Role of Microfinance Institutions on Entrepreneurial and Business Development in Nigeria

Abstract

This study examines the impact of microfinance institutions (MFIs) on entrepreneurship and business development in Nigeria, focusing on their role in providing financial services to small business owners and the economically disadvantaged. By facilitating access to microloans, savings, and financial education, MFIs contribute to economic growth, employment, and poverty reduction. Through a comprehensive literature review, the study highlights how concepts such as Financial Systems Theory, Social Capital Theory, and Institutional Theory explain the mechanisms through which MFIs influence entrepreneurial outcomes. The findings indicate that MFIs effectively complement the formal banking system by addressing gaps in financial access, particularly within the informal credit market. The study also provides policy recommendations aimed at enhancing legal frameworks and developing context-specific financial products to support sustainable business growth. Additionally, it discusses the implications and limitations of the research, emphasizing the need for future studies to explore the evolving role of digital financial services in improving MFI efficiency in Nigeria and across Africa, thereby contributing to broader economic development and poverty alleviation.