Socio-Economic Impact of Informal Financial Sector and Inclusive Growth: Empirical Evidence from North Central-Nigeria

Abstract

The paper examines the socioeconomic impact of informal financial sector and inclusive growth in north central-Nigeria. The notion behind inclusive growth entails analysis how employment opportunities arise and change with growth process with time. Economic growth can be accompanied by an increase in informal sector employment. Informal financial sector may support growth by reducing cost of borrowing, collateral, bureaucratic process and improving competitiveness. However, a well-functioning and regulated informal financial economy will be a critical prerequisite to achieve sustainable growth in north central-Nigeria. And also, a widespread informal financial sector with regard to employment, enterprise, and productive activities is frequently perceived as a barrier to full participation in the economy and as a hindrance to long-run economic development and poverty alleviation in this region. This is because the link between, informal financial sector, growth and inclusiveness is not fully understood. Inclusive growth has been defined as growth that takes place in a context in which economic opportunities-including employment opportunities expand, the poor"s access to these opportunities improves, and inequalities are reduced. This paper seeks to investigate the socioeconomic impact of informal financial sector activities, inclusiveness" and economic growth in north central-Nigeria. A systematic random sampling method was used to collect data from 500 informal financial sector operators in Abuja, kogi and Niger states. A multivariate panel logit model statistic was used to analyze the data in order to identify the perception of socioeconomic impact of Informal financial sectors on economic growth in north central-Nigeria. The findings revealed that informal sector operators has a positive and significant impact on growth in the region; while poverty-mentality, illiteracy, high inflation, low infrastructure, access to credit, social safety nets and information dissemination are the major problems encountered by these institutions. The paper recommends among other things the education of the rural poor to embark on viable projects, infrastructural development and favorable government policies so as to regulate the sector becomes relevant.