Assessing the Effectiveness of Commercial Bank Loans as Sources of Funding/ Capital Formation for Small and Medium Enterprises (SMEs) in Southeast, Nigeria
The paper assesses the effectiveness of commercial bank loans as sources of funding Small and Medium Enterprises
(SMEs) in Southeast, Nigeria. A cross-sectional survey method wherein structured questionnaire was used to collect
data was adopted. A sample of 500 respondents was randomly selected from the five industrial hubs in the five states
of Southeast, namely Nnewi, Aba, Enugu, Abakiliki, and Owerri. With the aid of pecking order theory
(POT)/hypothesis of Lending, percentage formula, and SPSS version 20.0 tools, the data generated from the
respondents were analysed. Among others, the results of the analysis reveal that SMEs and commercial banks are
highly indifferent to the loans facilities; strict collateral requirements, high interest rates, and the nature of
requirements for guarantors dissuade SMEs from accessing loans; and government interventions provided palliative
measures but failed to address the problems associated with the loans. Therefore, this paper recommends policy
reforms to reduce interest rate, collateral and guarantor requirements. Further research on how to modernise and
harmonise other external sources of SME funding such as „daily contribution‟ and „Isusu‟ systems is required.
Firm level determinants to small and medium sized enterprises’ access to fina...rrpidani
Firm Level Determinants to Small and Medium-Sized Enterprises’ Access to Financing in Indonesia by Rita Pidani and Ishak Balaka. Academy of Taiwan Business Management Review, April 2013, Volume 9, Number 1, pp. 117-126.
Problems Of Funding Small And Medium Scale Enterprises In Nigeriaiosrjce
This paper examined the problems of funding small and medium scale enterprises in Nigeria. The
study identified the sources of finance, types of finance available to small scale enterprises and the various
financial challenges bedevilling the smooth operation of small and medium scale enterprises and suggested the
way forward. Observation and review of relevant documents were employed in carrying out the study. It was
discovered that though adequate finance is indispensable for the successful operation of small and medium
scale enterprises, government still needs to create a more conducive environment for small scale business to
thrive by streamlining business tax policies to eliminate extortion from small scale businesses.
Does Bank Credit Have Any Impact on Nigeria’s Domestic Investment?iosrjce
There is an extensive literature on the role of the bank lending and credit facilities in Nigeria but
most of these literature concentrate on its impact on the gross domestic product. This study focuses on the
impact of Nigeria’s banking sector on domestic investment from 1980 to 2012 bearing in mind that funding is
one of the major challenges of domestic entrepreneurs in Nigeria. A domestic investment model was adopted
and the unit root test was first applied to the data set. All the data are stationary and the ordinary least square
method was used to identify the impact of capital market activities on domestic investment in Nigeria using the
cointegration technique. Findings reveal that bank credit negatively though significantly impacted on domestic
investment in the long run while its short run impact is both positive and significant. This is an indication that
financial intermediation (captured by bank credit to private sector) is a strong driver of domestic investment in
Nigeria only in the short run. The study thus recommends amongst others, the strengthening of Nigeria’s
banking system with more funds and supervisions as well as the encouragement of both foreign and domestic
investments through government’s creation of a more conducive political and economic climate.
Equity investment financing is an innovative way of financing the real sector which has considerable developmental potential. The study empirically determined the effect of Equity investment financing on sustainable increase in productivity among agro-allied small businesses in South-South Nigeria. The instrument of data collection is the research questions structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that equity investment financing has a positive and significant effect on the sustainable productivity of businesses in Nigeria. The study recommended educating small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
Firm level determinants to small and medium sized enterprises’ access to fina...rrpidani
Firm Level Determinants to Small and Medium-Sized Enterprises’ Access to Financing in Indonesia by Rita Pidani and Ishak Balaka. Academy of Taiwan Business Management Review, April 2013, Volume 9, Number 1, pp. 117-126.
Problems Of Funding Small And Medium Scale Enterprises In Nigeriaiosrjce
This paper examined the problems of funding small and medium scale enterprises in Nigeria. The
study identified the sources of finance, types of finance available to small scale enterprises and the various
financial challenges bedevilling the smooth operation of small and medium scale enterprises and suggested the
way forward. Observation and review of relevant documents were employed in carrying out the study. It was
discovered that though adequate finance is indispensable for the successful operation of small and medium
scale enterprises, government still needs to create a more conducive environment for small scale business to
thrive by streamlining business tax policies to eliminate extortion from small scale businesses.
Does Bank Credit Have Any Impact on Nigeria’s Domestic Investment?iosrjce
There is an extensive literature on the role of the bank lending and credit facilities in Nigeria but
most of these literature concentrate on its impact on the gross domestic product. This study focuses on the
impact of Nigeria’s banking sector on domestic investment from 1980 to 2012 bearing in mind that funding is
one of the major challenges of domestic entrepreneurs in Nigeria. A domestic investment model was adopted
and the unit root test was first applied to the data set. All the data are stationary and the ordinary least square
method was used to identify the impact of capital market activities on domestic investment in Nigeria using the
cointegration technique. Findings reveal that bank credit negatively though significantly impacted on domestic
investment in the long run while its short run impact is both positive and significant. This is an indication that
financial intermediation (captured by bank credit to private sector) is a strong driver of domestic investment in
Nigeria only in the short run. The study thus recommends amongst others, the strengthening of Nigeria’s
banking system with more funds and supervisions as well as the encouragement of both foreign and domestic
investments through government’s creation of a more conducive political and economic climate.
Equity investment financing is an innovative way of financing the real sector which has considerable developmental potential. The study empirically determined the effect of Equity investment financing on sustainable increase in productivity among agro-allied small businesses in South-South Nigeria. The instrument of data collection is the research questions structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that equity investment financing has a positive and significant effect on the sustainable productivity of businesses in Nigeria. The study recommended educating small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
Financial Inclusion and Micro and Small Enterprises GrowthDr. Amarjeet Singh
The persons or firms linked with the either way of
financial transaction are known as participants of financial
inclusion financially included otherwise financially
excluded. The normal way of flow of money is routed
through banking system, post office, insurance and FBFC
channels. The MSE is financially included with operation of
saving account, current account or loan account with banks;
financial transaction with other government financial
agencies as well as some private sector NBFC. Recent
initiatives of Government of India and Indian Banking
system have accelerated the performance of financial
inclusion through various schemes such as MNREGS,
Jandhan, Atal Pension Yojna, MUDRA and so forth. The
MUDRA scheme, credit scheme for MSE, credit scheme for
KVIC & Coir firm, Kishan credit card, General Credit
Card are exclusive financial inclusion scheme for MSE
credit. Out of total size of MSEs, less than forty percent
units are getting benefits from schedule commercial banks;
as on 2017-18 only Rs. 1337 billion credit facilities given by
the lending institutions. The paper examines the current
status and potential prospect of financial inclusion at given
numbers of units and employment.
Micro Financing Of Small and Medium Enterprises (Smes) In Zambiainventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Influence of External Equity Financing on Growth of Craft Micro Enterprises i...paperpublications3
Abstract: Micro enterprises together with small and medium enterprises provide employment and income to many people in Kenya. The main objective of the study was to establish the influence of external equity financing on growth of craft micro enterprises in Kenya. The target population for the study constituted all the 2334 craft micro enterprises. The sample frame constituted all the soapstone micro enterprises operating within Tabaka Town and all the woodcarving micro enterprises registered by Wote Town Council. The study used a sample of 330 craft micro enterprises drawn using stratified sampling technique. Data were gathered data using a semi-structured questionnaire after testing it for reliability and validity, and then analyzed by use of descriptive and inferential type of statistics. The ANOVA and multiple regression analysis were used to analyze the data. The findings of the study revealed that, external equity financing (p-value 0.000) has a significant influence on the growth of craft microenterprises. The study recommended that the government should sensitize and encourage the entrepreneurs on to use funds from friends and family members since these are cheap sources because they do not attract interests.
