This study examines the Effect of Microfinance Banks on Entrepreneurship Growth in Nigeria. Data for the study were sourced from secondary sources and the period of that research spans from 2005 to 2017. The study uses ordinary Least Square regression to analyze results of the study. Findings from the study show that there is no significant relationship between microfinance banks and entrepreneurial activities.













Title Page                                                                                                                                i

Certification                                                                                                                            ii

Declaration                                                                                                                              iii

Dedication                                                                                                                              iv

Acknowledgements                                                                                                                v

Abstract                                                                                                                                  vi

Table of Contents                                                                                                                   vii



1.1       Background of the Study                                                                                          1

1.2       Statement of the Problem                                                                                           3

1.3       Objectives of the Study                                                                                              4

1.4       Research Questions                                                                                                     4

1.5       Statement of Hypotheses                                                                                            4

1.6       Significance of the Study                                                                                           5

1.7       Scope of the Study                                                                                                     5

1.8       Limitations of the Study                                                                                             6

1.9       Justification of the Study                                                                                           6

1.10     Definition of Terms                                                                                                    6


CHAPTER TWO: LITERATURE REVIEW                                                                 

2.1       Introduction                                                                                                                8

2.1.1    Concepts of Microfinance Bank                                                                                 8

2.1.2    Concept of Entrepreneurship                                                                                      9

2.1.3    Types of Microfinance                                                                                                12

2.1.4    Conceptualizing Entrepreneurship Growth                                                                13

2.2       Theoretical Literature Review                                                                        14

2.2.1    The Economic Perspective on Entrepreneurship                                                         15

2.2.2    Modern Theory of Entrepreneurship                                                                          16

2.2.3    Innovation Theory of Entrepreneurship                                                                      17

2.3       Empirical Review                                                                                                        18



3.1       Introduction                                                                                                                20

3.2       Area of Study and Coverage                                                                                      20

3.3       Model Specification                                                                                                    20

3.4       Evaluation Procedure                                                                                                  21

3.5       Source of Data                                                                                                                        21

3.6       Evaluation Based on Economic Criteria                                                                     21

3.7       Evaluation Based on Statistical Criteria                                                                     21

3.8       Evaluation Normality Test Based on Econometric Criteria                                        22



4.1       Introduction                                                                                                                25

4.2       Analysis of Regression Coefficients                                                                           26

4.3       Economic Criteria                                                                                                       26

4.4       Statistical Criteria                                                                                                       27

4.5       Econometric Criteria                                                                                                   29


5.1       Summary                                                                                                                     32

5.2       Recommendations                                                                                                      33

5.3       Conclusion                                                                                                                  34

References                                                                                                                              35






In consonance with the Millennium Development Goals (MDGs) of the United Nations, which include reduction elimination of poverty and disease, the Federal Government of Nigeria poverty eradication programmes. The strategies of previous  governments  to  address poverty  include  establishment  of  Peoples  Bank  of  Nigeria  (PBN), Community  Banks  (CBs),  Family  Economic  Advancement programme  (FEAP),  Better  Life  for  Rural  Women  Programme among others. These strategies   were unsuccessful because they were seen as programmes meant to distribute money to politicians. Since  the  1980‟s  Non-Governmental  Organizations  (NGOs) have  emerged  in  the  country  to  champion  the  cause  of  the  micro entrepreneur with a shift from the supply-led approach to the demand driven  strategy.  The  number  of  NGOs  involved  in  micro  finance activities has increased significantly in the recent times due largely to the  inability  of  the  formal  financial  sector  to  provide  the  service needed by the low income groups, the poor and entrepreneurs (Central Bank of Nigeria)CBN 2008.

The  micro-finance firms  fund their  operations  from  the  grants, interest  on  loans  and  contribution from  members.  They however, have limited outreach due largely to the unsustainable nature of their funds. The Central Bank of Nigeria (CBN) in accordance with section 28(1) of the CBN Act No 24 of 1991 (as amended) provides the framework guideline for micro finance banks in Nigeria.

The guideline recognizes  the  existing  information  institutions  and  brings  them  within  the  supervisory purview  of  the  CBN  would  not  only  enhance  monetary  stability,  but also  expand  the  financial  infrastructure  of  the  country  to  meet  the financial  requirements  of  the  micro,  small and  medium  enterprises (MSMEs)  and  also  entrepreneurship.  Such a policy would create vibrant micro finance sub-sector that would be adequately integrated into the mainstream of the national financial system and provide the stimulus for growth and development.  It would also harmonize operating standards and provide a strategic platform for the evolution of micro finance institutions. On the  other  hand,  entrepreneurship  has  been  seen  as  the engine  of  Nigeria  economy.  Right from 1960  when  Nigeria  got  her independence,  the  federal  Government  of  Nigeria  has  taken  bold steps  to  empower  entrepreneurship  using  monetary,  fiscal  and industrial policies. All the policies failed to yield a positive result owing to lack of transparency, accountability and trustworthiness of their leaders and those entrusted with those responsibilities. According to the  United  Nations  Institution  Development organization  (UNIDO  1969:100)  Nigeria  is  among  the  countries classified  as  developing. The organization further defined a developing economy as an economy where there is acute shortage of natural resources and also where there is dearth of trained manpower to manage the available scarce resources.

