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Financial Inclusion is considered an important means to realize the goal of inclusive economic growth.  Inclusive financial  arrangement  is  becoming  a  policy issue in both  developed  and developing  nations  of  the  world  as  it  has  been  perceived  as  a  veritable  tool  for  poverty alleviation and economic development. This study was set to determine the impact of financial inclusion on economic growth in Nigeria. The nature of data was Secondary sourced from the Statistical Bulletin of the Central Bank of Nigeria (CBN), and the Nigeria bureau of statistics. Data collected covered a period of twenty-eight (28) years (1987-2015). This was analyzed using regression test statistic. Findings revealed that, financial inclusion had a positive impact on poverty reduction in Nigeria, there is causal relationship between financial inclusion and economic growth in Nigeria and that commercial banks intermediation activities have positive effect on financial inclusion in Nigeria. Hence, financial inclusion enhances economic growth in Nigeria. The study therefore recommended that regulators and supervisory bodies, need a consistent and coordinated effort at not only ensuring that the financial institutions offer basic banking products at minimal cost through all their channels to most of the population but also promote consumer enlightenment and protection policy. Efforts should also be made to close the gap/spread between deposit and lending rate in the rural areas to encourage savings.




The emerging trends in financial inclusion have gained growing attention among developing countries Policymakers and central bankers from around the world. The Emerging economies enhanced interest towards economic growth with specific interest on the factors that lead to higher savings and investments, which have been viewed as important determinants of economic growth (Gardeva & Rhyne, 2011). Previous researches on financial exclusion define it among others as those processes that serve to prevent certain social groups and individuals from gaining access to the formal financial system (Leyshon & Thrift, 1995), Hannig & Jensen (2010) or as the inability of some societal groups within an economy to access the financial system. Similarly, Conroy (2005) identified the process that prevents the poor and the disadvantaged social groups from  gaining  access  to  formal  financial  systems  of  their  countries  as  a  form  of  financial exclusion, while Mohan (2006) opined that lack of access by certain segments of the society to appropriate, low-cost, fair and safe financial products and services from mainstream providers are measures of financial exclusion.

Financial inclusion is described as the delivery of banking and other financial services at affordable costs to the vast sections of disadvantaged and low income groups. Unrestrained access to public goods and services is essential for an open, inclusive, and efficient society. Banking services are in the nature of public services. As such it is essential that availability of banking and payment services to the entire population without discrimination is adopted as one of the prime objectives of public policy. Therefore, all countries have widely acknowledged the fact that improving the access to financial services is a very effective strategy for development of rural areas. Hence, it is important that financial inclusion of the excluded households of rural areas is being accorded high priority by the governments in the developing countries.

Developing countries all over the world has been constantly emphasizing reduction of poverty, one of the basic agenda of Millennium Development Goals (MDGs). The State, formal financial system and community based organizations are incidental in annihilating poverty while posing as

the three pillars in achieving societal transformation Thorat, (2006). Financial system can play a role in  reinforcing many of  the objectives  of  the MDGs  involving savings,  livelihood  and economic infrastructure apart from providing an efficient payments system. Financial exclusion epithets limited accessibility of individuals to formal financial services.

Mobilization and circulation of finance is the primary requirement of development of an economy. Achieving inclusive growth makes financial inclusion a key policy concern for a developing nation like Nigeria. Inclusive financial arrangement is becoming a policy issue in both developed and developing nations of the world as it has been perceived as a veritable tool for poverty alleviation, economic growth and development (Onaolapo, 2015). Financial inclusion refers to a process that ensures the ease of access, availability and usage of the formal financial system by all members of an economy. Martinez (2011) identified financial access as an important policy tool employed by government in fighting and stimulating growth given its ability to facilitate efficient allocation of productive resources, thus reducing the cost of capital. This process otherwise referred to as an inclusive financing system can significantly improve the day-to-day management of finances, as well as reduce the growth of informal sources of credit (such as money lenders), which are often found to be exploitative. An inclusive financial system is now widely recognized as a policy priority in many countries with initiatives coming from the financial regulators, the government and the banking industry. Legislative measures have also been initiated in some countries leading to such regulatory frameworks as the United States Community Reinvestment Act (1997),which requires banks to offer credit throughout their entire area of operation and prohibits them from targeting only the rich neighborhoods.