Keywords: Craft, External equity, Financing, Growth, Microenterprise, Tabaka.
Title: Influence of External Equity Financing on Growth of Craft Micro Enterprises in Kenya
Author: Steve Ondieki Nyanamba, Dr. Florence Sigara Memba, Dr. Willy Mwangi Muturi, Electrin Teresa Maswari
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
This is my Internship Report. I prepare it to complete my Graduation Degree (B.B.A). This report is based on statistical & past data. If it make something good for someone, that will be a great pleasure for me. Thank You.
The practice of venture management has recorded success in the United States of
America and India. This brought about the turn-around of businesses, both prospect
and existing formal business operators in these nations. In the case of Nigeria, banks
and other financial institutions have ended up providing advice to successful firms to
acquire business organisation in distress and at times are the leaders in that
particular industry, thus bringing about unemployment. It is of a note that
entrepreneurs are the drivers of a nation’s economy irrespective of government
practices. It is based on this premises that the relevance of transition from informal
to formal entrepreneurship practices must occur for the existence of economic
growth. To bridge this gap in literature, a comparative study on venture management
practices and expected performance for practicing entrepreneurs in the informal and
formal sector is required.
Entrepreneurial Orientation and Performance of Small and Medium Scale Enterpr...YogeshIJTSRD
Ineffective and poor entrepreneurial orientation seems to adversely affect performance of small and medium scale enterprises SMEs in Nigeria. Thus, the study was designed to examine relationship that exists between entrepreneurial orientation and performance of SMEs in South Eastern Nigeria. The study adopted a survey research design. The target population of the study comprised of 35,535 SMEs in South East Nigeria with a sample of 396 respondents, arrived at using Taro Yamane Formula. Data was collected using structured questionnaire and analyzed using, frequency, percentage and mean. Pearson Product Moment Correlation Coefficient was used to test the hypotheses at 5 level of significance. Results indicated that there exist a strong positive relationship between strategic orientation and market expansion of SMEs r=0.76, p value 0.05 and that there exist a strong positive relationship between market orientation and market sustainability of SMEs business activities r=0.83, p value 0.05 The study concluded that entrepreneurial orientation has positive impact on the performance of SMEs in South East Nigeria and recommended among others that SMEs need to embrace entrepreneurial orientation, strategic orientation and market orientation, to improve business performance. Chinedu Cosmas Onyemesi | Michael Augustine Ikon "Entrepreneurial Orientation and Performance of Small and Medium Scale Enterprises (SMES) in South-Eastern Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd43904.pdf Paper URL: https://www.ijtsrd.com/management/business-economics/43904/entrepreneurial-orientation-and-performance-of-small-and-medium-scale-enterprises-smes-in-southeastern-nigeria/chinedu-cosmas-onyemesi
This slide is prepared based on the position of small and median enterprise. Especially is defined the small and median enterprise separately. The different sectors of sme are also included. The process of loan application for sme load and the documents that are needed for sme loan is described.
Identity Management Reform and Fraud Prevention in the Nigerian Banking IndustryDr. Amarjeet Singh
This paper assesses the effect ofidentity management reform, namely the Bank verification number (BVN) policy on fraud prevention in the Nigerian banking industry. Using secondary data obtained from annual reports of Nigerian Deposit Insurance Corporation (NDIC) from 2011 to 2018, the study employed descriptive method to analyze trend in fraud variables before and after introduction of the policy and independent t-test to test the hypotheses in the study. Findings revealed that there was an initial decrease in number of staff involved and total amount involved in fraud in the two years following BVN introduction, but which showed increases thereafter.A similar trend was revealed in various fraud types with internet banking fraud showing significant increases in frequency of cases. The results from the t-tests revealed that theBVN policy had no significant impact on fraud prevention within the period under study. It was recommended that the banking public be educated on the different types of fraud and how to protect their personal details from getting into wrong hands. There is also the need to beef up security by improving on protocols required to carry out bank transactions particularly in the area of internet banking. It was also suggested that all bank account numbers be linked to the National Identity Number (NIN) immediately in line with proposals made by the Federal Government on identity management.
An Investigation into the Financial Performance of Micro, Small and Medium En...Dr. Amarjeet Singh
Micro, small and medium enterprises (MSMEs) are an indispensable part of the Indian economy. In terms of Gross Value Added (GVA) and Gross Domestic Product (GDP), MSMEs accounted for about 33% and 31% of India's GVA and GDP, respectively, in the year 2019-20. Unlike large enterprises that are concentrated in the metros, MSMEs are spread across smaller and larger rural as well as urban centres of India. They are also the biggest source of employment, especially in rural India, and contribute to the rural development and industrialisation. MSMEs also act as a great social bridge as smaller enterprises are owned by socially backward classes and women than are larger enterprises. For these reasons and more, the India government has always promoted the growth and development of MSMEs through policy initiatives, technology up gradation, and via other means. Consequently, MSMEs have also grown in multi-folds in the past decades in terms of the number of enterprises in operation and the collective revenue of the sector. Several challenges affect the growth of MSMEs, however. One of these is the limited academic studies into the financial performance of MSMEs, probably due to the unavailability of adequate data. The present research attempts to fill this gap by conducting a financial performance evaluation of 51 sample MSMEs based in the district of Nanded, Maharashtra. The research utilizes Data Envelopment Analysis (DEA) to compare the financial performance of sample MSMEs selectively using the suitable variables identified by Arasu et al. (2021). Findings suggest sharp differences in the financial performance of sample units. Inefficient units are suggested to improve their return on asset, return on capital employed, and net profit margin.
Analysis Of The Effect Of Capital, Credit Risk and Profitability To Implementation Banking Intermediation Function(Study On Regional Development Bank All Over Indonesia Year 2012 )
Equity financing is one of the sources of funding available to non-bank financial institutions which is quite prevalent in developed financial markets for small or start-up firms. This study empirically determined the effect of the Equity Financing Scheme on a sustainable increase in productivity of agro-allied small businesses in Nigeria. Data for this study were elicited through the use of a questionnaire structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that the equity financing scheme had a positive and significant effect on the sustainable productivity of agro-allied small businesses in South-South Nigeria. The study recommended that efforts should be made to educate the small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
American Research Journal of Humanities & Social Science (ARJHSS) is a double blind peer reviewed, open access journal published by (ARJHSS).
The main objective of ARJHSS is to provide an intellectual platform for the international scholars. ARJHSS aims to promote interdisciplinary studies in Humanities & Social Science and become the leading journal in Humanities & Social Science in the world.
For the process of economic growth and industrialization the Small and Medium Scale Enterprises (SMEs) plays a very crucial role in developing and developed countries. For developing nations like Nigeria, the country has great interest in contributing towards the development of SMEs. SMEs provide great advantages to the developing nations. SMEs have been known to increase output and per capita income, increases regional economy and promotes resource utilization in an effective manner, encourage entrepreneurship and all these factors lead to growth and development of the country. The SMEs having labor intensive work also create employment opportunities for people of the nation and this also leads to development of the nation. The SMEs can be established quickly and can produce quick returns. Thus these industries contribute to nations by achieving economic and socio-economic objective in very short period of time and thus also contribute towards the alleviation of poverty
Financial Inclusion and Micro and Small Enterprises GrowthDr. Amarjeet Singh
The persons or firms linked with the either way of
financial transaction are known as participants of financial
inclusion financially included otherwise financially
excluded. The normal way of flow of money is routed
through banking system, post office, insurance and FBFC
channels. The MSE is financially included with operation of
saving account, current account or loan account with banks;
financial transaction with other government financial
agencies as well as some private sector NBFC. Recent
initiatives of Government of India and Indian Banking
system have accelerated the performance of financial
inclusion through various schemes such as MNREGS,
Jandhan, Atal Pension Yojna, MUDRA and so forth. The
MUDRA scheme, credit scheme for MSE, credit scheme for
KVIC & Coir firm, Kishan credit card, General Credit
Card are exclusive financial inclusion scheme for MSE
credit. Out of total size of MSEs, less than forty percent
units are getting benefits from schedule commercial banks;
as on 2017-18 only Rs. 1337 billion credit facilities given by
the lending institutions. The paper examines the current
status and potential prospect of financial inclusion at given
numbers of units and employment.
