Testing the Influence of Macroeconomic Environment on Microfinance Banks’ Liquidity in Nigeria: A Vector Autoregressive Approach

Abstract

Adequate level of liquidity is essential for microfinance banks to ensure sustainable provision of credit to less privileged members of the society that cannot access credit from conventional banking system. This study was therefore carried out to verify whether or not macroeconomic factors have impact on liquidity position of microfinance banks in Nigeria. To achieve the objective, vector autoregressive method has been adopted to analyze data on microfinance liquidity ratio, growth rate of real GDP, inflation rate and interest rate. The outcome of the study showed that the impact of macroeconomic factor on microfinance banks’ liquidity is negligible and insignificant. The study concludes that the Nigerian macroeconomic environment has no influence on liquidity of microfinance banks. Nevertheless, the macroeconomic environment should always be closely monitored.

Keywords: Liquidity, Microfinance, Macroeconomic, Vector Autoregressive

DOI: 10.7176/RJFA/10-24-13

Publication date: December 31^st 2019