Micro financing and Poverty Alleviation: Empirical investigation from Nigerian Economy

Apart from macroeconomic challenges such as rising inflation and unemployment rate, another challenge that faces Nigerian economy is the rising rate of poverty and income inequality. This study examined the effect of microfinance credit on poverty alleviation in Nigeria. The objective was to ascertain the extent to which micro financing have affected the rate of poverty in Nigeria. poverty rate was proxy by absolute poverty rate and is used as dependent variable while microfinance loans to agricultural sector, manufacturing sector, real estate, transport and communication and other sectors not classified above was used as predictor variables. The study adopted the ordinary least square method of data analysis using econometrics view. Cointegration test, Granger causality test, unit root test and vector error correction estimate were used to determine the dynamic relationship between micro financing and poverty rate in Nigeria. It was found that microfinance loans to agricultural sector, manufacturing sector and real estate reduced poverty rate in Nigeria while increase in microfinance loans to transport and communication and other sectors will increase poverty rate in Nigeria. Findings also proved that the variables are stationary at first difference and a presence of long run relationship between the dependent and the independent variables. The Granger causality test detected a univariate relationship between poverty rate to microfinance loans to transport and communication and from microfinance loans to other sectors to poverty rate. We conclude weak relationship between micro financing and poverty rate in Nigeria. We therefore recommend policies that will enhance the operational efficiency of the microfinance banks in Nigeria.