The paper gives a detailed analysis on the efficiency of Operating Microfinance Institutions (MFIs) and the resulting implications it has on the performance and sustainability of the Micro, Small, and Medium Enterprises (MSMEs) in the sub-Saharan Africa region with a specific reference to Nigeria region. Inclusive growth and economic resilience depend mainly on the Nigerian economy by using microcredit as a major tool to boost the economy particularly in the face of fluctuating macroeconomic conditions. With bases on the theory of financial intermediation according to which the efficient financial institutions have the potential to improve capital allocation, as well as, stimulate the growth of enterprises, the analysis is based on an empirical test at how far the micro finance institutions can take the institutional efficiency and convert the same into real actions that benefit the MSMEs. In order to provide strong and grounded knowledge, the study utilized a purposive multi-stage method involving selection of the 18 strategically situated microfinance banks (MFBs) in southwestern Nigeria in six states. Particular attention was given to interested customers who had received government supported intervention loans, which are a valuable scheme to have filled the financing gap of MSMEs. The primary data was also collected carefully by use of structured questionnaires that admitted an impressive response rate of 98% besides the use of bank administrative records and national economic statistics in order to make findings as legitimate as possible. Methodologically, the research deployed Stochastic Frontier Analysis (SFA) in measuring the technical efficiency of MFB operations, which provided subtle understanding of how operational activities were meeting best possible results. The empirical results indicate great inefficiency in the operations of the surveyed MFBs that spill over the optimum delivery of microcredit services limit the potential growth and the capacity of MSMEs.
Saka et al. (Mon,) studied this question.