EFFECT OF ELECTRONIC PAYMENT SYSTEMS ON THE PERFORMANCE OF MICROFINANCE BANKS IN NIGERIA

Abstract

This study investigated the effect of electronic payment channels, namely Automated Teller Machines (ATMs), Point of Sale (POS) devices, and Mobile Banking Services (MBB) on the performance of microfinance banks in the South West region of Nigeria. Return on Assets (ROA) and Return on Equity (ROE) were employed as proxies for measuring the performance of twelve microfinance banks in Nigeria. Secondary data from annual reports of the selected microfinance were obtained from 2007 to 2021. Descriptive statistics, correlation analysis, and fixed effect regression model were employed for the analysis. Results indicated that ATMs (0.0003, p<0.05) and POS channels (0.0116, p<0.05) have positive and significant effect on the performance of microfinance banks, as measured by ROA and ROE. However, findings revealed that MBB (0.226, p<0.05) had positive but insignificant effect on the performance of microfinance banks in Nigeria. The study suggested that the adoption and effectiveness of MBB in this specific context may be hindered by barriers such as limited technological literacy, lack of access to smartphones, and insufficient awareness and trust in digital financial services. Therefore, microfinance banks should continue to invest in expanding their ATM and POS networks, as these channels have demonstrated a significant positive impact on their profitability.