Module title: Mental Wealth and Applied Research (HR7004)

Assessment point: Module Assessment (Week12)

Research Proposal: The Impact of Microfiance activities on

 1. RESEARCH TOPIC, AIM AND OBJECTIVES

1.1. Objectives of the Study

The proposed study's general objective is to investigate how the economic growth of Nigeria is

impacted by the activities of Microfinance institutions. The proposed study will however

specifically seek:

I. To determine the link between the GDP of Nigeria and the loans and advances of the

MFIs,

II. To determine the GDP of Nigeria is impacted by the deposit liabilities of the MFIs,

III. To examine how the GDP of Nigeria is impacted by the asset base of the Microfinance

institutions,

IV. To determine if the GDP of Nigeria is affected by the cash reserves of the MFIs.

1.2. Rationale for Study

Several studies have examined in depth the relationship between microfinancing and the

performance of small, and medium enterprises (SMEs). However, to the best of my knowledge,

those that investigate the relationship between microfinance activities and economic growth and

development in Nigeria are few and far between. This study thus seeks to bridge this gap, by

examining this subject area.

1.3. BACKGROUND OF THE STUDY

At various developmental stages, the Nigerian government has promulgated different

policies aimed at reducing the level of unemployment in the country. Interest has been shown at

all levels, including the Federal, State, and Local in fixing the dire situation of the masses. One

such was the program initiated by the Military government of General Ibrahim Babangida, the

structural adjustment program (SAP) which attempted to shift focus to small and medium

enterprises from large enterprises due to the belief in the potential of SMEs to create economic

expansion and consequently employment opportunities. It is a fact that without nurturing small

and medium enterprises, a meaningful economic expansion can't be experienced by any country.

The major impediment for SMEs however is the non-accessibility to financing due to several

reasons that center around a lack of collateral.

However, the advent of microfinance banks appears to offer SMEs a chance to gain access to

needed funding without the often stringent conditions being set by conventional banks, thus,

making them more productive, and creating jobs to alleviate the unemployment problem which

contributes to economic development. Given this brief background, it is appropriate to state that

the establishment and effective management of microfinance institutions (MFIs) can facilitate

the objective of economic growth in Nigeria.

The advent of microfinance institutions in Nigeria commenced back in 2005 with the

adoption of microfinancing by the Nigerian Government as the major financing vehicle for

micro, small and medium enterprises in Nigeria, as well as for alleviating poverty. This objective

led to the launching of the Microfinance Policy Regulatory and Supervisory Framework

(MPRSF). In line with the government's faith in microfinancing, Akingunola (2013) identified

some benefits of microfinancing as its ability to provide individuals and groups with the support
needed for starting a business, and for the development of entrepreneurial ventures and other

productive activities. It has been suggested that putting a feasible avenue in place through which

low-income earners and small businesses can have access to financing is critical to achieving

faster economic growth, reduction in the level of poverty, and improvement in the citizens'

standard of living. The apex bank in Nigeria, the Central Bank of Nigeria observed the potential

of microfinance institutions to provide financial services to the financially excluded in the

Nigerian society, who is estimated at 65% ( C.B.N, 2005). This is in line with the success

achieved with the employment of micro-financing in other parts of the world (Taiwo, 2012). It

was observed as being an avenue for low-income people to gain access to a range of financial

services that might not have been able to get through conventional banks. This increased

accessibility to loans and other financial services was observed to have led to the generation of

employment, reduction in poverty, and economic growth and development.

Given this glowing assessment of microfinancing and its use all over the world to stimulate

economic growth and provide employment, it is imperative that the Microfinance institutions in

Nigeria are having the same effect on the economy.

1.4. STATEMENT OF THE PROBLEM

Several studies have investigated how the performance of small and medium enterprises

is impacted by services provided by Microfinance Institutions in Nigeria. Yet, the subject of how

the activities of Microfinance institutions impact the growth of the Nigerian economy appears to

haven't been sufficiently studied to the best of my knowledge.

Developing a robust financial system is critical to achieving the significant objective of

achieving the economic growth of a nation. Generating economic growth however in developing

nations has proven to be an immense challenge, and this is the key to alleviating the poverty that

plagues these countries. The insufficient supply of credits to small and medium entities, as well

as low-income people with productive intentions, has led to the production process in many

developing nations becoming stunted.

