FINANCIAL INCLUSION, MSMEs AND ITS IMPACT ON DEPOSIT MONEY BANKS PERFORMANCE IN NIGERIA

1Lukman O. Lawal Ph.D, ACA, 2Idris A. Abubakar, 3 Rahmat A. Salau

Abstract

This study examined the impact of financial inclusion on financial performance of listed Deposit
Money Banks (DMBs) in Nigeria. The study measured financial inclusion using Micro, Small and
Medium Enterprises Financing, Rural Financing, Number of branches of DMBs, Pricing and Usage
of banking services, while performance was measured with return on assets (ROA). This study
adopted ex-post facto research design. The population of the study comprised of the 14 listed deposit
money banks on the Nigerian Stock Exchange for the period of 2005-2018. The study censured all the
14 listed DMBs as the sample size. The study collected secondary data from Central Bank of Nigeria
statistical bulletin and financial reports of the sampled banks. Panel multiple regression analysis was
utilized to analyse the data and Hausman specification test revealed that fixed effect model was more
appropriate to random effect model. Test for adequacy were performed on the residuals and the results
indicated that the residuals were homoskedastic and had no serial correlation, suggesting that the
model is good. The study found that rural financing and number of branches of deposit money banks
have statistically significant effects on profitability of DMBs in Nigeria. The study concluded that
financial inclusion improves profitability of DMBs in Nigeria. Based on the findings, this study
recommended that DMBs should increase the amount of loan and advances given to rural areas and
Micro, Small and Medium Enterprises as this will strengthen profitability of DMBs in Nigeria.