Outreach and Financial Sustainability of Microfinance Banks in Southwest Nigeria

Musa A. Olasupo, Carolyn A. Afolami, Adebayo M. Shittu


Microfinance Banks (MFBs) in Nigeria are still a far cry from meeting their potentials as instrument of genuine economic development through the empowerment of the economic active poor whose core economic activities are located along the agricultural value chains. We examined the outreach and financial sustainability of MFBs to ascertain how well they have contributed to the financial intermediation process and also provide insight into their readiness as catalyst for the financial inclusion strategy. We measured outreach through technical efficiency and financial sustainability through economic efficiency using Data Envelopment Analysis for the activities of 86 MFBs in South-West, Nigeria. We observed a mean annual technical efficiency score of 0.464 and 30.23% of the sampled MFBs had technical efficiency score estimates of between 0.61 and 1.0. The mean economic efficiency score was 0.055 with a maximum of 2 MFBs on the economic efficiency score range of 0.81 and 1.0 over the study period. The mean economic efficiency of MFBs located in commercial areas was 0.0712 greater than the mean economic efficiency of their counterparts in the agrarian areas. Overall, the study depicted the Nigerian Microfinance sub-sector to be at its infancy (stage) and hence needs to be nurtured to achieve its potentials.


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DOI: https://doi.org/10.5539/ijef.v6n2p25

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