The Multiplier Effect of Micro Finance Banks in the Sub-Sectors of the Economy

Abstract

Over the years, the micro finance banks sector has been bedeviled with inability to achieve sustainable economic security and financial inclusion of Nigeria banking population. Therefore, this research aimed at understudying the net effect of micro finance banks loans to sub-sectors of the economy in Niger State. A survey research design was adopted whereby questionnaires were administered; index analysis was carried out on economic variables while 2006 was used as the base year. Three null hypotheses were tested; access to productive capital is not enough to enable people out of poverty, there is no positive net effect on sectoral allocation of loans and there is no relationship between financial intermediation of micro finance banks and GDP. The study postulated that vibrant micro finance banks are panacea to creating net positive effect that will consequently contribute to real Gross Domestic Product (GDP). The findings were as follows; net cumulative effect was so little to leverage the economy due to the people social cultural lifestyle and creating access to productive capital was not enough to enable people out of poverty. The study concluded that economic security can be improved through the formal sector by strengthen the micro finance banking system. It therefore recommended that the provision of access to other micro financial services to help people cope with unpredictable shocks and emergencies, and loans should be associated with increase in asset (income generating asset).