The Nigerian Government promulgated the Microfinance Policy, Regulatory and

Supervisory Framework (MPRSF) in 2005 to try and bridge the financing gap and improve

funding to SMEs and other local productive ventures. The aim was also to ensure the Central

Bank of Nigeria had Supervisory control over already existing unceremonious institutions. This

mover improved the financing gap, and SMEs had increased access to loans with little to no

collateral (CBN, 2005). It is now this premise that this study seeks to determine the impact of

micro financing on the economic growth of Nigeria, or whether the need arises for changes to be

made.

1.5. SIGNIFICANCE OF THE STUDY

Several reasons make this study relevant, they are:

A) There is a consensus among scholars that poverty can be alleviated using the

Microfinance approach. It is expected that the outcome of this study will

further provide clarity as to the importance of microfinancing to economic

development.
B) Findings from the proposed research are expected to serve as some sort of

guide to improving policies and laws on microfinance, to strengthen so they

can achieve their objectives.

 C) It is expected to give improved clarity to the Microfinance institutions in the assessment of

potential and challenges towards improving products and services being provided to SMEs and

other clients. Furthermore, the proposed study could serve as an overview of the Microfinance

climate in Nigeria, to help the MFIs improve their performance and growth.

DEFINITION OF TERMS

MICROFINANCE INSTITUTIONS (MFIs): these are firms involved in wholly or partly providing financial

products and services to small, medium enterprises and low-income people.

MICROFINANCE: this entails providing financing to individuals/groups in the low-income bracket. They are often

micro-entrepreneurs and other poor people, who are offered small credits, can pay in small deposits, and have access

to financial services (USAID, 2005).

MICROCREDIT: the definition of microcredits is often done as a percentage of average per capita income (USAID,

2005).

PER CAPITAL INCOME: this is used in measuring the standard of living in a country, or the income per person in a

population.

ECONOMIC GROWTH: This entails an improvement in the production level of products and services over a given

time frame. It is the community and policymakers' sustained effort to ensure economic health and living standards are

promoted in a particular aspect (Chima, 2012).

STRUCTURE OF THE STUDY

the structure of this proposal is in five sections. The first contains the introductory aspect of the proposal, which

includes the proposed study's background, statement of the problem, significance, and research questions and

objectives. The second section delves into relevant literature in the subject area, with an examination of key aspects

that include theoretical framework, review of relevant literary works, and empirical review of related literature.
The methodology for the proposed study is discussed in detail in the third section. They include the population, data

collection methods, data collection instruments, ethical considerations, and data analysis methods.

2. LITERATURE REVIEW

The focus of this section will be on the review of relevant literature, theoretical reviews of MFIs, and empirical

review of related literary works.

REVIEW OF RELEVANT LITERATURE

2.0. MICROFINANCE INSTITUTIONS

Different definitions have been ascribed to microfinance based on a diverse understanding of the concept. It has been

defined as a range of procedures and structures through which low-income people and owners of SMEs are given

appropriate financial services sustainably (Ehigiamusoe, 2005). It has however been suggested that microfinancing

extends beyond just the provision of financial products and services to low-income earners. Eluhaive (2005) for

instance defined it as the provision of credit, thrift, and small amounts of other non-financial products and services to

low-income earners to ensure their level of income improves as well as facilitate an improvement in their living

standards. The Central Bank of Nigeria defines microfinance institutions (MFIs ) as companies issues license to

undertake the provision of microfinancing such as loans, savings, insurance, and other financial services for SMEs

and economically poor people (CBN, 2007).

2.0.1 AN OVERVIEW OF MICRO-FINANCING IN NIGERIA

Over time, different societies and nations have devised different means of ensuring the capital requirement of

economically active low-income people are met (Taiwo, 2012). In Nigerian society, for instance, different tribes had

local microfinancing schemes named differently. Yorubas in the Southwest refer to local microfinancing as "Esusu",

