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

Document Type : Original Article


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


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.


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