Informal Financial Institutions (IFIs) and Investment in Nigeria: A Binomial Logit Linear Regression Approach

Abstract

Small and Medium Enterprises (SMEs) occupy a central place in the economic growth of nations. SMEs have a fundamental role to play in the development of an economy and this cannot be over emphasized. SMEs serve as training arena for local skills and entrepreneurs, and could become channels for mobilizing local savings, ensuring a more equitable distribution of income and reducing the migration of manpower from the rural to urban areas. On this note, ggovernment has identified the need for the development of SMEs. One of such Sectorial strategies is the introduction and pursuit of policies such as concessionary financing to encourage and strengthen the growth of SMEs in Nigeria. However, a well-functioning and regulated informal economy will be a critical prerequisite to sustainable growth. This is because the link between, informality and Investment in Nigeria is not fully understood. This study seeks to investigate the nexus between Informal Financial Institutions and Investment in Nigeria. A binomial Logit Linear Regression approach was employed with data from structured questionnaires having Investment and repayment plan as variables. The finding revealed that the odd ratio of investment against the IFIs chance of alleviating poverty in north central-states-Nigeria is 2.21. The study therefore concluded that there exists a significant relationship between IFIs and Investment in north central-Nigeria. The study recommends among others that there is the need for the government to utilize Informal Financial Institutions in its poverty reduction programmes, since about 75 percent of the Small and Medium scale Enterprises (SMEs) could assess credit for investment through them. This will go a long way in promoting inclusive growth in the country.