Hausas in the North "Adashe", and Igbos in the East, "Etoto". These traditional methods allowed rural and even
urban dwellers to gain access to small forms of financing for their productive activities (CBN, 2005). However, due

to the small amounts of funds for loans, this informal system has significant limitations. Non-governmental

organizations (NGOs) under the trusteeship act sought to set up initiatives to supplement the local financing methods

through membership. Members often make contributions, along with grants and interests, and other fees from loans

given to members are used for financing the loan schemes. Several micro/rural credit schemes and initiatives have

also been devised by the Nigerians over the years to supplement the traditional methods and those from NGOs to

ensure poor people have access to needed financing (C.B.N, 2005). Some of the programs and initiatives of

governments in Nigeria include Agricultural credit guarantee schemes, rural banking initiatives, concessionary

interest rates, and sectoral credits allocation. Others include the National Poverty Eradication Program, the People's

Bank, the National Directorate of Employer, and the Nigerian Agricultural Cooperative and Rural Development

Bank. The traditional supply-led, subsidized credit approach targeted at agricultural and non-agricultural ventures

was adopted in these programs and initiatives. Beneficiaries were involved in tailoring, blacksmithing, transportation,

weaving, agro-processing, and many more (C.B.N, 2005).

The economically active poor gained increased access to financing through the schemes mentioned above, yet,

corruption, inconsistencies, and insufficient loanable funds led to the unsustainability of the programs, and thus were

short-lived. Consequently, the Nigerian government introduced the Microfinance Policy Framework (2005) to fix the

inadequacies of the previous initiatives and Provide a channel where financial services can be accessed by the

economically active poor in the society. The start of the policy in the country was in line with the declaration of 2005

by the United Nations as the year of microcredit. The policy aims to increase financial services access for low-

income households and micro-entrepreneurs so their economic activities can be expanded and modernized to be able

to improve their contribution to the growth and development of the economy. Many microfinance institutions have

been established due to this policy, with other informal ones formalized. Nigeria had a total of 825 MFIs operational

in the country as of 2011.

2.0.2. MICROFINANCE POLICY MEASURES IN NIGERIA

The categorization of MFIs in Nigeria was done based on paid-up capital, in three categories namely Unit, State, and

National.

Those categorized as "Unit" must have a paid-up capital of 20 million naira, with operations limited to only one

location. Those categorized as "State", must have a minimum paid-up capital of 100 million naira and have their

operational area limited to only one state of the Federal Capital Territory. The National Microfinance Institutions

have a minimum of two billion naira paid-up capital and have permission to operate anywhere in the country.

Microfinance institutions were observed to have certain characteristics that include the provision of financing for

everyone, flexibility in the delivery of services, disregard for collateral security, etc (Ehigiamusoe, 2012). However,

several of the aforementioned characteristics are no longer valid given the state of the Microfinance sector and the

economy, as credits are not given by many of these MFIs without collateral security being demanded.

2.0.3. THE CHALLENGES MFIs FACE IN NIGERIA

it has been observed by many, that several challenges have bedeviled the Microfinance sector in Nigeria, thus,

leading to a below-par performance from the MFIs. The challenges faced by MFIs in Nigeria were published in a

microfinance newsletter of July – December 2010 by Attah who highlighted the issues as follows:

● The uneven spread of MFIs across the country,

● And the continuance of the mismanagement culture from the days of communities banking,

● Inadequacies in terms of microfinance banking knowledge and competencies,

● Weak internal control mechanisms,

 ● Difficult and expensive operational terrain,

● Lack of intermediation funds,

● Poor corporate governance.

The almost complete absence of basic infrastructure is one of the most significant challenges MFIs in Nigeria face.

Coupled with the high cost of doing business in the country, the inadequate basic infrastructure problem complicates

the operations of MFIs. Compared to traditional banks, MFIs also incur higher costs of transactions given that they

deal with so many small clients. Their reach is also impacted, especially in providing services to rural areas in the

country by the poor road infrastructure (Bamisile, 2006). The combination of all these adversities leads to increasing

operational costs and loss of competitive advantage.

Another factor that complicated the growth of MFIs in Nigeria is the absence of banking culture among the rural poor

people. It has always been their tradition to secure loans from family members and friends and repay them whenever

they have without any interest payment. This thus creates confusion when asked to pay interest on loans secured from

banks. Furthermore, there is a religious dimension to interest payments in Northern Nigeria. That region is

predominantly Muslim and forbids usury. The development of microfinance institutions in that region has thus been

hampered. In line with this, it was stated that charging interest is in violation of Islamic principles (Mohammed and

Hassan, 2009). It is therefore no surprise that an estimated 75% of microfinance institutions in Nigeria are situated in

the country's Southern region, despite the higher prevalence of poverty in the Northern region.

