Microfinance Banks’ Investment Portfolio and Standard of Living in Nigeria: an Empirical Study

Iranian Journal of Accounting, Auditing and Finance

مقاله 1، دوره 6، شماره 2 - شماره پیاپی 19، مرداد 2022، صفحه 1-17   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2022.41859

نویسنده

Gbenga F Babarinde^*

Lecturer II, Department of Banking and Finance, Modibbo Adama University, Yola, P.M.B. 2076, Yola, Adamawa State, Nigeria, West Africa

چکیده

There are two important missions of microfinance banks, financial and social. The social mission has brought to the fore the role of microfinance credit, investment, and other activities in improving the social well-being of the people. Thus, this study aims to examine the effect of the investment activity of microfinance banks on the standard of living in Nigeria between 1992 and 2018 using annual time series data. Based on Autoregressive Distributed Lag (ARDL) model and in the company of cointegrating regression techniques as robustness checks, this study finds evidence of a long-run relationship between standard of living and microfinance investment portfolio, with the lagged value of the latter having a significant negative effect on per capita income (a proxy for standard of living) in the long-run but the significant positive association was confirmed in the short run. The study concludes that microfinance banks’ investment activity is only a short term means of raising the standard of living in Nigeria, for in the long run, rather than raising, it reduces the standard of living in Nigeria significantly. Therefore, it is recommended that microfinance banks' activity be directed towards financially profitable ventures and more socially rewarding outlets capable of improving the social well-being of the people, thereby helping raise the standard of living in Nigeria.

