THE IMPACT OF FINANCIAL INCLUSION ON ECONOMIC GROWTH IN NIGERIA: THE ROLE OF MICROFINANCE BANKS (1995 - 2024)

Abstract

This research project discusses the effects of financial inclusions on the economic development of Nigeria with particular reference to the roles of the Microfinance Banks (MFBs). The research is driven by the fact that there is continued financial marginalization of most of the adults in Nigeria even though successive Nigerian government programs and policy restructurings have led to the promotion of financial accessibility. Using a time series dataset of 1995 -2024, this study uses the Ordinary Least Squares (OLS) regression method, accompanied by other related diagnostic tests, to test the relationship between the financial inclusion indicator, including microfinance bank loans, savings, and the total number of MFBs, and economic growth, which is measured by nominal Gross Domestic Product (GDP). The control variables are inflation rate and unemployment rate to represent the impacts of macroeconomic conditions on growth. The results of the empirical research indicate that financial inclusion and the functioning of microfinance banks positively affect the growth of the economy of Nigeria significantly. The results suggest that the better the access to the cheap and relevant financial services, the higher investment, productivity, and economic performance. The research, therefore, presents the conclusion that the growth of microfinance activities and intensifying inclusive financial policy are the key to attaining sustainable and inclusive economic growth in Nigeria. It suggests that the policymakers should step up the financial literacy efforts, increase rural financial infrastructure, and use digital banking technologies to enhance inclusion, poverty alleviation, and faster economic growth