Private Sector Microcredit Programmes, Financial Inclusion and Sectoral Entrepreneurship: Evidence and Insights From Nigeria

Given the growing interest in microcredit operations, especially in the developing economies and the need to investigate the varied interrelationships between sectoral microcredit operations and economic growth of nations, this study examines the nature and direction of causal relationships that prevail between classified sectoral microcredit allocations and sectorally classified entrepreneurship contributions to Nigeria’s economic growth. Secondary data were sourced from Central Bank of Nigeria covering the period 1992 to 2011. Augmented Dickey-Fuller and Unit Root and the Standard Granger Causality techniques were employed in processing the data. The results of the study show that the time series variables are stationary. Out of the five classified sectors of economic activity – agriculture/forestry, other mining/quarrying, manufacturing/food processing, real estate/construction and transport/commerce, significant unidirectional causality only prevails in the other mining/quarrying sector with   causality running from contributions of other mining/quarrying in Nigeria’s GDP to microcredit allocations to that sector. The rest other sectors failed the causality test at 0.05 level, although transport/commerce sector records a near significance level of 0.055. The study concludes that: (i) In the sectors where microcredit operations have become significant and/or near significant, they only function to service rather than promote entrepreneurial activities, (ii) For majority of the sectors, entrepreneurship ventures are largely independent of microcredit institution’s operations. Consequently, the study recommends diversified product development and intensified marketing of microfinance service products on the part of the participating institutions. Further recommended is that the government should, through all legal and institutional means, strengthen the enforcement of credit contracts in general and microcredit operations in particular. This measure is justified in order to minimize the incidence of delinquent credit exposures, guarantee continued microcredit operations and long run survival of microcredit operating institutions in Nigeria. Key Words: Microcredits Allocation, Financial Inclusion, Sectoral Entrepreneurship