Annals of Management Science


This study examined the factors that influenced micro credits granted by microfinance institutions and deposit money banks in Nigeria. The study used time series data on micro credits, bank-specific factors (bank size, deposits volume and liquidity ratio), regulatory factors (cash reserves ratio, monetary policy rates and money supply) and economic rates (lending rates, deposit rates, treasury bills rates and exchange rates), over the years 1980-2014. The data, which allowed broader lessons and policies to be drawn, were collected from the Central Bank of Nigeria and subjected to econometric analyses such as unit roots and autoregressive distributed lag (ARDL) cointegration tests. Results showed that micro credits significantly depended on bank size, deposits volume, exchange rates, lending rates and treasury bill rates as well as one-year lagged deposits volume, lending rates and exchange rates in the short and long run. However, cash reserves ratio, savings deposit rates and its one-year lagged values significantly caused micro credits to reduce. We concluded that bank-specific, regulatory and economic factors played dual (beneficial and detrimental) roles in the micro credits granted by the banks. Increased capital base, especially for microfinance institutions; low interest spreads and diversification of the Nigerian economy for increased foreign exchange earnings, were recommended.