Effect Of Agricultural Loans Of Microfinance Bank On Nigeria Economy

ABSTRACT

The study determined the effect of agricultural loans of microfinance bank on the grassroots economic development of Nigeria, using time series analysis spanning from 2012-2017. The data set were analysed using Ordinary Least Squares (OLS) simple regression technique. From the results, the study found significant relationship between microfinance bank agricultural loans volume, microfinance bank interest rate and microfinance bank investment on Gross Domestic Product in Nigeria. In But the need to address these issues such as agricultural funding led to the transformation of community banks to microfinance banks in 2005 (CBN, 2005). Reduced interest rate of microfinance banks leads to high loan volume which affect growth in SMEs and economic growth. Also increase in microfinance bank investment in turn increases Gross Domestic Product in Nigeria. Based on the findings, we recommend that (i) overemphasis on collateral should be reduced, so that great and small will have equal access to loans and should be made available to individuals at the right time. (ii) Credit risk management by the MFBs, setting the liquidity ratio by the Central Bank at levels that will not over-contract the ability of MFBs to extend loans and advances to microenterprises and, control of inflation by the relevant authorities should be properly addressed. (iii) Supply of loans and advances by the MFBs to enhance their contributions to economic growth and development of Nigeria should be increased including mobilization of more deposits, expansion of shareholders’ base and fund. 

TABLE OF CONTENTS

Title Page ﾿ i

Declaration ﾿ ii

Certification ﾿ iii

Dedication ﾿ iv

Acknowledgement ﾿ v

Table of Contents ﾿ vi

Abstract ﾿ v

CHAPTER ONE ﾿ 1

INTRODUCTION ﾿ 1

1.1 ﾿ background of the study ﾿ 1

1.2 ﾿ Statements of the Problem ﾿ 5

1.3 Objectives of the study ﾿ 6

1.4 ﾿ Research Question ﾿ 6

1.5 ﾿ Research Hypothesis ﾿ 6

1.6 ﾿ Scope of the Study ﾿ 7

1.7 Significance of the study ﾿ 7

1.8 Limitations of the Study ﾿ 8

1.9 ﾿ Definition of terms ﾿ 8

CHAPTER TWO ﾿ 10

REVIEW OF RELATED LITERATURE ﾿ 10

2.1 Conceptual Framework ﾿ 10

2.1.1 Meaning of Agricultural Loans and Microfinance ﾿ 10

2.1.2 Grass roots development ﾿ 12

2.1.3 The Nigeria Micro Finance Banks (MFBs): Origin and Benefits ﾿ 17

2.1.4 Nigerian Commercial Banks and Microfinance ﾿ 19

2.1.5 Microfinance and Poverty Alleviation ﾿ 19

2.1.6 The Role of Microfinance Banks (MFBs) ﾿ 21

2.2 ﾿ Theoretical Framework ﾿ 22

2.2.1 Classical microfinance theory ﾿ 22

2.2.2 School of thought Theory ﾿ 24

2.3 Empirical Framework ﾿ 25

CHAPTER THREE ﾿ 29

RESEARCH METHODOLOGY ﾿ 29

3.1 Research Design ﾿ 29

3.2 ﾿ Source of Data ﾿ 29

3.3 Population of the Study and Sample Size ﾿ 29

3.4 Sample Size and Sampling Technique ﾿ 29

3.5 Analytical Procedures and Variable Specifications ﾿ 30

3.6 Analytical Technique ﾿ 30

3.7 Test of Significance ﾿ 31

3.7.1 Decision Criterion ﾿ 32

CHAPTER FOUR ﾿ 33

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ﾿ 33

4.1 Data Presentation ﾿ 33

4.2 Test of Hypotheses ﾿ 38

4.3 Discussions of Findings ﾿ 39

CHAPTER FIVE ﾿ 41

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION ﾿ 41

5.1 Summary of Findings ﾿ 41

5.2 Conclusion ﾿ 41

5.3 Recommendations ﾿ 42

References

Appendix