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Assessing The Impact of Institutional Quality on Financial Performance: Evidence from Nigerian Microfinance Institutions

Abdulsalam Ahmed, Mohammed Yahya Murtala, Usakutiya Jeff Okundamiya

Abstract

This study investigates the relationship between institutional quality and financial performance of microfinance institutions in Nigeria. Using a panel dataset of 89 microfinance institutions over a period of 2009 2018, we employ regression analysis to examine the effect of institutional quality on financial performance metric such as return on assets. Our findings suggest that institutional quality influences financial performance, with rule of law playing a crucial role. The study contributes to the existing literature by providing empirical evidence on the importance of institutional quality in the Nigerian microfinance sector. The results have implication for policymakers, regulators and microfinance practitioners seeking to improve financial stability and sustainability in the industry.

Keywords

Institutional qualityMicrofinance institutionsFinancial performanceGovernance

References

Adejumobi, S. (2015). The political economy of corruption in Africa: A theoretical discourse. In Democratic Renewal in Africa: Trends and Discourses (pp. 153-176). New York: Palgrave Macmillan US. Ahlin, C., Lin, J., & Maio, M. (2011). Where does microfinance flourish? Microfinance institution performance in macroeconomic context. Journal of Development economics, 95(2), 105120. Agola, T. (2014). Credit policy and financial performance of microfinance institutions in Kenya (Doctoral dissertation). Ahmed, A. (2014). Analysis of Performance of Sample Microfinance Institutions in Nigeria (Unpublished Thesis). Department of Banking and Finance, Eastern Mediterranean University, Gazimagusa, North Cyprus. Aralica, Z., Svilokos, T., & Bacic, K. (2018). Institutions and firms’ performance in transition countries: the case of selected CESEE countries. South East European Journal of Economics and Business, 13(1), 68-80.

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