Micro- Financing and Financial Inclusion in Nigeria

Raymond Rahaj Adegboyega


This paper examines the empirical relationship between micro financing and financial inclusion in Nigeria over the period of 1981 - 2013. The long-run and short-run parameters were estimated by use of autoregressive distributed lag (ARDL) bounds testing approach for co integration analysis. The time series for all the variables under the study were subjected to unit root test using Augmented Dickey-Fuller test. The unit root test showed that access and lending rate were stationary at their levels I(0), loan deposit ratio integrated of order I(1) while number of bank branches integrated at order I(2). The results of the study showed that loan deposit ratio (ldr) (λ = 0.005, ƿ < 10%) is positively significant at first lag to access, lending rate (lr) (λ = 0.018, p < 5%) is also positively significant at first lag to access while number of bank branches (nrbb) (λ =-5.12) is insignificantly negative. The bound test indicates that there is stable long-run relationship among, access, lending rate and number of bank branches while no long relationship between access and loan deposit ratio in Nigeria. The results also revealed that micro finance has positive and statistically significant effect on financial inclusion. The magnitudes of the ECT coefficients (ldr = 50%, lr = 86%and nrbb =75%) suggest that the speed of adjustment in each of the estimated model is high. The study recommends that there is a need to reinforce existing financial inclusion policies by promoting a linkage between cooperative societies and microfinance banks. This will encourage more people especially low income group to participate in economic activities, thus boosting investment through credit.

Key words: Financial Inclusion, Micro financing, ADF Test, Unit Root Test, ARDL, ECT.


Financial Inclusion, Micro financing; ADF Test; Unit Root Test; ARDL; EC

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