Micro Financing Of Small and Medium Enterprises (Smes) In Zambiainventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Influence of External Equity Financing on Growth of Craft Micro Enterprises i...paperpublications3
Abstract: Micro enterprises together with small and medium enterprises provide employment and income to many people in Kenya. The main objective of the study was to establish the influence of external equity financing on growth of craft micro enterprises in Kenya. The target population for the study constituted all the 2334 craft micro enterprises. The sample frame constituted all the soapstone micro enterprises operating within Tabaka Town and all the woodcarving micro enterprises registered by Wote Town Council. The study used a sample of 330 craft micro enterprises drawn using stratified sampling technique. Data were gathered data using a semi-structured questionnaire after testing it for reliability and validity, and then analyzed by use of descriptive and inferential type of statistics. The ANOVA and multiple regression analysis were used to analyze the data. The findings of the study revealed that, external equity financing (p-value 0.000) has a significant influence on the growth of craft microenterprises. The study recommended that the government should sensitize and encourage the entrepreneurs on to use funds from friends and family members since these are cheap sources because they do not attract interests.
Keywords: Craft, External equity, Financing, Growth, Microenterprise, Tabaka.
Title: Influence of External Equity Financing on Growth of Craft Micro Enterprises in Kenya
Author: Steve Ondieki Nyanamba, Dr. Florence Sigara Memba, Dr. Willy Mwangi Muturi, Electrin Teresa Maswari
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
This is my Internship Report. I prepare it to complete my Graduation Degree (B.B.A). This report is based on statistical & past data. If it make something good for someone, that will be a great pleasure for me. Thank You.
The practice of venture management has recorded success in the United States of
America and India. This brought about the turn-around of businesses, both prospect
and existing formal business operators in these nations. In the case of Nigeria, banks
and other financial institutions have ended up providing advice to successful firms to
acquire business organisation in distress and at times are the leaders in that
particular industry, thus bringing about unemployment. It is of a note that
entrepreneurs are the drivers of a nation’s economy irrespective of government
practices. It is based on this premises that the relevance of transition from informal
to formal entrepreneurship practices must occur for the existence of economic
growth. To bridge this gap in literature, a comparative study on venture management
practices and expected performance for practicing entrepreneurs in the informal and
formal sector is required.
Entrepreneurial Orientation and Performance of Small and Medium Scale Enterpr...YogeshIJTSRD
Ineffective and poor entrepreneurial orientation seems to adversely affect performance of small and medium scale enterprises SMEs in Nigeria. Thus, the study was designed to examine relationship that exists between entrepreneurial orientation and performance of SMEs in South Eastern Nigeria. The study adopted a survey research design. The target population of the study comprised of 35,535 SMEs in South East Nigeria with a sample of 396 respondents, arrived at using Taro Yamane Formula. Data was collected using structured questionnaire and analyzed using, frequency, percentage and mean. Pearson Product Moment Correlation Coefficient was used to test the hypotheses at 5 level of significance. Results indicated that there exist a strong positive relationship between strategic orientation and market expansion of SMEs r=0.76, p value 0.05 and that there exist a strong positive relationship between market orientation and market sustainability of SMEs business activities r=0.83, p value 0.05 The study concluded that entrepreneurial orientation has positive impact on the performance of SMEs in South East Nigeria and recommended among others that SMEs need to embrace entrepreneurial orientation, strategic orientation and market orientation, to improve business performance. Chinedu Cosmas Onyemesi | Michael Augustine Ikon "Entrepreneurial Orientation and Performance of Small and Medium Scale Enterprises (SMES) in South-Eastern Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd43904.pdf Paper URL: https://www.ijtsrd.com/management/business-economics/43904/entrepreneurial-orientation-and-performance-of-small-and-medium-scale-enterprises-smes-in-southeastern-nigeria/chinedu-cosmas-onyemesi
This slide is prepared based on the position of small and median enterprise. Especially is defined the small and median enterprise separately. The different sectors of sme are also included. The process of loan application for sme load and the documents that are needed for sme loan is described.
Identity Management Reform and Fraud Prevention in the Nigerian Banking IndustryDr. Amarjeet Singh
This paper assesses the effect ofidentity management reform, namely the Bank verification number (BVN) policy on fraud prevention in the Nigerian banking industry. Using secondary data obtained from annual reports of Nigerian Deposit Insurance Corporation (NDIC) from 2011 to 2018, the study employed descriptive method to analyze trend in fraud variables before and after introduction of the policy and independent t-test to test the hypotheses in the study. Findings revealed that there was an initial decrease in number of staff involved and total amount involved in fraud in the two years following BVN introduction, but which showed increases thereafter.A similar trend was revealed in various fraud types with internet banking fraud showing significant increases in frequency of cases. The results from the t-tests revealed that theBVN policy had no significant impact on fraud prevention within the period under study. It was recommended that the banking public be educated on the different types of fraud and how to protect their personal details from getting into wrong hands. There is also the need to beef up security by improving on protocols required to carry out bank transactions particularly in the area of internet banking. It was also suggested that all bank account numbers be linked to the National Identity Number (NIN) immediately in line with proposals made by the Federal Government on identity management.
An Investigation into the Financial Performance of Micro, Small and Medium En...Dr. Amarjeet Singh
Micro, small and medium enterprises (MSMEs) are an indispensable part of the Indian economy. In terms of Gross Value Added (GVA) and Gross Domestic Product (GDP), MSMEs accounted for about 33% and 31% of India's GVA and GDP, respectively, in the year 2019-20. Unlike large enterprises that are concentrated in the metros, MSMEs are spread across smaller and larger rural as well as urban centres of India. They are also the biggest source of employment, especially in rural India, and contribute to the rural development and industrialisation. MSMEs also act as a great social bridge as smaller enterprises are owned by socially backward classes and women than are larger enterprises. For these reasons and more, the India government has always promoted the growth and development of MSMEs through policy initiatives, technology up gradation, and via other means. Consequently, MSMEs have also grown in multi-folds in the past decades in terms of the number of enterprises in operation and the collective revenue of the sector. Several challenges affect the growth of MSMEs, however. One of these is the limited academic studies into the financial performance of MSMEs, probably due to the unavailability of adequate data. The present research attempts to fill this gap by conducting a financial performance evaluation of 51 sample MSMEs based in the district of Nanded, Maharashtra. The research utilizes Data Envelopment Analysis (DEA) to compare the financial performance of sample MSMEs selectively using the suitable variables identified by Arasu et al. (2021). Findings suggest sharp differences in the financial performance of sample units. Inefficient units are suggested to improve their return on asset, return on capital employed, and net profit margin.
