From Rural to Microfinance Banking: Contributions of Micro Credits to Nigeria’s Economic Growth – An ARDL Approach

Abstract

Given current emphasis on potentials of micro credits as a means of addressing poverty alleviation and improved economic growth especially in developing economies, this study seeks to evaluate the nature of long-run relationship and the direction of causality between economic growth and micro credits disbursed by private sector led micro finance institutions in Nigeria. Covering the period 1982 – 2011 (30 years), the Autoregressive Distributed Lag (ARDL) technique was employed in analyzing the time series data. The study finds significant long-run relationship between Nigeria’s economic growth and micro credits disbursed, while causality runs from economic growth to micro credits (unidirectional). Accordingly, increase in the quantum of micro credits as well as development of long tenured micro credit products are recommended as strategies to enhance the contributions of micro credits to Nigeria’s economic growth.