کلیدواژه‌ها

ARDL؛ Investment؛ Microfinance Banks؛ Portfolio؛ Standard of Living

مراجع

1. Agbaeze, E. K. and Onwuka, I. O. (2014). Impact of micro-credit on poverty alleviation in Nigeria: The case of Enugu East Local Council. International Journal of Business and Management Review, 2(1), pp. 27-51.
2. Aigbokhan, B. E. and Asemota, A. E. (2011). An assessment of microfinance as a tool for poverty reduction and social capital formation: Evidence on Nigeria. Global Journal of Finance and Banking Issues, 5(5),38-48.
3. Akinmulegun, S. O. (2012). Foreign direct investment (FDI) and standard of living in Nigeria. Journal of Applied Finance and Banking, 2(3), pp. 295-309.
4. Akpunonu, U. E., Nkechukwu, G. C., and Okonkwo, O. G. (2017). Stock market reforms on standard of living in Nigeria. International Journal of Trend in Research and Development, 4(6), pp. 50-54.
5. Akpunonu, U. E., Obialor, M. C., Dim, E. O., and Egungwu, I. (2017). Stock market performance indicators and standard of living in Nigeria: Entrepreneurial approach. International Journal of Trend in Scientific Research and Development,1(5), pp. 941-948.
6. Alabi, K. O. (2019). The effect of foreign direct investment on economic growth: Nigeria experience. Open Journal of Applied Sciences, 9(05), pp. 372-385.
7. Alani, G. O. and Sani, J. (2014). Effects of microfinance banks on the rural dwellers in Kogi State, Nigeria. International Journal of Public Administration and Management Research, 2(2), pp. 66-79.
8. Ali, S., Asghar, M., Ayaz, M., & Yousuf, M. U. (2015). The Economic Impact of Microfinance: A Comparative Analysis of Small Enterprises. J. Appl. Environ. Biol. Sci, 5(5), pp. 280-287.
9. Aliyu, L. O., & Ambali, A. (2021). Electoral institutions and management of elections in Nigeria and Ghana: A comparative assessment. African Journal of Political Science and International Relations, 15(2), pp. 41-53.
10. Allen, F. and Santomero, A. M. (1998). The theory of financial intermediation. Journal of Banking and Finance, 21(11-12), pp. 1461-1485. https://doi.org/10.1016/S0378-4266(97)00032-0
11. Apere, T. A. (2016). The impact of microfinance banks on economic growth in Nigeria. International Journal of Academic Research in Economics and Management Sciences, 5(4), pp.53-61.
12. Audu, M. L. and Achegbulu, J. O. (2011). Microfinance and poverty reduction: The Nigerian Experience. International Business and Management, 3(1), pp. 220-227. http://dx.doi.org/10.3968/j.ibm.1923842820110301.080
13. Ayam, J., Abangbase, F., Doku, C., and Dadzie, E. N. (2020). Perceived effects of microfinance on women empowerment in La-Nkwantanang-Madina municipality. UDS International Journal of Development, 7(2), pp. 448-460. https://doi.org/10.47740/501.UDSIJD6i
14. Ayodele, A. E. and Arogundade, K. (2014). The impact of microfinance on economic growth in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 5(5), pp. 397-405. https://hdl.handle.net/10520/EJC163083
15. Babarinde, G. F. (2020). Growth effects of foreign direct investment and financial deepening in Nigeria (1981-2018). Business Excellence and Management Journal, 10(4), pp. 49-67.
16. Bamidele, S. S. and Danlami, A. U. (2021). Impact of microcredit on poverty reduction in Kano State, Nigeria. Journal of Management Sciences, 4(1), pp. 562-572.
17. Central Bank of Nigeria (CBN) (2020). Guidelines for the regulation and supervision of microfinance banks in Nigeria. United Kingdom
18. Chidoko, C. and Sachirarwe, I. (2015). An analysis of the impact of investment on economic growth in Zimbabwe. Review of Knowledge Economy, 2(2), pp. 93-98. https://doi.org/10.18488/journal.67/2015.2.2/67.2.93.98
19. Chigbu, E. E., Ubah C. P., and Chigbu U. S. (2015). Effect of capital inflows on economic growth of developing countries. International Journal of Management Science and Business Administration, 1(7), pp. 7-21. https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.17.1001
20. Chowdhury, M. A., Rahman, S. M. K., and Salman, M. A. G. (2021). Economic and social impact of microfinance: An empirical evidence from Bangladesh. Global Journal of Management and Business Research: C: Finance, 21(1), pp. 63-73.
21. Cole, A. A. and Akintola, A. F. (2021). Microfinance banks and economic growth of Nigeria (1999-2018). International Journal of Scientific and Research Publications, 11(3), pp. 311-316. https://doi.org/10.29322/IJSRP.11.03.2021.p11143
22. Deutsch, J. and Silber, J. (1999). Religion, standard of living and the quality of life. Contemporary Jewry, 20(1), pp. 119-137. https://doi.org/10.1007/BF02967962
23. Eigbiremolen, G. O. and Anaduaka, U. S. (2014). The place of microfinance in today’s economy: Further evidence from Nigeria. International Journal of Academic Research in Economics and Management Sciences, 3(1), pp. 12-22. http://dx.doi.org/10.6007/IJAREMS/v3-i1/551
24. Ek, A. (2007). The impact of FDI on economic growth: The case of China. B.Sc. Thesis, Jönköping International Business School. Jönköping University. Sweden
25. Ezeanyeji, C. I., Usifoh, K. S., Obi, C.O., and Ejefobihi, U. F. (2020). Microfinancing, poverty alleviation and Nigeria’s economic growth: The nexus. European Journal of Economic and Financial Research, 4(1), pp. 1-35. https://doi.org/10.5281/zenodo.3732438
26. Fapetu, O., Adegoriola, A. E., and Azeez, B. A. (2021). Impact of deposit money banks on poverty reduction: A focus on microfinance banks in Nigeria. Journal of Business School, 4(2), pp. 158-167.
27. Fayyaz, S. and Khan, A. (2021). Impact of microfinance on quality of life, personal empowerment and familial harmony of female borrowers in Pakistan. Journal of Public Affairs, 21(3), pp. 1-9 . https://doi.org/10.1002/pa.2614
28. Idolor, E.J. and Imhanlahimi, J. E. (2017). Access and impact assessment of micro finance banks on rural poor in Nigeria: A case study of Edo State. Indian Journal of Economics and Business, 2(2), pp. 327-359
29. Idowu, A. and Oyeleye, O. A. (2012). Impact of microfinance banks on poverty alleviation in selected Local Government Areas of Oyo State, Nigeria. European Journal of Business and Management, 4(21), pp. 125-137.
