Relationship Between Microfinance Bank Loans and Poverty Alleviation in Nigeria

Poverty alleviation has been a global contending economic issue, which governments at all levels fight zealously to minimise. Poverty can be seen as a situation whereby people, households, firms or individuals cannot be able to meet their basic daily needs. This study centred on investigating the relationship between microfinance loans and poverty alleviation in Nigeria from 1980 to 2021. Microfinance loans often target lifting and supporting the poor and most vulnerable individuals, households, small hold businesses and small and medium enterprises, hence microfinance loans are meant for poverty alleviation and should be used for this purpose for the national building, economic growth and development. Findings from the cointegration test show that there is the existence of cointegration between microfinance loans and poverty alleviation in Nigeria. Also, findings from the long-run bound test show that there is the existence of a long-run relationship between microfinance loans and poverty alleviation in Nigeria since the F-statistic is greater than both Pesaran et al. (2001) and Narayan (2004) upper 1% critical values. Findings from the ARDL results show that microfinance outstanding loans (MOL) have a positive and insignificant impact on poverty alleviation, and the number of microfinance bank branches (MOB) has a negative and significant impact on poverty alleviation in Nigeria. Furthermore, in the short run, the coefficient of the error correction model (ECM) has a negative sign and is statistically significant, which measures the speed of adjustment by 0.7%. Thus, this study recommends that microfinance institutions should offer loans with fairness to small-hold businesses, households, and small and medium enterprises and reduce the cost of obtaining loans so that the most vulnerable people in Nigeria would be accommodated.