2.0.4. PROSPECTS OF MICROFINANCE BANKING IN NIGERIA

The fact there is so much potential in microfinancing in Nigeria isn't even an issue anymore. There is a unanimous

agreement by scholars and industry experts alike that the market isn't even close to being saturated. This view was
stressed by Oluyombo and Ogundimu (2006) who noted that agricultural production and other informal activities are

being engaged by about 70% of the population in Nigeria. This should correspond to about 150 million Nigerians,

given the population estimates of about 200 million. Mohammed and Hassan (2009) also asserted that given the

situation where 40 million people require microfinance services, and less than one million are served, there is an

immense opportunity. To further buttress this point, the Central Bank of Nigeria noted that the total credit from

MFIs to enterprises was less than 1%, and just 0.2 percent of the country's GDP (CBN, 2005). This is an indication

of the massive potential that can be tapped into by MFIs. Additionally, the fact that 65% of the Nigerian population

was identified by the CBN (2005) as having no access to formal banking services, indicates a gap that can be filled

by MFIs.

The prospect for growth and development of MFIs in Nigeria is further boosted by the renewed interest by the

Government and improvement in the regulatory environment in the microfinance sub-sector. Additionally, the

Central bank of Nigeria implemented pieces of training for practitioners, promoters, and regulators in this regard.

Going further to reduce burdens on MFIs by subsidizing training for practitioners, an adaptation of Irobi (2008)'s

suggestion. The apex bank in Nigeria aims at developing the industry capacity by paying for 60% of the training cost

of the MFIs' management staff. The management of these MFIs will have to pass a certification exam from the

Chartered Institute of Bankers of Nigeria (CIBN), through this program, which is a joint initiative of the CBN and

the Nigerian Deposit Insurance Corporation (NDIC). Given guidelines stipulating that the management of MFIs in

the future will only be undertaken by certified persons, the seriousness with which the development /capacity-

building initiative is being taken by the apex bank is intense.

The inclusion of MFIs' deposits in the deposit insurance scheme is another indication of the intention of regulators to

ensure the microfinance banking subsector is vibrant. This situation has led to an improvement in the confidence of

the public in the microfinance industry. Another further sign of intention on the part of the regular to boost the

success of the MFIs is through the upward review of the deposit insurance limit to 200,000 naira from 100,000 naira

by the NDIC act of 2006.

2.0.5. IMPACT OF MFIS ON SMES

without putting a well-focused microfinance policy in place that will ensure the existing MFIs are strengthened in the

aspect of wealth creation, poverty alleviation, and employment generation through the empowerment of SMEs, the

struggle to alleviate poverty and increase employment will be in vain. The way to achieve this is by ensuring that

access to production factors, specifically credits is enhanced. Providing microfinance products and services to the

economically poor will facilitate their ability to engage in productive ventures, thus, gaining self-sustenance,

increasing employment opportunities, improving the income of the household, and creating wealth (CBN, 2004).

Evidence from countries all over the world suggests that the economic development objectives of those countries

were significantly boosted by entrepreneurship manifesting in the form of Small and Medium Scale Enterprises

(SMEs). The objectives in question include generation of employment, income redistribution, production of

intermediate goods for strengthening Intra and inter industrial linkages, promotion of indigenous entrepreneurship

and technology, as well as output expansion. It is no surprise most countries have made steps to promote

entrepreneurship (Abu and Ezike, 2012)

2.0.5. THE ROLE PLAYED BY MFIS IN ECONOMIC GROWTH AND DEVELOPMENT

Solutions to economic growth and development issues are often provided using economic models. Some of the

available models for this practice include the Keynesian macroeconomic growth model, and Leontif’s input/output

models. Carefully studying the models indicates there is a common link between the growth and development of the

economy and the level of savings, investment, poverty alleviation, and employment generation (Obianuju, 2012).

