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Microfinance bank in Nigeria: operating environment, sustainability, and welfare impact

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  • Akinwumi Sharimakin

    (Adeyemi Federal University of Education)

Abstract

The significance of sustainability and operating environment of microfinance banks (MFBs) on developmental outcomes has created desire for several studies. Unfortunately, studies have either concentrated on sustainability or operating environment. Thus, this study jointly examined the impact of operating environment on sustainability of MFBs, and equally investigated the impact of credit from sustainable and unsustainable MFBs on developmental outcomewelfare. Micro-level data obtained across cross-sectional individuals were used to evaluate the relationship between operating environment and MFB’s profitability, and impact of loan-taking from sustainable and unsustainable MFBs on welfare indicators. The results showed that the profit level of MFBs is more adversely affected by loan default, taxes, and cost of education. The finding revealed that life cycle of MFB is associated with level of sustainability, and that clients who obtained loans from sustainable MFBs are more likely to have better welfare. It is, therefore, important for the management of MFBs to improve on loan management mechanism. Regulatory framework that prevents multiple taxes and strengthen MFBs will, in no distant time, improve profitability and service delivery of MFBs.

Suggested Citation

  • Akinwumi Sharimakin, 2023. "Microfinance bank in Nigeria: operating environment, sustainability, and welfare impact," SN Business & Economics, Springer, vol. 3(10), pages 1-27, October.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:10:d:10.1007_s43546-023-00552-y
    DOI: 10.1007/s43546-023-00552-y
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