Analysis Of The Effect Of Capital, Credit Risk and Profitability To Implementation Banking Intermediation Function(Study On Regional Development Bank All Over Indonesia Year 2012 )
Similar to Assessing the Effectiveness of Commercial Bank Loans as Sources of Funding/ Capital Formation for Small and Medium Enterprises (SMEs) in Southeast, Nigeria
Equity financing is one of the sources of funding available to non-bank financial institutions which is quite prevalent in developed financial markets for small or start-up firms. This study empirically determined the effect of the Equity Financing Scheme on a sustainable increase in productivity of agro-allied small businesses in Nigeria. Data for this study were elicited through the use of a questionnaire structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that the equity financing scheme had a positive and significant effect on the sustainable productivity of agro-allied small businesses in South-South Nigeria. The study recommended that efforts should be made to educate the small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
American Research Journal of Humanities & Social Science (ARJHSS) is a double blind peer reviewed, open access journal published by (ARJHSS).
The main objective of ARJHSS is to provide an intellectual platform for the international scholars. ARJHSS aims to promote interdisciplinary studies in Humanities & Social Science and become the leading journal in Humanities & Social Science in the world.
For the process of economic growth and industrialization the Small and Medium Scale Enterprises (SMEs) plays a very crucial role in developing and developed countries. For developing nations like Nigeria, the country has great interest in contributing towards the development of SMEs. SMEs provide great advantages to the developing nations. SMEs have been known to increase output and per capita income, increases regional economy and promotes resource utilization in an effective manner, encourage entrepreneurship and all these factors lead to growth and development of the country. The SMEs having labor intensive work also create employment opportunities for people of the nation and this also leads to development of the nation. The SMEs can be established quickly and can produce quick returns. Thus these industries contribute to nations by achieving economic and socio-economic objective in very short period of time and thus also contribute towards the alleviation of poverty
An Assessment of the role of Financial literacy on Performance of Small and M...World-Academic Journal
The purpose of this study was to assess the effects of the financial literacy education on performance of small and micro enterprises in Njoro District where the program was implemented since 2011. The study investigated the financial literacy skills imparted, and their role on performance of small scale enterprises. Specific objectives of the study were: to establish how book keeping skills influence performance of MSEs under that EGF financial literacy programme in Njoro District, to establish the effects of credit management skills on performance of SMEs under EGF financial literacy programme in Njoro District and to find out how budgeting skills affect performance of SMEs under that EGF financial literacy programme in Njoro District. Descriptive survey research design was used to guide the study. The target population for the study was 467 beneficiaries of equity group foundation project in Njoro District. A sample size of 82 was selected random sampling technique. Primary data was obtained using questionnaires administered to the selected program beneficiaries. Data collected was then organized, coded and entered in the computer for analysis. Analysis was done using frequency counts, percentages, means and standard deviation, t-test was used to analyses the difference in performance before and after training. The study found out that: the program emphasized on budgeting, financial analysis, credit management and book keeping skills; indeed there was a significant improvement in revenue performance of small enterprises whose managers had attended the financial literacy programme. Credit management skills obtained through the financial literacy programme enhanced performance through acquisition of credit financing, and management of loan portfolios to ensure that loan liability was minimized and interest expenses minimized. Budgeting skills significant roles in growing sales, profits and ensuring smooth running of the business. The impact of this programme is evident in enhancing business performance. The government should therefore fund the mainstreaming financial literacy training programmes throughout the country as a strategy for enhancing small and micro enterprise performance.
Multidisciplinary Journal Supported by TETFund. The journals would publish papers covering a wide range of subjects in journal science, management science, educational, agricultural, architectural, accounting and finance, business administration, entrepreneurship, business education, all journals
Characteristics of Nigerian Deposit Money Banks and Their Financial Outcomeijtsrd
The purpose of this research was to examine the connections between DMB profitability and various company characteristics in Nigeria. This study used panel data regression to evaluate five hypotheses on how market share, liquidity, credit risk, interest rate spread, and leverage affect bank profitability. Secondary data was gathered from the financial statements of the 19 deposit money banks listed on the international and local markets of the Nigerian Stock Exchange NSE between 2012 and 2021. The success of Nigerian banks is strongly influenced by their market share, liquidity, interest rate spread, and leverage. There was a connection between credit risk and ROA, however it was weak and not statistically significant. The report recommended that the Central Bank of Nigeria CBN create policies to enable banks increase their market share, rather than seeking to limit the number of firms in the banking sector. Dr. Confidence J. Ihenyen | Okpobo, Timinipre Joseph | Monron, Ezekiel Lawrence "Characteristics of Nigerian Deposit Money Banks and Their Financial Outcome" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-3 , June 2023, URL: https://www.ijtsrd.com.com/papers/ijtsrd56303.pdf Paper URL: https://www.ijtsrd.com.com/management/accounting-and-finance/56303/characteristics-of-nigerian-deposit-money-banks-and-their-financial-outcome/dr-confidence-j-ihenyen
Effect of Earnings Management on Bankruptcy Predicting Model Evidence from Ni...ijtsrd
This study determined the effect of Earnings Management on Bankruptcy Risk in Nigerian Deposit Money Banks. The specific objectives are to examine the effect of Debt Covenant, bank Size moderates effect of Earnings Management Incentives and bank Age moderates the effect of Earnings Management Incentives on Bankruptcy Risk of listed Deposit Money Banks on Nigerian Stock Exchange. The study employed Ex Post Facto research design and data were collected via anuual reports and accounts of the sampled banks in Nigeria. The formulated hypotheses were analyzed and tested with Regression analysis with the aid of E view version 10 2019 . The result shows that debt covenant has inverse significant effect on bankruptcy risk of listed DMBs in Nigeria, implying that degree of debt covenant violations does not strongly influences bankruptcy risk among Nigeria deposit money banks. Also that firm size moderates the effect of earnings management incentives on bankruptcy risk, meaning that the behaviours of the earnings management incentives on bankruptcy risk among Nigerian DMBs significantly and largely depends on the size of the company. Another finding revealed that firm age has no significant moderating effect on the nexus between the selected earnings management incentives and bankruptcy risk of listed DMBs in Nigeria. The study thereby recommended among others that even though higher debt contracting does not necessarily result to insolvency, management should ensure proper balancing of debt and equity in order to ensure a trade off between risk and return to the shareholders. Emma I. Okoye | Ebele G. Nwobi ""Effect of Earnings Management on Bankruptcy Predicting Model: Evidence from Nigerian Banks"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-2 , February 2020,
URL: https://www.ijtsrd.com/papers/ijtsrd30187.pdf
Paper Url : https://www.ijtsrd.com/management/accounting-and-finance/30187/effect-of-earnings-management-on-bankruptcy-predicting-model-evidence-from-nigerian-banks/emma-i-okoye
Effects of micro- finance institutions' services on sustainability of small e...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Influence of Debt Equity Financing on Growth of Craft Micro Enterprises in Kenyapaperpublications3
Abstract: Craft industry contributes greatly to the economy of a country for it provides income for not only micro enterprises but also small and medium enterprises. The main objective of the study was to determine the influence of debt financing on growth of craft micro enterprises in Kenya, to determine the influence of retained earnings on growth of craft micro enterprises in Kenya. The study covered the soapstone micro enterprises registered by Tabaka Town Council and the woodcarving micro enterprises registered by Wote Town Council. This study adopted descriptive research designs. The target population for the study constituted all the soapstone micro enterprises in Tabaka Town which are registered by Tabaka Town Council, Kisii County, and all the woodcarving micro enterprises of Wamunyu Location, Machakos County, which are registered by Wote Town Council. From this population of 2334 respondents, a sample of 330 respondents was divided proportionately between the two regions according to the proportion of their craft micro enterprises under study, using stratified random sampling. The study gathered data using a semi-structured questionnaire, and the data collected were analyzed by use of descriptive and inferential type of statistics using the Statistical Package for Social Science (SPSS) version 21.The results were then summarized in tables, charts and graphs. The findings of the study revealed that debt financing has a significant influence on the growth of craft microenterprises.
Keywords: Debt, Craft, Equity, Financing, Growth, Microenterprise.