For the last decades, the ability to facilitate access to loans and other services for SMEs became quite a lucrative

venture (Ehigiamusoe, 2008). Microfinance institutions are increasingly being patronized by, for example, farmers in

Ethiopia, food vendors in Las Paz, street traders on Lagos streets, and fabricators on the streets of Nairobi. It is

because of such demands that most developing countries are turning to MFIs.
MFIs are considered a critical vehicle for achieving any country's meaningful economic development. Facilitating

access to financial services for low-income households has been the objective of most development policies or

initiatives. Different policies have been enacted at different times by the government via appropriate agencies tasked

with the financial system of Nigeria to expand access to loans and other related services for low-income households

and SMEs in the country. Different measures have been developed by countries to strengthen their financial services

sector going by some of the theoretical postulations, to undertake savings mobilization, and for its allocation to their

economies' productive sector to be used to reduce poverty, generate employment, and for investment, particularly for

rural dwellers.

The Central Bank of Nigeria observed that 65% of the publication of countries economically active don't have access

to banks' financial services, with these conventional banks providing services to only 35% of economically active

citizens (CBN, 2005). In places such as Europe, Latin America, and North America, MFIs have worked acidulously.

Access to a range of financial services such as loans, savings, insurance, and many more have been facilitated for

low-income people in many underdeveloped, developing, and developed nations. Having access to such funds leads

to the generation of employment, a reduction in the level of poverty, and as a result growth and development of the

economy.

Practically though, there has been a movement toward product innovation and commercialization in contemporary

microfinancing, beyond the provision of financial services to low-income people. The need for a range of financial

products that integrates packages that are dependable, flexible, and reasonably priced by SMEs is the reason for this

modern shift. Different service delivery models that take the inability of SMEs and low-income households to

provide tangible collateral security to obtain loans have been developed by MFIs in recognition of this

2.1. THEORETICAL REVIEW OF RELATED LITERATURE

MFIs' fundamental presumption holds that by providing access to finance for those that couldn't gain access to it

before, MFIs intend to provide their low-income clients with necessary economic strength and extra liquidity, so
arising economic opportunities can be tapped into, and to facilitate their ability to accumulate wealth and savings to

help mitigate the effect of unexpected occurrences (Akanji, 2001). There must however be long-term sustainability

and viability of MFIs with robust balance sheets if their services are to last for a long time. Consequently, the

unemployment level will decline, productivity will increase, and investment and savings will increase, leading to

sustainability of the economic growth. The process of transforming an economy into an industrial, urban service-

based one from a predominantly rural and agricultural one was defined as economic development by Syrous and

Laura (2007). The characteristics of economic development include a higher living standard and improvement in

welfare, in the course of achieving Pareto optimality.

2.1.1. LOANABLE FUND THEORY OF INTEREST

The price of credit which is dependent on the loanable funds' demand and supply is the rate of interest, going by this

theory. A cost reasonable enough to motivate the clients of the MFIs (micro-entrepreneurs, poor villagers, farmers,

etc) is applied in lending loanable funds, indirectly contributing to economic growth. The reasons for borrowing the

funds by the clients of MFIs are diverse, ranging from starting new ventures to purchasing capital goods or tools and

so forth. These type of loans is mostly dependent on expected returns in comparison with an interest rate, thus

interest is elastic. Savings which can either be individual, private or group are the sources of these loanable funds

according to Khawari (2004). Low-income households dwelling in rural and urban areas are often the ones who take

the micro credits and other services from MFIs, and the key sticking point in obtaining the loans and credits is often

the rate of interest. The price of acquiring the loans or the interest rate is determined through the integration of the

demand and supply of loanable funds, which also creates the equilibrium level in the market. There is a negative

relationship between this credit cost and its demand.

2.1.2. INPUT-OUTPUT THEORY

This theory assumes that there is equality in terms of the need for finance and the input amounts from other sectors.

Basic amenities, social welfare programs, transportation, and education are some of these financial needs (Chima,

2012). Additionally, Chima (2012) noted that the amount of informal finance that low-income people get is often

small, given that large financial markets aren't that too common in developing nations. There is a general limitation in

terms of low-income people having access to institutional microfinance. In market economies, the balance sheet of

low-income households is often largely self-financing. One must realize finance availability is a sine-qua-non issue,

in terms of surmounting all impediments to any nation's economic growth and development. In development,

finance can't be dispensed with (Klaus, 2010). One major impediment to wealth development, socio-economic

welfare enhancement, and human dignity promotion is a finance system that is poorly developed (Iniodu and Ukpak,

1996). The main thing is that without capital (finance), no production, irrespective of the simplicity of the employed

technology can take place. The critical aspect of achieving sound economic management entails obtaining credit and

savings as financial support to acquire capital goods necessary to enhance equity, sustainability, and prosperity.

