An appraisal of financial sector reforms’ impact on credit access in Nigeria: A study of microfinance institutions in Kano State (2000–2020)
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Background of the Study :
Financial sector reforms are designed to improve access to credit, particularly for small-scale enterprises and underserved populations. In Nigeria, reforms aimed at deregulating the banking sector and enhancing financial inclusion have had varied effects on microfinance institutions (MFIs). In Kano State, MFIs serve as critical financial intermediaries, providing credit to entrepreneurs and low-income households. Between 2000 and 2020, a series of reforms—including the liberalization of interest rates, improved regulatory oversight, and capacity-building initiatives—were implemented to expand credit access. These reforms have been credited with increasing loan disbursement and improving financial literacy among marginalized communities (Okonkwo, 2023). However, challenges such as high operational costs, inadequate risk management, and limited collateral among borrowers continue to restrict credit access. This study appraises the impact of financial sector reforms on MFIs in Kano State by analyzing lending patterns, default rates, and borrower satisfaction. It aims to provide a detailed assessment of how regulatory changes have enhanced or hindered credit access and to offer recommendations for further improvements (Adeniyi, 2024; Chukwu, 2025).
Statement of the Problem
Despite significant financial sector reforms, access to credit through microfinance institutions in Kano State remains constrained. Factors such as high interest rates, limited borrower collateral, and operational inefficiencies continue to restrict the effectiveness of these reforms. Consequently, many low-income entrepreneurs struggle to secure the necessary funds to expand their businesses. The gap between reform policies and actual credit accessibility calls into question the overall efficacy of current financial sector reforms. This study seeks to investigate the specific challenges that limit credit access in the microfinance sector and assess the overall impact of regulatory changes on financial inclusion in Kano State (Okonkwo, 2023; Adeniyi, 2024).
Objectives of the Study:
1. To evaluate the impact of financial reforms on credit access in Kano State’s microfinance institutions.
2. To identify challenges that limit effective credit distribution.
3. To propose strategies to improve financial inclusion.
Research Questions:
1. How have financial sector reforms affected credit access in Kano State’s MFIs?
2. What are the main challenges faced by these institutions?
3. What measures can enhance credit accessibility for low-income borrowers?
Research Hypotheses:
1. H1: Financial sector reforms positively impact credit access in MFIs.
2. H2: Operational inefficiencies hinder the full benefits of these reforms.
3. H3: Improved risk management practices enhance credit distribution.
Significance of the Study (100 words):
This study provides valuable insights into the impact of financial sector reforms on credit access via microfinance institutions in Kano State. Its findings will assist policymakers and financial regulators in designing more effective interventions to boost financial inclusion and support entrepreneurship among underserved communities (Chukwu, 2025).
Scope and Limitations of the Study:
The study is limited to evaluating the impact of financial sector reforms on credit access through microfinance institutions in Kano State, focusing solely on lending practices and regulatory outcomes.
Definitions of Terms:
1. Financial Sector Reforms: Policy changes aimed at improving the efficiency and inclusiveness of the financial system.
2. Credit Access: The ability of individuals and businesses to obtain loans and financial services.
3. Microfinance Institutions (MFIs): Financial organizations that provide credit to low-income clients.
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