Title: Influence of Debt Equity Financing on Growth of Craft Micro Enterprises in Kenya
Author: Steve Ondieki Nyanamba, Dr. Florence Sigara Memba, Dr. Willy Mwangi Muturi, Electrin Teresa Maswari
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
Performance Implication of Entrepreneurial Orientation in South Eastern Niger...YogeshIJTSRD
The performance of small and medium scale enterprises SMEs in Nigeria seem to be adversely affected as a result of poor entrepreneurial orientation, hence, the need to carry out this study to identify the extent of the relationship that exists between proactiveness and customers patronage of SMEs in South East, Nigeria. Survey research design was adopted for the study, with a target population of 35,535 SMEs in the study region. A sample of 396 respondents were selected through the application of Taro Yamane Formula. Data collection was carried out through a structured questionnaire, while the analysis of the collected data was handled using descriptive and inferential statistics. Hypothesis was tested 5 level of significance. The Result revealed that there is a positive significant relationship between the proactiveness of SMEs and customer patronage r= 0.55 p value 0.05 . The study, therefore, concluded that entrepreneurial orientation is a key part of the survival strategies of SMEs as the proactiveness of the SMEs go a long way in building confidence in customers and retaining their patronage. Sequel to this, it was recommended among others, that the management of small businesses should build their anticipatory capacity to be able to take proactive steps to remedy situations to avoid devastating effects in the future. Chinedu Cosmas Onyemesi | Faith Chidi Onwuchekwa | Chike Kanayo Nwosu "Performance Implication of Entrepreneurial Orientation in South-Eastern Nigeria: A Small and Medium Scale Enterprises Perspective" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd43930.pdf Paper URL: https://www.ijtsrd.com/management/business-economics/43930/performance-implication-of-entrepreneurial-orientation-in-southeastern-nigeria-a-small-and-medium-scale-enterprises-perspective/chinedu-cosmas-onyemesi
Similar to Assessing the Effectiveness of Commercial Bank Loans as Sources of Funding/ Capital Formation for Small and Medium Enterprises (SMEs) in Southeast, Nigeria (20)
Although performance appraisal is concerned with the evaluation of workers job performance, it at the same time serves to highlight the specific objectives of an organization. As the employee is being evaluated the organization is also evaluating itself by comparing objectives and standards of performance, reviews the whole appraisal framework and design as well as organizational values and culture. Performance appraisal is a veritable tool for organizations to evaluate and increase the quality of education and training of their workforce with a view to developing lifelong learning patterns and strategies to sustain productivity throughout longer working periods. Motivation as it relates to employee productivity is often behind the drive for performance and self-actualization and provides opportunities for higher productivity. Productivity is an important measure of goal achievement because getting more done with less resources increases organizational profitability. Using the exploratory research design and 109 participants the result of the study indicates a strong positive correlation between performance appraisal and employee productivity. It suggests that the issue of performance appraisal in charitable organizations should be addressed. In view of the result of the study, the paper recommends that performance appraisal should carefully review employee’s strengths and weaknesses against requirements for possible future higher responsibilities.
The integration between innovation and business is a key factor in competitiveness between organizations. That is, innovation applied to a business makes no sense if not considered as an integral tool for the processes of the organization. Companies should therefore adopt a policy where innovation plays a strategic role in the design of business models to become lean, effective and competitive entities (Moraleda, 2004). The objective of this paper is to show the importance of innovation within companies, identifying the concept, the various models that different entities might adopt in order to develop better processes of innovation, as well as indicators that represent innovation at global and national levels in order to develop strategies that lead to an increase in competitiveness. For this work the method used was a bibliographical review of relevant articles from a range of authors was conducted.
The practitioners and academicians in the business arena are highly concern about the enhancement of employee performance in this competitive age for achievement of business goals. Considering the issue, this study aimed to measure the influence of Human Resource Management (HRM) practices on the performance of employees. The data of this study have been collected from 392 on-the-job operational level employees using survey method who are working at different garment factories in Bangladesh. The collected data are analyzed through structural equation modeling to partial least square method. The study empirically proves that employee training and development, promotion opportunity, and job security has significant influence on the employees’ performance. Theoretically, this study proves that training and development, job security and promotion opportunity together influence on the performance of employees in the developing economy. The practitioners and policy makers of the organizations are expected to make necessary adjustments in their existing HRM practices based on the findings of this study in the context of Bangladesh for enhancing the employees’ performance level so that their whole-hearted efforts can be gained for the achievement of business goals.
Child labor is one of the issues receiving much attention from researchers and scholars around the world. Child labor still occurs in most countries around the world. Viet Nam is also one of the countries with relatively high child labor and increasing trend. This article is based on critical discourse analysis and data from the General Statistics Office of Vietnam to analyze some fundamental issues of child labor in Vietnam, thereby giving policy suggestions to the Vietnam government in minimizing the current child labor situation.
The rapid trend of changes and social issues in managing the global workforce has forced organizations to look for innovative ways of enhancing the job satisfaction of employees. Among these innovative approaches is the provision of Flexible Working Arrangements (FWAs). The purpose of this exploratory research was to identify the effects of FWAs, i.e., flextime schedule, compressed workweek, and telecommuting on job satisfaction from the perspective of the Ethiopian national employees of the United Nations Economic Commission for Africa (ECA) in Addis Ababa. To achieve this objective both descriptive and inferential statistics were conducted. The total population of the study was 250; out of which, 71% of responses were collected. A primary data collection method was implemented using a structured questionnaire. The analysis showed that there is significant positive effect of flextime schedule (R = .39, R2 = .264, p = .001) and compressed workweek (R = .39, R2 = .159, p = .039). This means that increase in the use of flextime schedules and compressed workweek enhances job satisfaction for employees of the ECA in Addis Ababa. The independent variables reported R = .39 and R2 = .15 which means that 15% of corresponding variations in employee job satisfaction can be explained by flexible working arrangements. Nevertheless, this study found out that there are no significant relationship of telecommuting (R = .39, R2 = .065, p = .398) on job satisfaction. Therefore, since the provision of FWAs is at the nascent stage, further studies on the effect of telecommuting on job satisfaction from Ethiopian employees context are highly recommended.
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Poor public management defined by corruption and lack of prudence in public life continues to hold Nigeria hostage and makes good governance difficult. Since the 1980s government has been using many methods including the processes of privatization and commercialization as means of re-engineering the public sector for total quality management, and to increase the share of the public sector’s contribution to the gross domestic product. The experiment never achieved the desired level of success partly due to lack of political will on the part of government to wedge a total war against corruption, and also partly because the public sector is a large scale administration that has many entry and revolving doors which government finds difficult to close. These limitations provide the incentives for widespread public corruption that is recognized as one of the greatest challenges of government in carrying out its mandate. 110 respondents participated in this study conducted through the exploratory research design. The participants provided useful data that were triangulated with data from secondary sources for the purpose of the study. To achieve the objective of the investigation, data were analyzed through statistical techniques and the result showed significant positive correlation between good governance and good management. It was recommended that appointments in the public sector should feature a combination of people from private and public sectors of the economy to enhance competence with the aim of reducing public sector corruption. Further study should examine the reasons behind rising budget deficits as a way of reducing cost of governance in Nigeria.
In this article, we analyze in the Malian context the link between the structure of the shareholding and the sustainability of companies based on data from the census of industrial enterprises of the Ministry of Trade and Industry, 2015. The results show that Mali’s economic opening option in the 1980s, strengthened in the 1990s following the implementation of the Structural Adjustment Programs, resulting in the state’s withdrawal from the management of enterprises, have enabled the emergence of private enterprises in almost all sectors of economic activity. However, shareholding in industrial enterprises has suffered from poor governance. It also shows that the number of women entrepreneurs is close to that of men. Between 2010 and 2014, the majority of shareholders are in the agri-food sector. The majority of the investment is in the metal and metallurgical sector.