In France, the Law on Exclusion (1998) emphasizes an individual’s right to have a bank account, while government of the United Kingdom constituted, a ‘Financial Inclusion Task Force’ in 2005 in order to monitor the development of financial inclusion. Regulations have also been enacted in developing nations such as the Reserve Bank of India Financial Inclusion initiative and the Central Bank of Nigeria (CBN) Micro-finance banking policy (2005). In South Africa, a low cost bank account called Mzansi was launched for financially excluded people in 2004 by the South African Banking institutions and Self-help Groups in order to extend financial services to the excluded. Many of these regulatory frameworks were designed as mediums for improving economic welfare of low income groups such as, rural women being able to buy serving machine

and establish small businesses artesian, having access to wider financial services with capacity to increase or stabilize income and thus build resilience against economic shocks. Besides income benefits of a safe place to make deposits and access to affordable credit assistance, access to financial services through micro-savings and micro-credit has resulted in positive outcomes such as a reduction in child-labour and increases in agricultural productivity (Robinson, 2001).

In  essence financial  inclusion  is complementary to  economic growth  as  the two  contribute toward poverty alleviation. For instance, Demirgue-Kunt, Beck & Honohan, (2008), Johnson & Murdoch (2008). Hannig & Jansen (2010) noted that financial sector development is a driver of economic growth which indirectly reduces poverty and inequality while appropriate financial services for the poor can improve their welfare. Such inclusive financial system is therefore a veritable   avenue   for   economic  development   and   growth   given   its   capacity  to   ensure improvement in the delivery of efficient services, creation of saving opportunities and facilitation of capital formation among the poor (Ahmed, 2006). This study seeks to investigate the impact of financial inclusion on the Nigerian economy.


A major cornerstone of inclusive growth is to ensure that the benefits and fruits of growth reach the bottom of the pyramid population especially, vulnerable social and sectoral groups. Inclusive growth in Nigeria hence remains a mirage, save a radical transformation of the entire tools of how the Nigerian economy functions in the grassroots. Well-functioning financial systems serve a vital purpose by offering savings, payment, credit, and risk management services to individuals and firms. Inclusive financial systems are those with a high share of individuals and firms that use financial services. Without inclusiveness in financial systems, people rely on their own limited savings to invest in education or become entrepreneurs. Newly founded enterprises must likewise depend on their constrained earnings to take advantage of promising growth opportunities. This can contribute to persistent income inequality and slow economic growth. Development  theory  provides  important  clues  about  the  impact  of  financial  inclusion  on economic development (World Bank, 2014). Available models illustrate how financial exclusion and, in particular, lack of access to finance can lead to poverty traps and inequality (Aghion & Bolton 1997; Banerjee & Newman 1993; Galor & Zeira 1993). For example, in the model of

Galor & Zeira (1993), it is because of financial market frictions that poor people cannot invest in their education, despite their high marginal productivity of investment. In Banerjee and Newman’s model (1993), the occupational choices of individuals (between becoming entrepreneurs or remaining wage earners) are limited by the initial endowments. These occupational choices determine how much the individuals can save and what risks they can bear, with long-run implications for growth and income distribution. These models show that lack of access to finance can be critical for generating persistent income inequality or poverty traps, as well as lower growth.

Financial inclusion and access to finance are different issues. Financial inclusion refers to the proportion of individuals and firms that use financial services. The lack of use does not necessarily mean a lack of access. Some people may have access to financial services at affordable prices, but choose not to use certain financial services, while many others may lack access in the sense that the costs of these services are prohibitively high or that the services are simply unavailable because of regulatory barriers, legal hurdles, or an assortment of market and cultural phenomena. The key issue is the degree to which the lack of inclusion derives from a lack of demand for financial services or from barriers that impede individuals and firms from accessing the services (World Bank, 2014).

