Microfinancing for Poverty Reduction and Economic Development: A Case for Nigeria

Abstract

The main focus of this research is to juxtapose the features of microfinancing and the institutional forbearance of economic development in Nigeria. Based on empirical study, it has been observed that poverty is multifaceted and its persistence is due to lack of productive resources. The Nigerian case reveals that the major constraint to improving the standard of living of the poor is capital (finance). This has restricted their extensive participation in economic activities which could improve their lives. For this study, our theoretical a priori expectation is that provision of microfinance services such as savings and microloans have direct impact on GDP. A causal relationship will be established and evaluated with the ‘t-test’ statistic, while the relevance of the independent variables in explaining the subject will be justified based on the F-statistic test and R coefficient of multi-determination. Also, using a lin-log regression model, economic growth shall be regressed on poverty level in Nigeria. This will create an assertion whether Nigeria needs a systematic reinforcement of the microfinance mechanism to propagate a soothing trend for poverty reduction and economic growth.

Keywords: Microfinance, Poverty, Economic Development, Economic Growth, Financial Services, Gross Domestic Product

JEL Classification: G21, I38, O17, O43