There is consistency in terms of microfinance's primary objective and the economic development goals of Nigeria,

which involves the improvement in living standards. The basis of all these is the assumption that the overall liquidity

of households will increase as a result of either saving or loan, for the production, investment, and/or consumption

activities of households as the foreign exchange gap or saving-investment models articulated, often the justification

for economic development borrowings (Chima, 2012).

2.1.3. VICIOUS CIRCLE THEORY

This theory assumes that the levels of savings are determined by the income level, and investment is a determinant of

the savings level. Having a lower production level signifies the level of investment is low. It has been suggested that

the poor around the world may remain in perpetual poverty, given the close-knit relationship between all the main

causes of poverty, to the point that a vicious circle is formed where one leads to the other (Adebayo, 2008). An
attempt was made to explain a part of the overall strategy for development encompasses the availability of capital.

Given this, microfinance and the urban-rural theory emerged from the general development theory (Eboh et al, 1995;

Ezeh and Mbanasor, 2004; Hulme and Mosley, 2006). The general assumption of this theory is that embarking on the

development of its economy by a nation will have certain impediments caused by strategy inputs' supply inelasticity.

This strategic input supply involves the required financing. Except for the production of substitutes for the factors

with inelastic supply is done as a means to reduce the impediments, there is bound to be a significant depression in

the entire economic development process (Hayami and Ruttam, 1971). The concept of microfinancing and the

development of the rural economy most countries have adopted in recent times involves the attainment of the process

of increasing urban-rural workers' productivity and income (Eboh et al., 1995, Adamu, 2010).

2.2. EMPIRICAL REVIEW OF RELATED LITERATURE

The significance of MFIs in the development of a nation is critical. A more comprehensive analytical framework for

the assessment of microfinancing effectiveness in its double objective of providing sustainability financially and

developing the economy was presented in a study by Mar (2005) which was regarded as a response to several partial

and over-simplistic theoretical and empirical research. The argument of Mar (2005) is that not only has the initial

lenders' and borrowers' information asymmetries been solved by Microfinance, the sustainability in finance pursuit as

well, through giving the study of group dynamics the center stage, as well as utilizing the social psychology and

imperfect information principles. It has been suggested that through the disruption of communities' social fabric,

these schemes' foundations are being destroyed, leading to more poverty being created and the exclusion of the most

vulnerable and poor from any specific group.

A study investigated 10 years of operations of MFIs and the development of the Nigerian economy in a period

spanning 2005 to 2014 (Ifionu and Olieh, 2016). The researchers obtained data from Nigeria's apex bank while
employing the old maple regression analysis method and the Granger Causality Test for their investigation using the

E-view 6 package (Ifionu and Olieh, 2016). They discovered that mobilization of deposits was keyboard the

operations of the MFIs and significantly contributes to the development of the economy while a negative relationship

was discovered between loans and economic development, attributed to heavy fees, diversions, and high rates of

interest. The establishment of additional MFIs was recommended in the study to achieve outreach sufficiency; they

also expected that the loan charges to clients will be driven down by this, as well as increasing access to loans.

The contribution of microfinancing to the growth of Nigeria's economy was investigated in a study by Nwakamma et

al. (2014), using the Autoregressive Distributed Lag (ARDL) approach for analysis of the time series, spanning a

period between 1982 to 2011 or 30 years. A significant long-run relationship was discovered between the disbursed

loans and the growth of the Nigerian economy. The recommendations include increasing the amount of disbursed

microcrystalline, including developing long-tenured microcredits to further boost the impact of microfinance on the

economic growth of Nigeria. Similarly, the community banking scheme in Nigeria was evaluated by Dauda (2009).

He discovered a significant growth in generated deposits for the considered period (1992 – 2004). The

improvement in banking habits at the rural level was attributed to the increased deposit. However, a decline in credit

exposure in comparison with exposure to general commerce (19.2% compared to 47.6%) was revealed, though there

was a nominal increase in the agriculture and rural-based real sector activities' aggregate loan portfolio. The decline

was found to be detrimental to the move to boost the growth of the real sector and to achieve sustainability in

Nigeria's economic development.

