The Role of Financial Inclusion in Economic Growth: A Case Study of Microfinance Banks in Lagos State
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Background of the Study
Financial inclusion is a cornerstone of economic development, enabling individuals and businesses to access financial services such as credit, savings, and insurance. Microfinance banks play a pivotal role in promoting financial inclusion, especially in Lagos State, where small businesses and low-income earners drive significant economic activities (Adebayo & Salami, 2024).
By providing affordable financial services, microfinance banks contribute to poverty reduction, business expansion, and job creation. This study investigates how financial inclusion through microfinance banks fosters economic growth in Lagos State.
Statement of the Problem
Despite the efforts of microfinance banks, a significant portion of Lagos State's population remains unbanked or underbanked, limiting their economic opportunities (Okonkwo & Hassan, 2023). Challenges such as high-interest rates, limited financial literacy, and infrastructural deficits hinder the effectiveness of financial inclusion initiatives.
This study examines the extent to which microfinance banks contribute to economic growth and identifies barriers to maximizing their impact.
Objectives of the Study
- To assess the contribution of financial inclusion to economic growth in Lagos State.
- To analyze the role of microfinance banks in promoting financial inclusion.
- To identify challenges affecting the effectiveness of financial inclusion initiatives.
Research Questions
- How does financial inclusion contribute to economic growth in Lagos State?
- What is the role of microfinance banks in promoting financial inclusion?
- What challenges hinder the effectiveness of financial inclusion initiatives?
Research Hypotheses
- Financial inclusion significantly contributes to economic growth in Lagos State.
- Microfinance banks play a pivotal role in enhancing financial inclusion.
- Barriers to financial inclusion negatively impact economic growth.
Scope and Limitations of the Study
This study focuses on microfinance banks in Lagos State and their impact on financial inclusion and economic growth from 2023 to 2025. Limitations include the availability of comprehensive data and the dynamic nature of the financial sector.
Definitions of Terms
- Financial Inclusion: The process of ensuring access to financial services for all individuals and businesses.
- Economic Growth: An increase in the production of goods and services in an economy over time.
- Microfinance Banks: Financial institutions that provide small-scale financial services to low-income earners and small businesses.
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