ABSTRACT
Micro
Finance is a living idea and Nigeria and the rest of the world cannot do
without Micro finance and SMEs in their bid to improving the living conditions
of citizens and the alleviation of poverty around the world. The objectives of
this research are, to; examine the impact of MFBs loans and advances on the net
profit of SMEs, examine the impact of loans and advances on shareholders’ funds
of SMEs and examine the impact of loans and advances on investment levels of
SMEs in Nigeria. The ex post facto research design was adopted to enable
the researcher make use of secondary data and determine cause-effect
relationship. The data were analyzed using simple linear regression model. The
results as revealed by the hypotheses tested indicated that; there was a negative
non-significant impact of loans and advances on profitability; there was a
positive significant impact of loans and advances on shareholders’ fund and
lastly, there was a positive significant impact of loans and advances on the
investment level of SMEs. It was also revealed from the study that since the
introduction of Micro finance banking in Nigeria in December 2005, SMEs
financing options have increased productivity and growth. Also, government
policies on Micro finance have been effective, thus, Micro Finance banks have
an impact on Small and Medium Scale Enterprises in Nigeria.
CHAPTER ONE
INTRODUCTION
Microfinance
banks in Nigeria play very positive roles towards sustaining the economy of the
country these are small scale banks that are approved by the federal government
of Nigeria through the central bank of Nigeria to give loans to people to use
and boost their existing business, or to give to the people to start up their
business. The banks also provide a good condition for people like market
traders, small scale business operators and even the non-literate to open a
savings account with them and also encourage them on how to save their money.
Micro-finance banks have help small and medium scale enterprises to increase
productivity, create jobs and help alleviate poverty.
Also, in developed economies Small and Medium Scale enterprises (SMEs)
represent more than half of their GDP and account for nearly two/ third (2/3)
of employment (Sanusi, 2003). But, these Small and Medium Scale Enterprises are
largely absent from the formal economic sector of Nigeria. Small and Medium
Scale Enterprises are often able to sustain macro-enterprises and huge
conglomerates but in Nigeria, their impact are missing because of lack of
funding for SMEs, therefore increasing funding for Small and Medium Scale
Enterprises could help big firms become a powerful engine of growth not only in
Nigeria but in the rest of the world. (Soludo, 2005).
For
Small and Medium Scale Enterprises in the developing world, although they are a
potentially high impact and high return on investment, only a trickle of
capital reaches them. Large business has access to formal, bank-based credit
and in some markets, private equities and public markets unlike at the other
end of the spectrum. However, over the last 30 years, the micro finance
movement has made substantial strides in making capital available to households
and micro-entrepreneurs. But, Small and Medium Scale Enterprises have remained
under-served and lack access to the tools and finance necessary for rapid
expansion, they are the “missing middle” (USAID, 2005).
According
to a UN report in 2004, there are indications that SMEs could generate high
returns on invested capital. Today, these investments are expensive to find,
execute and manage relative to their sizes and the returns on investment often
do not match the expense, because the cost of sourcing and completing deals are
high. (USAID, 2005)
Microfinance
is a living idea. As the awareness grows, this idea will continue to evolve. No
wonder on 15th December 2005, the Central Bank of Nigeria launched
the micro finance policy and framework basically to assist SMEs. Robust
economic growth cannot be achieved without putting in place well focused
programmes to reduce poverty through empowering the people by increasing their
access to factors of production, especially credit. The latent capacity of the
poor for entrepreneurship would be significantly enhanced through the provision
of micro finance services to enable them engage in economic activities and be
more self-reliant; increase employment opportunities, enhance household income
and create wealth (CBN, 2005).
The
practices of Micro finance in Nigeria have always existed in Nigeria at a
traditional level. The traditional Micro finance institutions provide access to
credit for the rural and urban low-income earners. They are mainly of the
informal Self-Help Groups (SHGs) or Rotating Savings and Credit Associations (ROSCAs).
Other providers of Micro finance services include savings collectors and
co-operative societies. The informal financial institutions generally have
limited outreach due primarily to paucity of loanable fund (Adewusi, 2007).
In order to enhance the flow
of financial services in Nigerian rural areas, government has in the past,
initiated a series of publicly financed micro/rural credit programmes and
policies targeted to the SMEs. Notable among such programmes were the Rural
Banking programmes, sectoral allocation of credit, a concessionary interest
rate and the Agricultural Credit Guarantee Schemes (ACGS). Other institutional
arrangements were the establishment of the Nigerian Agricultural and....
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Item Type: Postgraduate Material | Attribute: 80 pages | Chapters: 1-5
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