Microfinance has gained increasing prominence as a vital instrument for poverty alleviation and the promotion of entrepreneurship, particularly in low- and middle-income countries where access to formal financial services is limited. Despite their strategic importance, many of these enterprises continue to face systemic barriers to accessing affordable and sustainable credit facilities. This study investigates the effect of microfinance services on the profit levels of micro-enterprises in Southwest Nigeria. The research employed a quantitative survey design and collected primary data from 344 owners/managers of micro enterprises selected through stratified random sampling across urban and semi-urban areas in six states of the region. Structured questionnaires were used to gather data on microfinance usage, business operations, and profit changes. The data were analyzed using descriptive statistics, t-tests, and regression analysis to determine the strength and nature of the relationship between microfinance services and profitability. Findings reveal a statistically significant and positive relationship, with microcredit access, structured savings schemes, and business advisory services contributing meaningfully to increased profit margins and operational efficiency. Specifically, the study found a statistically significant positive effect of microfinance services on profit level of micro-enterprises in Southwest Nigeria (β = 0.282; t = 5.586; p < 0.005). The study concludes that microfinance services are not only financial interventions but also strategic enablers of micro-enterprise sustainability and income growth. Based on these findings, the study recommends that microfinance institutions should deepen their outreach and product customization while policymakers should support enabling environments that foster financial inclusion and enterprise development.
Adeniyi et al. (Wed,) studied this question.