This paper’s objective is to present the importance of the strategic planning in business management. Speaking of strategic planning is always speaking in general terms and how to fix paths of behavior will necessarily affect deeply and significantly in the future evolution of the company or organization that adopts it. Today we think of the organization as part of an environment and in terms of options or choices based on what you have, of its surroundings and the opportunities or pathways that can lead to achieving the objective, (Garrido, 2009). For this work the method used was a bibliographical review of relevant articles from a range of authors was conducted. The conclusions were that the be properly analyzed and adapted to the precise conditions and characteristics of the small business or, more generally, to any type of business for which the planning is intended. Strategic planning brings multiple benefits (which exceed its disadvantages) if applied in the right way, however, there are inherent risks, which can be overcome with proper monitoring and control.
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This literature review is organized in five sections. Firstly, we begin with general ideas and continue with the origin of the fraudulent. Secondly, we discuss the struggle of the phenomena, insisting on the available mechanisms. Finally, we’ll discuss the link between audit and fraud.
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This study examines the effect of the trademark on consumer behavior of consumers of air conditioners in Sudan, in order to know the dimensions of the trademark that affect consumer behavior in Sudan, and provide information to companies on the dimensions of the trademark that affect the purchasing decision of the customer and contribute to customer satisfaction. The study adopted descriptive analytical method using a sample of 230 individuals who consume air conditioners in Sudan. The results showed that there is a positive significant relationship between the trademark of air conditioning and consumer behavior as well as a positive significant relationship between the trademark name of air conditioning and consumer behavior and finally there is a positive significant relationship between the trademark logo and consumer behavior.
In recent years, retired workers eligible for social security receive their emoluments from the appropriate regulatory agency and this provides more realistic evidence on the better living standard of the aged (retirees) under the scheme. Empirically, this paper examines the impact of social security on economic growth in Ghana using time series secondary (monthly) data ranging from 2000 – 2018. The author answers in two questions: 1) how significant are pensioners benefit payments dependent on economic growth and also, 2) how business environmental policy is contributing to economic performance as far as pensioners well-being are concerned. Using STATA analytical software, the findings show a positive significant relationship between social security and economic growth. The study concludes by outlining appropriate policy measures to help strengthen the current social security scheme in Ghana.
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The study investigates the impact of team building on organisational productivity. The objective of this study is to evaluate the impact of team building among the members of the selected case study and to assess the effect of training and retraining of team members on organisational productivity. The study also x-rayed the absence of team building in a workplace which led to low levels of turnover and productivity. the total population of the study was 750 while researcher employed Yaro Yamane sampling technique to select sample size of 261 because of the large population and hypothesis were tested using Pearson correlation. The finding revealed that if members of the team can work in synergy without considering the differences in the likes of level of educational background and others, the expected productivity will be very high. It was also observed that capabilities of team leader in carrying out the assigned task determined its output especially if the team leader understands the technical knowhow of job and he is friendly with co-team members with a lot of motivation, that this would definitely enhance employees’ efficiencies and productivities. The study recommends that team members should trust, support and respect one another individual differences in order to accomplish group common goals and tasks.
Compared with general commercial reverse logistics operators, the recovery and treatment of expired drugs and medical waste is a complex and highly technically difficult project. The qualifications required by the relevant service providers are also more stringent. For medical institutions, the selection of reverse logistics operators is always a critical issue. On the perspective of sustainability, this paper aims to investigate and explore the critical factors of selecting a medical reverse logistics service provider. Through the process of the Delphi method, the experts’ assessments were collected, and 24 factors affecting the selection of medical reverse logistics service provider were screened and summarized. Then, Decision-Making Trial and Evaluation Laboratory (DEMATEL) was employed to calculate the total influence values and net influence values between factors that could be used to draw the visual causal map. Referring the causal map, “Green process operation level” and “Recycling process greening degree” are significantly higher than other factors in terms of total influence value and net influence value. Therefore, they can be regarded as crucial factors. This finding implies that medical reverse logistics providers must have the ability to improve the greening of facilities, as well as equipment, integrating existing processes to make it greener and environmentally friendly.
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Assessing the Effectiveness of Commercial Bank Loans as Sources of Funding/ Capital Formation for Small and Medium Enterprises (SMEs) in Southeast, Nigeria
1. Business, Management and Economics Research
ISSN(e): 2412-1770, ISSN(p): 2413-855X
Vol. 5, Issue. 4, pp: 62-70, 2019
URL: https://arpgweb.com/journal/journal/8
DOI: https://doi.org/10.32861/bmer.54.62.70
Academic Research Publishing
Group
*Corresponding Author
62
Original Research Open Access
Assessing the Effectiveness of Commercial Bank Loans as Sources of Funding/
Capital Formation for Small and Medium Enterprises (SMEs) in Southeast,
Nigeria
Ugwu-Oju M. Obiageri
Department of Management, Faculty of Business Administration, University of Nigeria Enugu Campus
Vincent A. Onodugo
Department of Management,Faculty of Business Administration,University of Nigeria, Enugu Campus
Mbah, Paulinus Chigozie*
Department of Business Administration, Faculty of Management Sciences, Enugu State University of Science and Technology
Abstract
The paper assesses the effectiveness of commercial bank loans as sources of funding Small and Medium Enterprises
(SMEs) in Southeast, Nigeria. A cross-sectional survey method wherein structured questionnaire was used to collect
data was adopted. A sample of 500 respondents was randomly selected from the five industrial hubs in the five states
of Southeast, namely Nnewi, Aba, Enugu, Abakiliki, and Owerri. With the aid of pecking order theory
(POT)/hypothesis of Lending, percentage formula, and SPSS version 20.0 tools, the data generated from the
respondents were analysed. Among others, the results of the analysis reveal that SMEs and commercial banks are
highly indifferent to the loans facilities; strict collateral requirements, high interest rates, and the nature of
requirements for guarantors dissuade SMEs from accessing loans; and government interventions provided palliative
measures but failed to address the problems associated with the loans. Therefore, this paper recommends policy
reforms to reduce interest rate, collateral and guarantor requirements. Further research on how to modernise and
harmonise other external sources of SME funding such as „daily contribution‟ and „Isusu‟ systems is required.
Keywords: Commercial banks; Interest rate; Loans; Profit; SMEs; Southeast.
CC BY: Creative Commons Attribution License 4.0
1. Introduction
The establishment, growth and survival of small and medium enterprises (SMEs) depend on funding and its
management. It enables entrepreneurs to undertake productive investments, expand existing investments, and acquire
necessary technologies and requirements to sustain the enterprise (Ijaiya and Abdulraheem, 2000; Ijaiya, 2003).
Entrepreneur as used here refers to one who possesses the inclination for self-development, “ability to innovate,
nurtures an enterprise and having means of and access to finance in both formal and informal financial sub-sectors to
achieve a successful investment towards sustainable economic growth‖” (Somoye, 2011). Majority of them are found
in the SMEs sector due to paucity of capital. Currently, SMEs represent about 90% of firms in the Nigerian
industrial sector.
Thus, SMEs dominate the industrial sector with overwhelmingly contribution to individual and national
economic growth. They exhibit huge potential for employment generation and wealth creation, ensures greater
utilization of raw materials, encourage rural development and the mobilization of local savings, create linkages and
lead to the emergence of bigger industries, contribution to national output and exports, provide avenue for self-
employment and provision of opportunity for training managers and semi-skilled workers, poverty alleviation,
economic participation, strengthening the industrial base and local production structure (Imoughele and Ismaila,
2014; Kadiri, 2012; Oluwarotimi and Adamu, 2017).
