Paper

Prime Lending Rates and Performance of Microfinance Banks in Nigeria

Studying the effect of prime lending rate on the ability of microfinance banks to grant loans

This paper examines the relationship between the prime lending rate and the performance of microfinance banks in Nigeria. It uses variables like total assets, total loan obtained, deposits, and shareholder funds to measure the performance of microfinance banks in the country. The paper finds that the lending rate is a weak determinant of a microfinance bank’s performance. A high lending rate reduces the capacity of microfinance banks to obtain loans and advances since it constrains their access to credit facilities from big banks and other institutions. The paper suggests that there is need for microfinance banks to reiterate credit mobilization, source long-term bank funding, and canvass for fund from big banks. It covers the following sections in detail:

  • Introduction to key financial institutions in Nigeria and a discussion on prime lending rates;
  • Theoretical overview of the relationship between lending rates and performance indicators of microfinance providers;
  • Methodology of the study with a focus on descriptive statistics and multi correlation analysis;
  • Results of the correlation test with a focus on data analysis and interpretation;
  • Findings, concluding remarks, and recommendations for microfinance banks to access increased funding from commercial banks and other financial institutions.

About this Publication

By Awoyemi, B.O. , Jabar, A.A.
Published