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Microfinance activities and entrepreneurship development in Nigeria

Onigah Peter Oko 1, Maimuna Munir Ibrahim 2, Nwawuba Ifeoma Grace 2 and Obani Chimaobi Desmond 3, *

1 Department of Banking and Finance, University of Abuja, FCT.
2 Department of Banking and Finance, University of Nigeria, Enugu Campus.
3 Accounting Department, Michael Okpara University of Agriculture Umudike, Umuahia, Abia State.
 
Research Article
International Journal of Frontline Research in Multidisciplinary Studies, 2026, 06(01), 001-016.
Article DOI: 10.56355/ijfrms.2026.6.1.0021
Publication history: 
Received on 22 April May 2026; revised on 07 June 2026; accepted on 09 June 2026
 
Abstract: 
This study examines the impact of microfinance activities on entrepreneurship development in Nigeria over the period 2000–2025, focusing on microfinance loans (MFL), microfinance savings (MFSAV), and microfinance-related investments (MFINV) as independent variables, with the SME-GDP entrepreneurship index (SMEGDP) as the dependent variable. Data sourced from the Central Bank of Nigeria Statistical Bulletin and World Development Indicators were analysed using the Autoregressive Distributed Lag (ARDL) bounds testing approach, chosen for its suitability in handling mixed-order integrated series and simultaneously estimating short-run and long-run dynamics. Preliminary diagnostics confirmed variable stationarity at both I(0) and I(1), while post-estimation tests validated model adequacy through absence of serial correlation, heteroscedasticity, and misspecification. The bounds test confirmed a long-run cointegrating relationship among variables, with an F-statistic of 44.65 exceeding upper critical bounds. Long-run estimates reveal that microfinance loans exert a positive and statistically significant effect on entrepreneurship development, while microfinance savings similarly demonstrate a positive and significant long-run influence, collectively reinforcing the role of credit access and savings mobilisation in sustaining entrepreneurial activity. Conversely, microfinance-related investments exhibit a negative and significant long-run effect, attributed to structural inefficiencies, poor investment targeting, and institutional misalignment within Nigeria's microfinance sector. Short-run coefficients were statistically insignificant across all variables. The study concludes that microfinance remains a critical driver of entrepreneurship development, contingent upon improved delivery mechanisms, rigorous investment appraisal, and inclusive policy frameworks. Recommendations emphasise flexible lending structures, enhanced savings products, and strengthened investment governance.
 
Keywords: 
Microfinance Activities; Entrepreneurship Development; Financial Inclusion; ARDL Bounds Testing; Nigeria.
 
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Copyright information: 
Copyright © 2026 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution Liscense 4.0