DETERMINANTS OF MICROFINANCE BANKS' SURVIVAL IN SOKOTO AND ZAMFARA STATES

Abstract

External and internal economic environments continue to pose serious challenges to the performance and survival of microfinance banks, particularly in developing economies such as Nigeria. This study examines the determinants of microfinance banks’ survival in Sokoto and Zamfara States. The specific objective is to assess the effect of capital adequacy, asset quality, liquidity, and operational efficiency on the survival of microfinance banks. The study employed a correlational research design and utilized quantitative secondary data covering a ten-year period from 2014 to 2023. The population comprised all ten microfinance banks operating in Sokoto and Zamfara States; however, due to data availability constraints, a filter sampling technique was adopted, resulting in a final sample of four microfinance banks. Data were sourced from audited annual financial statements of the sampled banks. Fixed effects multiple regression analysis with robust standard errors was employed for data analysis. The findings reveal that capital adequacy and operational efficiency have positive and statistically significant effects on the survival of microfinance banks, while asset quality and liquidity, although positively related, do not exert statistically significant effects during the period under review. The study concludes that strong capitalization and efficient cost management are the most critical drivers of microfinance bank survival in Sokoto and Zamfara States. Consequently, the study recommends that the Central Bank of Nigeria should prioritize policies that strengthen the capital base of microfinance banks to enhance their resilience, sustainability, and contribution to financial inclusion.