Determinants of Financial Inclusion in Kano State Government-Led Microfinance Banks: A PLS-SEM Approach
DOI:
https://doi.org/10.56919/jbam.2621.010Keywords:
Financial Inclusion, Microfinance Banks, Financial Self-Sufficiency, Financial Literacy, Government Policy, Kano StateAbstract
Financial inclusion remains a critical yet elusive tool for poverty reduction and youth unemployment in developing nations. In Nigeria, despite national strategies, financial exclusion remains high, particularly in the Northwest region where rates have historically reached 70%. This study examines the effects of Kano State Government’s microfinance banks on financial inclusion. It specifically investigates the conflict between social objectives, such as poverty alleviation, and the commercial necessity of financial sustainability. The study adopted a positivist research philosophy and a cross-sectional survey design using census sampling to collect primary data from 222 management staff across the 37 MFIs. Data were analyzed using Partial Least Square Structural Equation Modeling (PLS-SEM) via Smart-PLS 4.0.9.9 to test the relationships between financial self-sufficiency, financial literacy, government policy, and financial inclusion. The results indicate that the model of the study explains 62.2% of the variance in financial inclusion. Financial self-sufficiency emerged as the most significant driver (β=0.456, p<0.001), exerting a medium effect size on inclusion efforts. Government policy also showed a significant positive relationship (β=0.299, p<0.001), though with a smaller effect size. Similarly, financial literacy was found to have a significant positive effect (β=0.160, p<0.001). The study also highlights significant challenges, including the "Unit bank" designation limiting savings mobilization and religious considerations regarding interest-based products in predominantly Muslim communities. The study concludes that sustainable financial inclusion requires MFIs to reach financial self-sufficiency to become grant independent.State Governments willing to replicate Kano State experience should focus on nurturing self-sufficient institutions that are well governed, politically insulated and well-fund. In addition, financial literacy development should be given serious attention by Governments, development partners and the microfinance banks themselves. The regulatory authorities should ensure that State Governments willing to establish microfinance banks make adequate provision for private sector participation to ensure financial self-sufficiency that will facilitate financial inclusion.
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