An investigation of determinants of consumer credit growth in Nigeria: A case study of microfinance institutions in Kano State.
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Background of the Study :
Consumer credit is an important component of financial inclusion and economic growth, particularly in developing economies. In Nigeria, microfinance institutions (MFIs) have emerged as pivotal players in providing credit to low-income individuals and small businesses, especially in Kano State between 2000–2020 (Owolabi, 2023). The determinants of consumer credit growth in this context include interest rate policies, regulatory frameworks, income levels, and financial literacy. Recent studies have shown that effective credit delivery by MFIs can spur entrepreneurship, improve living standards, and contribute to overall economic resilience (Adebola, 2024). However, challenges such as high default rates, inadequate collateral, and limited outreach hinder the expansion of consumer credit. This study examines how these factors influence credit growth by analyzing both quantitative data from MFI records and qualitative insights from borrowers and managers. The research aims to understand the dynamics of credit provision and utilization in Kano State, offering insights into how policy interventions and institutional practices can enhance consumer credit growth and financial inclusion (Chukwu, 2025).
Statement of the Problem
Despite the recognized potential of microfinance institutions to promote consumer credit growth, Kano State faces persistent challenges that limit credit expansion. High interest rates, poor financial literacy, and a lack of adequate collateral have contributed to lower than expected credit uptake among target populations. The gap between the demand for credit and the supply by MFIs remains a critical concern, impacting economic inclusion and growth. This study aims to identify the key determinants that hinder consumer credit growth and to propose actionable strategies to overcome these obstacles, ensuring that MFIs can better serve the financial needs of low-income groups (Owolabi, 2023).
Objectives of the Study:
1. To identify determinants influencing consumer credit growth in Kano State.
2. To evaluate the performance of microfinance institutions in facilitating credit.
3. To recommend strategies to enhance financial inclusion through improved credit delivery.
Research Questions:
1. What factors drive consumer credit growth in Kano State?
2. How effective are MFIs in expanding consumer credit?
3. What measures can enhance the uptake of consumer credit?
Research Hypotheses:
1. Effective regulatory frameworks positively influence consumer credit growth.
2. Financial literacy significantly impacts credit uptake among consumers.
3. Improved MFI practices lead to enhanced credit growth.
Significance of the Study (100 words):
This study is significant as it investigates the determinants of consumer credit growth in Kano State through the lens of microfinance institutions. Its findings will provide valuable insights for policymakers and financial institutions seeking to enhance financial inclusion and credit accessibility. By identifying key challenges and proposing strategic interventions, the research aims to contribute to a more inclusive financial system that supports economic empowerment and growth (Owolabi, 2023).
Scope and Limitations of the Study:
This study is limited to evaluating consumer credit growth determinants among microfinance institutions in Kano State. It focuses on credit delivery mechanisms and borrower behavior, excluding larger commercial banks and other regions.
Definitions of Terms:
1. Consumer Credit: Loans extended to individuals for personal use.
2. Microfinance Institutions (MFIs): Financial organizations that provide small loans and financial services to low-income clients.
3. Financial Inclusion: The accessibility of financial services to all segments of society.
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