The Impact of Digital Economic Tools on Loan Disbursement and Branch Network Optimization among Leading Microfinance Banks in Nigeria

The digitization of microfinance institutions has emerged as the new wave, and these institutions persistently advancing technology to enhance efficiency and effectiveness in various economies. This study investigates the impacts of digital economic tools on loan disbursement and branch network optimization in eight leading microfinance institutions in Nigeria, which collectively account for over 80% of the market share, during the period 2011 to 2020. Using a panel fixedeffect analysis of tools such as point-of-sale (POS) terminals, internet banking, automated teller machines (ATMs), agent banking, and online banking, the study examines their role in enhancing operational efficiency and financial inclusion. The findings reveal that POS terminals and internet banking significantly and positively influence loan disbursement, while ATMs also have a positive but statistically insignificant impact. Conversely, agent banking and online banking negatively affect loan disbursement but are not statistically significant. For branch network optimization, POS terminals, ATMs, and agent banking demonstrate positive and significant effects, while internet banking and online banking exhibit negative but insignificant impacts. The study emphasized the need for digital tools in integrating microfinance operations facing challenges posed by infrastructure deficits, trust, and gaps in digital literacy. The policy prescriptions include the fostering of digital literacy, investment in infrastructure, facilitating hybrid operational models, and using cost management approaches to ensure inclusive financial growth.