Microfinance banking sector mobilize deposits from customers and extend credit to active poor and
individuals who possess the capacity to direct these funds towards profitable ventures thereby, contributing
to overall economic growth. The objective of this study is to examine the determinants of the lending
behaviour of microfinance banks in Nigeria. This study covers all the micro-finance banks in Nigeria and
hence, used aggregated data sourced from Central Bank of Nigeria (CBN) statistical bulletin and World
Bank Development Index. To achieve these goals, the study adopts a quantitative research approach based
on time series data and employs the auto-regressive distributed lag (ARDL) regression method for data
analysis. In both the short and long run, the ARDL results highlight the significance of some macroeconomic
variables. Specifically, the inflation rate which exhibits significant coefficients of (-0.049, -0.041) in both
timeframes, the lending rate demonstrates significant coefficients of (-0.359, -0.055) in both the short and
long run, and the exchange rate showcases a significant coefficient value of (-0.021) in the long run.
Furthermore, institutional factors assume importance in shaping the lending behaviour of microfinance
banks in Nigeria. Specifically, the corruption index displays a significant coefficient value of (-6.564) in the
short run, while political instability reveals a significant coefficient value of (-0.573) in the long run. The
regression outcomes further reveal that some bank-specific factors are instrumental in influencing the
lending behaviour of microfinance banks in Nigeria. In both the short and long run, short-term investment
demonstrates significant coefficients of (-0.0014, -0.0012), long-term investment exhibits significant
coefficients of (-0.0024, -0.004), and in the long run, liquidity rate displays a significant coefficient value of
(0.037). Study therefore, concludes that some macro-economic, institutional and bank specific factors
collectively play a substantial role in influencing the lending behavior of microfinance banks in Nigeria, and
recommends that in order to achieve a desirable lending behavior from microfinance institutions in Nigeria,
policymakers should focus on maintaining macroeconomic stability.