30. Idowu, A. and Salami, A.O. (2011). Impact of microfinance bank on standard of living of hairdresser in Ogbomoso North Local Government of Oyo State, Nigeria. American Journal of Social and Management Sciences, 2(1), pp. 34-40. https://doi.org/10.5251/ajsms.2011.2.1.34.40
31. Ihenetu, H. I. (2021). Microfinance bank lending and poverty reduction in Nigeria. International Journal of Innovative Finance and Economics Research, 9(1), pp. 50-59.
32. Imoisi, A. and Opara, G. (2014). Microfinance and its impact on poverty alleviation: A case study of some microfinance banks in Edo State, American Journal of Humanities and Social Sciences, 2(1), pp. 27-41. https://doi.org/10.11634/232907811604456
33. Imtiaz, A., Mehmood, H. Z., Akram, W., and Irfan, M. (2014). Impact of microfinance on poverty reduction: A case study of District Faisalabad. Journal of Economics and Sustainable Development, 5(9), pp. 60-65.
34. Ingabire, D. and Ogoi, H. J. (2021). Effect of microfinance loan on poverty reduction in Rwanda. Global Journal of Management and Business, 21 (3- C), pp. 61-66.
35. Jude, E. I. and Emori, E.G. (2017). Empirical analysis of holistic activities of microfinance banks in Nigeria. AKSU Journal of Management Sciences, 2(2), pp. 79-92.
36. Karsch, S. M. A. and Deek, A. Y. (2019). Microfinance institutions: It’s role in Palestine economic development. International Business Research, 12(2), pp. 165-173. https://doi.org/10.5539/ibr.v12n2p165
37. Kasali, T. A., Ahmad, S. A., and Ean, L. H. (2015). Does microfinance operation have effect on poverty alleviation in Nigeria? European Journal of Contemporary Economics and Management, 2(2), pp. 54-69. http://dx.doi.org/10.19044/elp.v2no2a4
38. Lopatta, K. and Tchikov, M. (2017). The causal relationship of microfinance and economic development: Evidence from transnational data. International Journal of Financial Research, 8(3), pp. 162-171. http://dx.doi.org/10.5430/ijfr.v8n3p162
39. Maîtrot, M. and Niño-Zarazúa, M. (2017). Poverty and well-being impacts of microfinance: What do we know?, working paper, University of York, England
40. Muharremi, O. and Madani, F. (2021). The impact of microcredit services on the rural economy: Evidence from Albania. Oeconomica, 17(1), pp. 243-260.
41. Murad, A. B. and Idewele, I. E. O. (2017). The impact of microfinance institution in economic growth of a country: Nigeria in focus. International Journal of Development and Management Review, 12(1), pp. 1-17.
42. Mustapha, M. B., Yusuf, B. I., and Abdullahi, A. N. (2019). Micro-financing and rural poverty reduction: A case of Rima microfinance bank in Goronyo Local Government Area, Sokoto State, Nigeria. Journal of Development and Agricultural Economics, 11(10), pp. 256-264. https://doi.org/10.5897/JDAE2018.0974
43. Nwakoby, I. C. and Okanya, O. (2021). The benefit of microfinance bank in poverty alleviation: A case of selected micro, small and medium enterprises in Anambra State. Asian Journal of Economics, Business and Accounting, 21(9), pp. 37-47. https://doi.org/10.9734/AJEBA/2021/v21i930420
44. Obayagbona, J. (2018). Microfinance bank and poverty alleviation in Nigeria: An impact assessment. Amity Journal of Finance, 3 (2), pp. 1-12.
45. Oduwa, G. O. (2021). The role of micro finance bank on the socio-economic empowerment of beneficiaries in Egor local government area of Edo State. International Journal of Management, Social Sciences, Peace and Conflict Studies, 4(2), pp. 41-52.
46. Okafor, I. G. (2016). Microfinance banks activities and standard of living in Nigeria. IOSR Journal of Economics and Finance, 7(1,1), pp. 1-11.
47. Osmanovica, N., Kb, P., and Stojanovic, I. (2020). Impacts of Islamic banking system on economic growth of UAE. Talent Development and Excellence, 12(3), pp. 1555-1566.
48. Pigou, A. C. (1952) The economics of welfare (4th ed.). Macmillan. New York, United States 49. Sen, A. (1984). The living standard. Oxford Economic Papers, 36, pp. 74–90. http://www.jstor.org/stable/2662838
50. Shaikha, A., Zhanga, Z., Yonga, J., and Shahb, U. (2016). Impact of microfinance on poverty alleviation in SAARC countries. Colloquium Proceedings, ECU Business Doctoral and Emerging Scholars Colloquium, Joondalup campus Perth, Western Australia, pp. 31-37
51. Ssembajjwe, B. and Ncwadi, R. (2020). An evaluation of the impact of microfinance on poverty alleviation: Evidence from Uganda., Oeconomica, 16(2), pp. 43-53.
52. Sultan, Y. and Masih, M. (2016). Does microfinance affect economic growth? Evidence from Bangladesh based on ARDL approach. Working paper, South East Asia. https://mpra.ub.uni-muenchen.de/id/eprint/72123
53. Tabash, M. I. and Dhankar R. S. (2014). Islamic banking and economic growth: A cointegration approach. The Romanian Economic Journal, 17(53), pp. 61-90.
54. Tabash, M. I. and Dhankar R.S. (2013). An empirical analysis of the flow of Islamic banking and economic growth in Bahrain. International Journal of Management Sciences and Business Research, 3(1), pp. 96-103.
55. Uddin, M. H. and Hossain, A. (2020). Impact of Microfinance on Poverty Alleviation: A Study in the Southern Part of Bangladesh. Asian Business Review, 10(2), pp. 81-86.
56. Uyang, F. A., Abanbeshie, J. A., Omono, C. E.., and Aboh, F. I. (2021). Access to microfinance banks credit facility and poverty alleviation through improved income among the people of cross river state, Nigeria. Information and Knowledge Management, 11(4), pp. 63-72.
57. Weerasinghe, I. M. S. and Dedunu, H. H. (2017). Impact of micro finance on living standard with reference to microfinance holders in Kurunegala District. International Journal of Business Marketing and Management, 2(7), pp. 16-23.
58. Weiss, J. and Montgomery, H. (2005). Great expectations: microfinance and poverty reduction in Asia and Latin America. Oxford Development Studies, 33(3-4), pp. 391-416. https://doi.org/10.1080/13600810500199210
59. Žiaková, M. and Verner, V., (2015). Microfinance as a tool for poverty reduction: A study of Jordan. Scientia Agriculturae Bohemica, 46(4), pp. 172–180. https://doi.org/10.1515/sab-2015-0033