Effect of microfinance bank financial intermediation on agricultural output in nigeria: 1992 - 2018

Abstract

This study examined the effect of financial intermediation by microfinance banks on the output of agricultural sector in Nigeria between 1992 and 2018. Data were collected in this study from the secondary sources and analyzed by means of inferential statistics. Specifically, the study employed Vector Error Correction model technique in data analysis after establishing the stationarity of the data series by means of Augmented Dickney-Fuller test and determined long run equilibrium relationship via Johansen cointegration technique.Findings from this study revealed that in the long-run, there was a positive and significant relationship between microfinance banks’ credits to agriculture and the output of agricultural sector in Nigeria as MCA was found to be positively promoting agricultural output by about 2.7%. Also, micro-finance banks’ gross saving deposit (MGSD) was found to have negative and significant relationship with agricultural output both in the short-run and in the long-run. Moreover, the deposit interest rate was found in this study to exhibit positive behavior in the short run but negative and significant relationship with agricultural output in the long-run. The lending interest rate by finding of this study negatively facilitated agricultural output in the short run but maintained positive relationship with agricultural output in the long run.Based on these findings, it was concluded that financial intermediation by microfinance banks was an insignificant determinant of agricultural output in Nigeria.Consequently, it was recommended that microfinance banks should be brought under close monitoring and supervision by the monetary authorities to ensure that significant portion of their deposits is not left fallowed and unproductive but optimally converted to credits for lending, especially to the grassroots farmers who lack investable capital for agricultural investment.