However, the report is not entirely true of the Nigerian economic system  firstly,  Nigeria  is  rich  in  natural  resources  such  as  mineral deposit (crude oil, coal and tin ore etc.) and fertile land for agriculture among others.  Secondly,  Nigeria  as  at  the  period  of  the  UNIDO  report  (1969) had about three tertiary institution responsible for man power training and development.

Failure to empower  small  business  and  entrepreneurship  fully or transparently  will  increase  poverty  and  escalate  unemployment which  according  to international labour organization (ILO 2017)  is  already  growing  by  more  than  3 million  people  or  approximately  25%  annually  while  the  economy grows by 6% or 3% when discounts for population.

In  the  light  of  the  foregoing  for  Nigeria  to  be  able  to  produce future  and  efficient  multinational  SMEs  and  entrepreneurship  fully supported and financially and technically empowered by government, growing from grass roots,  transcending  their territory  can eventually become  Nigeria’s  symbol  of  economic  power  and  prosperity. Adequately making use of financial institutions, entrepreneurs in Nigeria will be doing very well and this should be the role of microfinance institution in Nigeria.



In  a  general  sense  it  is  essential  to  recognize  the  effect  of micro-finance institutions towards the development of entrepreneurship  in Nigeria.  However, if the micro-finance firms perform up to expectation, entrepreneurship will experience tremendous growth. The  problem  of  this  study  therefore  is  to  critically  look  at  the gradual growth of entrepreneurship in Nigeria and the causes of it.  In this, entrepreneurship in Nigeria is not developing as expected as a result of so many problems facing it.  It  is  resulted  from  lack  of financial  motivation  and  encouragement  among  entrepreneurs  in Nigeria.  These may lead to low productivity and turnover in industry.

These  problems  go  a  long  way  to  stifle  their  growth  and development,  thereby  limiting  their  potential  contributions  to  the development of the national economy.





The main objective of this study is to examine the effect of micro finance banks on entrepreneurship growth.

Other specific objectives include:

  1. To examine the effect of microfinance banks on the growth of entrepreneurial activities in Nigeria.
  2. To investigate the activities of microfinance banks on entrepreneurship financing.



This research project will be developed from the following research questions;

  1. What is the effect of microfinance banks on entrepreneurship growth?
  2. What is the effect of microfinance banks on the growth of entrepreneurial activities in Nigeria?
  • What are the activities of microfinance banks in entrepreneurship financing?



Drawn from the research questions marshaled above and the objectives that this research aim to achieve, the following hypotheses have been formulated to help in the conduct of veritable and worthwhile research

         There is no significant relationship between microfinance banks and                                      entrepreneurship growth.

There is significant relationship between microfinance banks and entrepreneurship growth.

There is no significant relationship between microfinance banks and entrepreneurial           activities.

There is significant relationship between microfinance banks and entrepreneurial    activities.

There is no significant relationship between microfinance banks and entrepreneurial           financing.

There is significant relationship between microfinance banks and entrepreneurial    financing.



This study dealt primarily with the examination of the effect of micro-finance firms on entrepreneurial growth.

Therefore,  this  study  will  be  useful  to  stakeholders  of  microfinance  firms  and  also  to  entrepreneurs  in  Nigeria.  It will help organizations involved in the advancement of entrepreneurs in formulating development programmes and policies. It will also provide necessary professional advice to organizations involved in the advancement of small business enterprises in Nigeria. It  will  also  be  useful  to  educationists,  scholars  and  students who wish to carry out further research on the subject matter or even produce  textbook  to  add  to  existing  literature  on  the  topic.



This study covers the effect of Micro-finance banks with great emphasis laid on Entrepreneurship growth in Nigeria from 2005-2017




However, a study of this nature cannot be carried out without some limitations some of  the problems were, insufficient data, there was  also  difficulty  in  convincing  some  of  the  respondents  of  Micro-finance  Bank  to  supply  the  needed information.  There was problem of finance in carrying out this research due to poor economic situation in the country.



This study is a build-up on the previous investigations by various scholars and researchers on the effect of microfinance banks on entrepreneurship growth and is aim at building up on the lapse of previous investigations.

The importance of this study lies in identifying the previous problems that have bedeviled the effectiveness of the microfinance banking system.

More so, the study will add to knowledge on how Nigeria policy makers can grow economy through their support on entrepreneurship growth in Nigeria which have been identified as the momentum for Nigeria economic growth (Onuoha2017).

Thus, the justification of the research. The finding of the research will therefore provide a veritable base for the effective functioning of microfinance to the growth of entrepreneurial activities.



Growth: An increase in amount, size, or degree or importance of something.

Development: The gradual growth of something so that it become bigger, stronger or more advanced.

Micro-credit:  Small loans made to low-income individuals to sustain self-employment or to start up very small business.

Small-scale: Small scale are those enterprises that have relatively little capital investment that produces in small share of the market, that employ not more than fifty workers.

Industry:  A group of firms that produce similar products or services.

Entrepreneur:  The  Oxford  Advanced  Learners  dictionary defined  entrepreneur  as  a  person  who  makes  money  by  starting  or running businesses which involves taking financial risks.

Enterprise: This is a term in the commercial world used to describe a project or venture undertaken for gain.