Financial inclusion has become a subject of considerable interest among policy makers, researchers, and other stakeholders. In international forums, such as the Group of Twenty (G-

20), financial inclusion has moved up the reform agenda. At the country level, about two-thirds of regulatory and supervisory agencies are now charged with enhancing financial inclusion Abreu and Mendes (2010). The heightened interest reflects a better understanding of the importance of financial inclusion for economic and social development. It indicates a growing recognition that access to financial services has a critical role in reducing extreme poverty, boosting shared prosperity, and supporting inclusive and sustainable development (World Bank,

2014).  The interest  also  derives  from  a  growing recognition  of  the large  gaps  in  financial inclusion.

The idea of inclusive economic development came after the introduction of the Millennium Development Goals (MDGs). The goals were developed because, although many countries have achieved remarkable results in their long-term economic development in terms of high economic

growth, high income per capita, and rapid structural change from agriculture-based to industry based economies, poverty is still high in many countries and the gap between the rich and poor has  become  wider  Tambunan,  (2015).  It  is  widely  acknowledged  that  sustained    poverty reduction depends on a rapid pace of economic growth. But the connection is not automatic. Some fast-growing economies have failed to tackle poverty, while some countries with slower economic growth have been more successful Tambunan, (2015). Even the United Nations Conference on Trade and Development (2010) argues that a fundamental problem in achieving the MDGs has been the lack of a more inclusive strategy of economic development that could integrate and support its “human development” ambitions.

Furthermore,  academic  literatures  abound  on  the nexus  between  financial  development  and economic growth (Odedokun, 1989; Ayadi et al, 2008; Ighodaro & Oriaki, 2011). Emphasis of these   studies   focus   on   the   relationship   between   financial   aggregates,   financial   sector development and economic growth. Studies on the likely impacts of financial inclusion as means for including the ‘excluded’ poor in the scheme for economic development and growth are relatively scarce and the extent to which an enhanced bank intermediation activity can support economic development in the Nigerian case has not been exhaustively addressed. This study is an attempt to bridge the gap in this essential area and thus complement existing researches designed  to  achieve  adequate  financial  inclusion  by the  CBN.  The  aim  of  the  study is  to undertake an  in-depth  study of  the impact  of  financial  inclusion  on  the Nigerian  economy between 1987 to 2015.


The main objective of the study is to investigate the impact of financial inclusion on the Nigeria economy. However, the specific objectives are:

1.  To assess the effect of financial inclusion on poverty reduction in Nigeria.

2.  To determine the nature of causality between financial inclusion and economic growth in Nigeria.

3.  To  evaluate  the  effect  of  commercial  banks  intermediation  activities  on  financial inclusion in Nigeria.


In line with the objectives of the study, the research questions shall be:

1.  How does financial inclusion affect poverty reduction in Nigeria?

2.  What is the nature of causality between financial inclusion and economic growth in


3.  What is the effect of commercial banks intermediation activities on financial inclusion in



Following the research  questions and objectives of the study, the following hypotheses are formulated:

1.  Financial inclusion does not have positive and significant impact on poverty reduction in


2.  There is no causality effect between financial inclusion and economic growth in Nigeria.

3.  Commercial banks intermediation activities does not have positive and significant effect on financial inclusion in Nigeria.


The scope of this research was to bridge the gap of existing product strategies, technological model and credit delivery strategies for financial inclusion. This research facilitated self-service technology solutions which are essential to address the sustainability challenges facing financial inclusion. The research provided main key learning’s that policy makers, financial institutions, and technology providers can use to establish innovative economic strategies to fulfil lthe demand. It covered a Twenty-eight (28) year period, 1987 to 2015.


This study is relevant and significant because it deals with a contemporary issue. Financial exclusion has been pointed as one of the major drivers of poverty; hence, financial inclusion is attracting worldwide attention. Poverty alleviation is one of the eight Sustainable Development Goals (SDGs) which Nigeria seeks to achieve. Financial inclusion has the potential to be embraced by people of all social groups for as long as one has access to financial services. Therefore;

1.  It is anticipated that the findings from this study will give insights to the policy makers so that they can formulate policies such bring thye unbankable groups into the financial system that encourage effort to embrace the ‘unbanked’ population.

2.  The public will make informed choices on whether to adopt or reject financial inclusion.

3.   Other scholars may use the research findings as a reference material and also to identify areas for further studies.

4.   Corporate strategies can be crafted around this new model for sustainable competitive advantage.

This material content is developed to serve as a GUIDE for students to conduct academic research



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