Profitability And Financial Sustainability Of Microfinance Banks In Nigeria

Abstract

This study seeks to evaluate the profitability of microfinance banks operating in Nigeria as a precondition of financial sustainability. Profitable banks tend to maintain adequate capital, high deposit base, high liquidity status and high loan quality. Correlational research design was adopted for the study and balanced panel data was used. Financial sustainability microfinance banks were profiled on size, capital adequacy and liquidity status, deposit base and loan quality following a balanced panel design. Multiple regression was used to analyze the data collected. The study reveals low level of profitability and sustainability, and hence recommends that Government and Monetary authorities (CBN) should increase the capital requirements for the establishment of Microfinance Banks as the current requirements are inadequate; embark on effective monitoring of the activities of Microfinance Banks; and promulgate policies that will enhance transparency, proper accountability and competition in the sector to attract more credible investors.