RESPONSIVENESS OF INCOME INEQUALITY AND POVERTY LEVEL TO RURAL BANK LOANS IN NIGERIA

RESPONSIVENESS OF
INCOME INEQUALITY AND
POVERTY LEVEL TO RURAL
BANK LOANS IN NIGERIA
Emmanuella Adaobi Onwubu
University of Nigeria, Enugu Campus
ABSTRACT
Unlike economic growth which is a rise in
aggregate outputs and often determined by
market forces, poverty level and income
inequality is less exclusively the outcome of
the market forces, but long-term investments
in infrastructure, innovations and knowledge
transfer. It is dependent on the workings of
the socio-economic institutions and also on
the collaboration between the private
enterprise and public sector. This paper tries
to analyse how income inequality and
poverty level responds to changes in rural
bank loans in Nigeria, covering 1990 to 2018.
The study used augmented vector
autoregressive (VAR) model and Toda and
Yamamoto Granger causality test as the
empirical method. The findings of the study
indicate positive non-significant relationship
between rural banks’ loans and income
inequality while there is negative insignificant
relationship between rural banks’ loans and
poverty level. The findings also reveal that
rural banks’ loans does not Granger cause
income inequality and poverty level.
Therefore, the study recommends that banks
rationale for opening a branch should not
only be based on the reason of profitability
but inclusivity so as to allow wide number of
Nigerians access to financial services. Also,
proper financial system reforms should be
introduced targeted at improving the
financial market imperfections allowing the
low-income group access loans needed for
education and health in order to improve
their chances of earning more.

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