Effect of Dividend Policy on the Growth of Microfinance Institution

ABSTRACT This study focused on the effect of dividend policy on the growth of microfinance institution. The specific objectives of the study were to investigate the effect of dividend payout ratio on the growth of microfinance institution; determine the impact of dividend per share on the growth of microfinance institution; and measure the level at which earning per share affect the growth of microfinance institution. The study adopted an ex-post facto research design. The population comprise of five (5) microfinance institution which include; Lapo MFB, ECB Microfinance Banks Limited, Redeemer’s University (RUN) Microfinance Banks, AB Microfinance Banks, and KJL Microfinance Banks Limited. The data were gathered through the Nigerian Stock Exchange fact Book and the annual published reports/accounts of the selected microfinance institution. Three research hypotheses were formulated and tested in the study. Result revealed that the coefficient of determination (R2) for the structural model was 0.500 which indicates 50% of the variance. This was supported by the Heteroskedasticity test which revealed the p-value as 0.474, which implies that dividend payout ratio has specific effect on the growth of microfinance institution. Also, findings showed the result of dividend per share coefficient is 0.015 which indicated 1% positive relationship on growth and significant to the growth of microfinance institution in Nigeria, which indicated that dividend per share have significant impact on the growth of microfinance institution. Result further revealed that the coefficient of determination for EPS was 0.364> 0.05. This shows that the findings affirmed that earning per share positively affect the growth of microfinance institution. Thus, the study concluded that dividend policy variables (dividend payout ratio, dividend per share, and earning per share) have a significant effect on the growth of microfinance institution. It was recommended among others that microfinance institution should prioritize long-term sustainability over short-term gains by adopting a balanced dividend policy that considers retention of earnings, reinvestment opportunities, and financial stability to ensure continued growth and development.