In spite of these contributions, entrepreneurs have continued to face stiff hindrances in raising the required fund
for establishing and investing in SMEs in Nigeria (Abereijo and Fayomi, 2005; Beck et al., 2006). They suffer from
scarcity of funds, limited access to capital markets, and debt funding opportunities (Beck et al., 2006; Inang and
Ukpong, 1992), This is because the Nigeria financial system contributes poorly to entrepreneurship and SMEs sector
(CBN, 2009). The maturity of credits extended to SMEs by the system is often limited to a very short period of
repayment with exorbitant interest. With bias in favour of lending to governments due to higher returns and low risks
than SMEs (Levitsky, 1997), the system applies tougher screening measures and tend to charge SMEs commission
for assuming risk.
To ameliorate this, the federal government of Nigeria embarked on the policy of providing loan guarantees and
credit subsidy programmes such as Small Scale Industries Credit Scheme (SSICS), Nigerian Bank for Commerce
and Industry (NBCI), and the National Economic Reconstruction Fund (NERFUND) among others. These
interventions provide long term credit, interest ceilings, and/or specialized services to the SMEs (Eniola and
Entebanga, 2015). The term credit as used here was aptly defined by the Central Bank of Nigeria (CBN) Prudential
Guidelines of 1990 as the aggregate of all loans, advances, overdrafts, bills discounted banks guarantees, banks
2. Business, Management and Economics Research
63
acceptances, commercial papers, leases and indemnities. Credits are advanced for purposes of making profit (Essang
and Olajide, 1974).
Nevertheless, four factors are posing serious threat or challenge to the policy. First systemic sabotage and
corruption tend to prevent the loans from reaching the target group and individuals. Second, some beneficiaries of
such loans fail to repay them. Third, most beneficiaries of the loans failed to achieve financial self-sustainability.
Fourth, banks lacked the incentive to develop their capacity for risk assessment and monitoring of loans. This failure
recently led to the introduction of Small and Medium Industries Equity Investment Scheme (SMIEIS). Therefore,
this paper examines the level of commercial banks funding of SMEs in the Southeast Nigeria under the SMIEIS
regime.
1.1. Objectives of the Study
The main purpose of this study is to examine commercial banks funding of small and medium enterprises in
Nigeria through credits/loans. However, the specific objectives are to:
i. Examine if entrepreneurs of SMEs rely on commercial bank loans for investments and expansion.
ii. Assess the impact of government policy on small and medium enterprises procurement of loans from
commercial banks in Southeast Nigeria.
iii. Examine the factors hindering small and medium enterprises procurement of loans from commercial banks
in Southeast Nigeria.
iv. Proffer solutions to the identified problems hindering small and medium enterprises procurement of loans
from commercial banks in Southeast Nigeria.
1.2. Research Questions
The following research questions were formulated to guide the research:
1. Has entrepreneurs of SMEs relied on commercial bank loans for investments and expansion?
2. Has government policy improved the rate of small and medium enterprises procurement of loans from
commercial banks in Southeast Nigeria?
3. What are the major factors militating against small and medium enterprises procurement of loans from
commercial banks in Southeast Nigeria?
4. What are the solutions to the problems hindering SMEs access to commercial banks loans?
2. Literature/Theoretical Underpinning
Small and Medium Scale Enterprises (SMEs) and its role in national economic development,
management/dynamics, funding, and problems have been well documented (Eniola and Ektebang, 2014; Fadahunsi,
1997; Mukhtar, 2009; Terungwa, 2012). This review groups this documentation into two major parts, namely:
conceptual and empirical reviews.
2.1. Conceptual Review
2.1.1. Small and Medium Scale Enterprises (SMEs)
Although the literature is littered with definitions of Small and Medium Enterprises (SMEs), these definitions
significantly differ. This is due to the inclusion or exclusion and valuation of variables such as number of employee,
number and value of fixed assets, production capacity, nature of technology used, management, economic
development, and the environment, in the conceptualisation of SMEs (Ekpenyong, 1997; Harabi, 2005). Thus, there
is no generally accepted or universal definition of SME. However, the Central Bank of Nigeria adopted asset base,
turnover, and number of staff employed as primary factors that defines SMEs.
Nevertheless, a synthesis of available definitions reveals a popular acceptance of certain variables as
characterisation of SMEs. These variables include asset values and the number of employees (Nwakoby, 2012;
Obistayo, 2001; OECD, 2000; Oteh, 2010; Udechukwu, 2003). For instance, it is defined as informal businesses
employing five or fewer workers including unpaid family labour; small enterprises as those operating in the formal
sector with five to twenty employees; and medium enterprises as those employing 21 to 50 employees. According to
the views of scholars, small businesses have fewer than 100 employees, while medium-sized business has fewer than
500 employees, while the total assets of any SME does not exceed N200million. Thus, the conceptualisation of
SMEs by the National Council of Industries (2009) as business enterprises (with fewer than 100 employees and)
whose total costs excluding land is not more than two hundred million naira (N200, 000, 000. 00) only is adopted for
this paper.
In its review of over fifty definitions of SMEs obtainable in 75 countries including Nigeria, the United Nations
Industrial Development Organization (UNIDO) identified the major variables that characterise SMEs as capacity
utilization, output, employment, capital, and type of country or other criteria. In addition, ownership structure or
base, which is characteristically one-man, family or partnership business; Labour-intensive production processes;
concentration of management on the proprietor; limited access to long term funds; high interest rates and bank
charges to credits; over-dependence on imported raw materials; poor intra and inter-sectorial linkages characterise
SMEs particularly in Southeast Nigeria (Ngwu, 2005).
Generally, SMEs display a distinct set of identifying characteristics and these include:
a. Capital and output, which do not exceed 50 million naira.
b. Employment power that does not exceed 100 employees.
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c. Serve small market area such as a street, community, and/or particular business operation.
d. The character of its ownership is sole proprietorships, partnerships or limited liability companies.
e. It can be found only in a limited area.
2.1.2. SME and Sources of Financing
Sources of funding or financing business enterprises are classified as Internal and external sources (Pretorius
and Shaw, 2004). Internal sources include entrepreneurial provision of the capital on their own, debt trading,
retaining of business profits, and price depreciation. On the other part, external sources include financial banks,
individual fund investors, venture capital, and crowd-funding. While internal source determines the stating of SMEs,
external sources of funding are key to the expansion and rapid growth of SMEs. The external source normally
provides credit facility (Eisenhardt and Martin, 2000; Shepherd, 1997).
In their quest to expand in the midst of fund raising difficulty, SMEs do resort to apply for and/or access short-
term and medium-term sources of financing at high costs through bank overdraft, trade credit, credit cards, leases
and bank loans (Bates and Hally, 1982; Keasey and Watson, 1994). In Nigeria, funding SMEs through the external
sources is difficult because government economic and financial policies are skewed against the informal sector
(Claessens, 2006; Ekpenyong and Nyong, 1992). Due to these policies, commercial bank loans to SMEs have been
decreasing over the years (CBN, 2014; Ogbuabor et al., 2013). For instance, it declined drastically from N41.1
billion in 2007 to N13.5 billion in 2008.
