IMPACT OF MICROFINANCE

This study investigated the impact of microfinance on small business development in Nigeria, using a case study of Lift Above Poverty Organization (LAPO) Microfinance Bank in Benin City, Edo State. Small and Medium Enterprises (SMEs) are critical drivers of economic growth, employment generation, and poverty reduction in Nigeria, yet they consistently face severe challenges accessing traditional credit. The main objective of this study was to assess how LAPO Microfinance Bank’s credit facilities, savings mobilization, and business advisory services influence the growth, operational capacity, and survival of small businesses in Benin City. The research adopted a descriptive survey research design. The target population comprised small business owners in Benin City who are active beneficiaries of LAPO Microfinance Bank's financial services. A structured questionnaire was utilized to gather primary data from a sampled size of respondents, selected via simple random sampling techniques. Data collected were analyzed using both descriptive statistics (mean, frequencies, and percentages) and inferential statistics (Multiple Linear Regression or Chi-Square analysis) via the Statistical Package for the Social Sciences (SPSS). The empirical findings revealed that access to micro-credit from LAPO Microfinance Bank has a positive and significant impact on the business expansion, asset acquisition, and sales volume of small enterprises in the region. Furthermore, the study established that LAPO’s group-lending methodology and flexible repayment structures effectively mitigated traditional collateral bottlenecks, making capital more accessible to the active poor and female entrepreneurs. However, challenges such as high interest rates, short loan repayment moratoriums, and insufficient loan amounts relative to inflation were identified as limiting factors affecting the long-term sustainability of these businesses. Based on these findings, the study concludes that microfinance institutions are pivotal to grassroots economic development, but their impact can be enhanced through policy adjustments. Consequently, it is recommended that LAPO Microfinance Bank review its interest rates and extend repayment periods to reduce financial strain on borrowers. Additionally, the Central Bank of Nigeria (CBN) should provide specialized intervention funds to microfinance banks to enable them to offer cheaper, more sustainable long-term credit to small businesses.