This paper applies the financing constraints approach to study whether microfinance institutions improved access to
credit for microenterprises in Nigeria or not. According to this approach, microenterprises with improved access to
credit rely less on internal funds for their investments. Thus, investment sensitivity to internal funds of micro
enterprises in Lagos State (a municipal with significant presence of Microfinance Banks (MFBs) was compared to
that of micro enterprises in Ekiti State (a municipal with no (or limited) presence of MFBs) using a cross sectional
survey method and Microfinance Institutions (MFI) branch location data. Results indicate that MFBs alleviated
micro businesses’ financing constraints. This approach is applicable to evaluating microfinance impact in other
countries
