IIARD International Institute of Academic Research and Development

RESEARCH JOURNAL OF PURE SCIENCE AND TECHNOLOGY (RJPST )

E-ISSN 2579-0536
P-ISSN 2695-2696
VOL. 7 NO. 1 2024
DOI: https://doi.org/10.56201/rjpst.v7.no1.2024.pg238.257

---

Financial Services and the Return on Equity of Microfinance Banks in Nigeria

M.O. Ndugbu, Peter. O. Ihejirika, Uzo-Ahunanya Chidinma

---

Abstract

This study examined the relationship between financial services and the return on equity of microfinance banks in Nigeria. Data were sourced from financial statement of the microfinance banks. Return on equity was used as dependent variable while microcredit, micro savings, micro insurance and micro leasing were used as independent variables. Panel data ordinary least square was used to examined the relationship between financial services and the return on equity of microfinance banks. The study found that 86.9 percent variations in return on equity of the microfinance banks can be accounted for by the independent variables. micro saving, microcredit and micro insurance have positive relationship while micro leasing have negative relationship with return on equity of the micro finance banks. From the findings, the study concludes that financial services explained significant variation in return on equity of the microfinance banks. We recommend that management of the microfinance banks should increase the loan rate so that investors see microfinance banks as the number one source of funding, and the Central Bank of Nigeria should reduce the microfinance banks minimum reserve in order to increase micro credit in the economy. Management of the microfinance banks should ensure effective means of deposit mobilization by increasing services to the rural communities and microfinance banks should allocate proper credit to the real sector for productive purposes in order to increase performance. The management of the microfinance banks should ensure well formulated policies to manage micro insurance services to add positive to the performance.

Financial Services, Return on Equity, Microfinance Banks, Micro-Credit, Micro- Savings

---

References:

Abebe, H. G. (2005). The Supply Responsiveness of Peasant Agriculture in Ethopia: some Macro
Econometric Results from Cereal Production. Center Discussion Paper.

Abrams, J. (2009). Zero is not the number: The microfinance debt default rate. A Baseline
Analysis, New York, IAMFI.
Abrams, J., & Ivatury, G. (2005). The market for foreign investment in microfinance: opportunities
and challenges.

Acha, I.A. (2011). Does Bank Financial Intermediation Cause Economic Growth in Developing
Economies: The Nigerian Experience. International Business and Management, 3(1), 156-
161.

Ackerman, P. L. (1988). Determinants of individual differences during skill acquisition: Cognitive
abilities and information processing. Journal of xperimental Psychology: General, 117,
288–318.

DOWNLOAD PDF

---

Back