Are Microfinance Banks Important in Deposit Mobilisation in Nigeria?

Abstract

Microfinance banking as a means of creating economic and social development from below has come a long way in Nigeria. Various comprehensive surveys of the diversified activities of microfinance banks have been provided since 2005 when the policy guidelines became operative. Microfinance banks in Nigeria operate in diverse environments- rural, urban, and cosmopolitan. They also differ in ownership structure as some are privately owned, while some others are owned by institutions. This heterogeneity make its operations open to different empirical investigations, as no single research can exhibit all the desired characteristics.Data were collected from the publications of the Central Bank of Nigeria Statistical Bulletin and World Development Indicator (WDI).The data spanned from the period of 1990 to 2010 and employs the Ordinary Least Square(OLS) method of regression analysis to determine the extent of deposit mobilization capacity of banks. It was discovered that a very small portion of savings go to microfinance banks compared to deposit money banks. The study recommended that Microfinance banks in Nigeria still need to do a lot more in their deposit mobilisation strategies if the objective of microfinance banking is to be realized in the country.

Key words: microfinance banks; deposit money banks; inflation rate; deposit mobilization