3. METHODOLOGY, METHODS AND ETHICAL CONSIDERATIONS

This section contains a detailed description of the procedures to be adopted for carrying out the proposed study. The

design of the proposed study, the population, the data collection, the method, and other information will be detailed

in this section.
 3.1 RESEARCH DESIGN

An ex-post facto research design (which involves the utilization of data already prepared by an agency of

government) will be adopted for the proposed study. The basis of utilizing this method is because obtained

information through this avenue is considered as the real happenings in that industry. The sourcing of the secondary

data, along with time series data from the period 2000 to 2014, or 14 years will be obtained from Statistical bulletins

of the Central Bank of Nigeria.

3.2 POPULATION AND STUDY SAMPLE

Any study's population is where the researcher(s) concentrate their effort. It can either be infinite or finite, it

represents elements with similar attributes according to Onwumere (2009). Sample in contrast is items obtained to be

examined or analyzed from a relevant population (Nwaeze et al, 2014). Microfinance institutions operating in Nigeria

will be the population for the proposed study. Studying the entire MFIs in Nigeria is possible given the availability

of data from the Statistical bulletin of the Central Bank of Nigeria. Doing this will allow for adequate information on

the sector under consideration, thus, the findings can be generalized.

3.3 METHODS OF DATA COLLECTION

The data to be used as stated above is secondary data obtained from the CBN. Such data are available from the

annual report, statement of account, and the Statistical bulletins of the Central bank of Nigeria.

3.4 RESEARCH VARIABLES

Dependent Variable
The proposed study's dependent variable will be economic growth. In line with studies by Levine et al. (2000) and

Ujah (2010), the proxy for economic growth will be Real Gross Domestic Product (RGDP). The value of every

output that was used in the production process is highlighted using the GDP.

Independent Variables

The proposed study will adopt its explanatory or descriptive variables as follows: The asset base of the MFIs, the

deposit liabilities of the MFIs, the loans and advances of the MFIs, the reserves of the MFIs, and policies of the

government, foreign direct investments exchange rate as stochastic or random variables.

3.5 DATA ANALYSIS METHOD

The linear regression analysis method through Statistical Package for Social Sciences (SPSS) will be adopted and

used in investigating the relationship between the activities of MFIs and Nigeria's economic growth. The RGDP will

be regressed on several independent variables while policies of the government, FDIs, etc that may impact the growth

of the economy will be held constant.

3.6. ETHICAL CONSIDERATIONS

For the proposed study, the Central Bank of Nigeria' Statistical bulletin will be used, as well as other publicly

available information. The process of making use of data already in existence to find answers to questions other than

the original intent of the researchers was defined by Szabo and Strang (1997) as secondary analysis.

When making the decision to use secondary data, potential harm to subjects and return for consent are major issues.

However, the level of identifying information in one over the other is the differentiating factor (Tripathy, 2013).

Codifying data or the absence of identifying information means no need for a full review by an ethical board. The

proposed study guarantees complete confidentiality and anonymity due to the absence of identifying information.
Obtaining information from the public domain means one can imply permission for further use. This is the case with

the proposed study as the website of the Central Bank of Nigeria will be the source of the secondary data, hence,

permission to use will be implied (Tripathy, 2013).

Relevance, excessiveness of collected data, and adequacy are other key issues. This means an evaluation of to be

conducted to establish data validity. However, the Central Bank of Nigeria is a reputable source of financial data for

any study in Nigeria, hence, the need to evaluate shouldn't be an issue.

4. RESEARCH SCHEDULE AND PLAN

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4.1. EXPECTED OUTCOME

The main objective of this study was to seek if there is any relationship between microfinance activities in

Nigeria and the country's economic growth and development. Financial availability is key to economic

development and growth, as multiple works of literature have indicated. The financing for SMEs and low-

income households has however been low due to the issue of collateral and astronomical interest rates. This is

why microfinance institutions are so important, as they were intended to bridge this financing gap by ensuring

economically active low-income people and small businesses had access to needed financing to improve their

living standards, generate employment and stimulate the economy. This study is expected to provide clarity

on whether the ultimate aim of creating the Microfinance framework is working as intended, i.e. facilitating

economic growth. If the answer to this is negative, then, policymakers and industry experts ought to devise

means to enhance the framework to cover the areas that have made it ineffective.

The proposed study should also be an addition to existing studies, and provide a basis for further research in

the quest to ensure microfinancing drives economic development.

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