Balance Sheet Management and Outreach Success for Microfinance Banks in Nigeria

Abstract

Traditionally, Microfinance Banks (MFBs) are saddled with a dual objective of
outreach and sustainability (efficiency). In the contemporary microfinance
literature, the question often asked is, “Do the goals of financial viability and
outreach complement each other?” or “is there a trade-off between the two?” We test the short and long run effects of balance sheet variables on outreach which we divide into loans and savings outreach. Our classification of balance sheet components and outreach is as given by the Central Bank of Nigeria (CBN) for the operation of microfinance banks. While the financial activities of MFBs have encouraged more of outstanding loans, savings balance has not been so affected. Quite disturbing is the fact that overtime, MFBs capital has worked against their savings balance. There is a need therefore for MFBs in Nigeria to intensify their savings mobilization drive.