The complex application procedures and stringent conditions attached to formal credit financing discourage women entrepreneurs from accessing FFIs. As a result, these entrepreneurs have no alternative but to fall back on IFIs for their credit needs. Consequently, this study seeks to evaluate the nexus between IFIs and performance of women entrepreneurs in Nigeria. It also investigates why IFIs continues to exist alongside the formal financial system, despite the implementation of financial sector reforms. A sample of 348 entrepreneurs was selected using multi-stage sampling technique and data were analysed using frequency and percentages, spearman rank correlation and factor analysis. Findings revealed that IFIs contributes significantly to job creation, accumulation of assets, savings mobilization, poverty alleviation and women entrepreneurship development. Moreover, some of the factors that accounts for the prevalence of IFIs among women entrepreneurs in Nigeria are low interest on loans, no request for collateral, quick response to member’s needs, flexible repayment pattern and less government interference in the activities of IFIs. However, insufficient funds, poor record keeping, illiteracy, loans default and delays in assessing credits leads to inefficiency and mismanagement of IFIs in Nigeria. Therefore, it would be important for reforms in FFIs to integrate IFIs to the mainstream of financial sector rather than seeking to eliminate them.