) in Nasarawa State of Nigeria.

Abstract

In recent years there has been increasing internal and external pressure for the microfinance institutions to decrease dependence on subsidies or grant funding by international organization designed to support microfinance institutions. The shrinking resources base for donor fund to support the increasing demand for grant and soft loans implies that microfinance institutions will eventually have to support themselves hence the need to determine alternative sources of fund and how it affect their financial sustainability. This study therefore aim to examine the effect of funding structure on financial sustainability of MFBs in Nasarawa State using a sample of four MFBs from the total population of seven in the state. The study uses secondary data sourced from the certified annual reports of the banks. The data for the study were analyzed using OLS and fixed effect regression and it was observed that there is no statistical evidence to suggest that funding structure has significant effect on financial sustainability of MFBs in Nasarawa State. The study therefore recommends that the banks should optimize funding through mixed of loan deposit and debt as against only equity finance.

Keywords: financial sustainability, leverage, loan deposit, equity finance