ABSTRACT:

This study examined the effect of selected macroeconomic variables on financial performance of Microfinance banks in Nigeria. The study used panel data obtained from nineteen banks for periods of fifteen years. The data were analyzed with autoregressive distributed lag (ARDL) framework and the properties of panel data were checked with normality tests and panel unit root tests. The results shows that the coefficient of capital asset, inflation and lending rate are positive and significant (p>0.05) in explaining financial performance of microfinance institutions. The coefficient of credit to private sector and public government expenditure are observed to have a negative and significant (p>0.05) in explaining financial performance of microfinance institutions. Furthermore, the result suggests that short-run disequilibrium is corrected in the long-run and also indicate the existence of a rebound effect. This study recommends introduction of new policies that combine tools of macroeconomic policy with those of microfinance institutions to integrate economic incentives with regulatory changes that will promote financial inclusiveness