Microfinancing and Growth of Small and Medium Scale Enterprises (SMEs) in Nigeria

This study examined the effect of microfinance banks on the growth of small and medium enterprises in Nigeria. The purpose of the study was to examine the extent to which microfinance credit affect the growth of small and medium enterprises. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin from 1992-2019. Percentage of small and medium gross domestic product to total gross domestic product was the proxy for dependent variable while microcredit to agricultural sector, mining and querying, manufacturing sector, real estate and construction and transport and communication were proxies for independent variables. The study employed multiple regression models to estimate the relationship that exists between microfinance credit and the growth of small and medium enterprises. The null Hypotheses (H0) were tested at 0.05 level of significance, Ordinary Least Square. The study found that 96.1 percent variation in the growth of small and medium scale enterprise can be traced to variation in microfinance credit to the various sectors of the economy. The regression coefficient indicates that microfinance credit to transport and communication sector have positive effect on the growth of small and medium enterprises. Microfinance credit to construction and real estate sector has positive effect on the growth of small and medium enterprises. Microfinance credit to mining and querying sector has positive effect on the growth of small and medium enterprises. Microfinance credit to agricultural sector has positive effect on the growth of small and medium enterprises while microfinance credit to transport and manufacturing sector has positive effect on the growth of small and medium enterprises. From the findings, the researcher concludes that microcredit allocation has significant effect on Nigeria economic growth. The study recommends that for re-introduction of the abolished compulsory sectorial lending operation and sectorial reforms to attract microfinance credit.