Commercial banks are reluctant to lend money to SMEs because such credits are considered non-commercially
viable (Odife, 2002). They regard lending to SMEs as a high risk and unprofitable business (Adejoh, 2013), because
weak management and information technology, and weak business plan drives their financial transactions, while
their financial condition and performance are not available. In addition to these factors, SMEs in Nigeria suffer from
lack of focus, inadequate market research, inexperience, lack of proper book keeping practices, irregular power
supply, infrastructural inadequacies, lack of proper records or lack of any records at all, inability to separate business
and family or personal finances, lack of business strategy, inability to distinguish between revenue and profit,
inability to procure the right plant and machinery, and cut-throat competition (Basil, 2005). According to Rudjito
(2003), this scenario leads to commercial banks reluctance to issue credits to SMEs, an act that is sustained by the
availability of other investments with high rate of profit and turnover; higher overhead cost; and higher interest rate
on the loans from the informal lending market. On their part, SMEs are unable to access available commercial bank
credits successfully due to stringent conditions set by financial institutions especially banks (Solola, 2006), majority
of their projects are not bankable projects; high interest rates; paucity of information required to accelerate the
processing of their credit or loan request; none provision of the price of equipment and machinery required by SMEs
(Akabueze, 2002).
2.2. Empirical Review
The literature is perverse with empirical investigations into commercial bank funding of SMEs. For instance, in
an investigation of the challenges facing commercial banks in Africa in adequately funding SMEs, (Gibson and van
der Vaart, 2008) observed that pure equity increases investors' risk and reduces their current income. Babafemi et al.
(2015), investigated the funding arrangements that are available to SMEs and their contributions to finance and
development needs of the SMEs in Nigeria. They observed that the Federal Government established many
programmes to enhance SMEs access to finance while financial institutions, non-financial institution and NGOs
have also made considerable efforts to solve the financial challenges confronting SMEs development with little or no
positive result. The study recommended that commercial banks should provide more funds to SMEs.
Imoughele and Ismaila (2014), explored the impact of commercial bank credit on Nigeria's Small and Medium
Scale enterprises (SMEs) between 1986 and 2012. The study reveals that commercial bank credit to SMEs, total
government expenditure and bank density has direct but insignificant impact on the country SMEs output. This was
attributed to the stringent policy associated with SMEs accessing of credit facility and the crowd out effect of
government expenditure in the economy. It reveals also that interest rate has adverse effect on SMEs output. Among
others, It recommended a drastic reduction of the interest rate on credit facility granted to SMEs, granting of soft
loan to SMEs, alteration of the stringent policy in supply of credit to SMEs.
Imoughele and Ismaila (2014), Ayeni-Agbaje and Osho (2015), investigated the role of commercial banks in
financing small scale enterprises in Ado Ekiti, Ekiti State, and observed that there is a positive correlation between
loans grants by banks and the growth and development of SMEs in Ekiti State. it therefore recommended a flexible
commercial banks guidelines/schemes to finance SMEs. Similarly, Oke and Aluko (2015), examined the impact of
commercial banks in financing small and medium scale enterprises (SMEs) in Nigeria between 2002 and 2012. The
study observed that commercial bank credit has significant impact on SMEs‟ financing and has led to substantial
proportion of changes. Thus, commercial banks are capable of making SMEs to grow through their financing.
However, the investigation carried out by Aliyu and Bello (2013), that examined the contribution of commercial
banks to the growth of SMEs in Nigeria from 1980 to 2009 equally discovered that although commercial banks
contribute to financing SMEs, their credit facilities to them have continued to decline after Central Bank of Nigeria
abolished the policy of mandatory bank credit allocations to SMEs. Ekpenyong (1997), Reveals that commercial
banks extend little financial supports or loans to SMEs. Further, Mamman and Aminu (2013), evaluated the effect of
2004 banking reforms on loan financing of SMEs in Nigeria. Analysis of responses from a sample size of 500
respondents reveals that there is no significant effect of 2004 banking reform on loan financing of SMEs in Nigeria.
Equally, the investigation by Omah et al. (2012), on the impact of banking reforms on the performance of SMEs in
4. Business, Management and Economics Research
65
Nigeria using Lagos State as area of study reveals that SMEs do not have better access to finance through banks.
Thus the reforms did not provide solutions to various challenges facing entrepreneurs in financing SMEs through
credits or loans.
Many other scholars such as Benson (2017), Oluwarotimi and Adamu (2017), Richard (2016), Okey (2016),
Imoisi (2015), Bello (2015), John and Olorunfemi (2014), Nwosa and Oseni (2013), and Imoughele and Ismaila
(2014), among others examined the impact of commercial banks credit on the growth of small and medium scale
enterprises, and national economy in different periods; and the intervening factors that hinder its positive relationship
in Nigeria. These empirical investigations did not substantially cover the scope of this inquiry. Little or no attention
was devoted to the rate or level of commercial banks credits to SMEs particularly in Southeast Nigeria. this
necessitated this current inquiry.
2.3. Theoretical Framework
This paper adopts the pecking order theory (POT)/hypothesis of Lending as its framework of analysis. The
foundation of this theory or framework of analysis is that only the firm manager is aware of the true value of the firm
and that the market is unaware of the true distribution of the firm‟s income. The theory therefore holds that these
prevail, firms are likely to fund themselves primarily internal sources such as retained earnings, and secondarily
from bank credits.
Further, the theory holds that firms can only succeed in this state through the mixture of debt and equity, which
is the cumulative result of hierarchical financing decisions over time. Although SMEs do not issue equity they incur
debt if their retained earnings are insufficient to fund them. This comes in a hierarchical fashion with internal funds
first, external debt and external equity as a last resort (Myers, 1984). These credit options are directly or indirectly
linked with commercial banking operations. Thus, commercial banks remain the known formal source of raising
credits or loans for enterprises (Agumagu, 2006; World Bank, 2001).
3. Methodology
The study adopted a cross-sectional survey of 500 small and medium enterprises located in the industrial hub of
each of the five states of Southeast, Nigeria. 100 firms each were randomly selected from Aba in Abia state, Nnewi
in Anambra state, Enugu in Enugu state, Abakiliki in Enpbonyi state, and Owerri in Imo state. The choice of these
cities was guided by the fact that large clusters of small and medium enterprises were located in these five cities
within Southeast, Nigeria. Structured questionnaires were administered and used to generate responses from owners
of different categories of SMEs and/ or their representatives. A total of 2 evaluators comprising of 2 lecturers from
the Department of Marketing and Business Administration, University of Nigeria validated the questionnaire
instrument. Any item in the questionnaire that did not receive 80% acceptance by the evaluators was discarded.
Further, Test re-test method was used to test its reliability. 10 copies of the questionnaires were administered to
similar respondents and setting at Awka and Obosi both in Anambra state. After an interval of two weeks, the
questionnaires were re-administered to the same respondents and the two set of responses obtained correlated using
the Pearson Product Moment Correlation (r) and a co-efficient of reliability of 0.95 was obtained. This shows that
the instrument is reliable for data collection. The categories of SMEs studied are garment/fashion firms, ICTs and
Communication firms, shoe and textile firms, transport firms, entertainment/events firms, and educational firms.
Five research assistants were employed and in four weeks, all the 500 questionnaires distributed were returned. Each
was checked for plausibility, honesty and completeness. In pursuit of central tendencies, mean, and deviations, the
data generated was analysed percentage formula, and SPSS version 20 (SPSS Inc., Chicago, IL). Decisions were
taken on the premise that mean difference is significant at >0.05.
4. Results/Findings
4.1. Respondents’ Demographic information
Table-1. Socio-demographic data of respondents‟ Gender and Age
s/n Type of
SMEs
Total Gender Age in years Education
Male Female 18-
27
28-
37
38-
47
48 &
above
WAEC/ND First
Degree
Higher
degrees
1 Aba 100 48 52 22 36 30 12 43 48 9
2 Nnewi 100 57 43 30 34 20 16 56 38 6
3 Enugu 100 42 58 29 40 18 13 23 61 16
4 Abakiliki 100 52 48 37 38 20 5 55 41 4
5 Owerri 100 45 55 30 38 21 11 30 59 11
Total 500 244 256 148 18
6
10
9
57 207 247 46
Source: Field Work, 2018
Table 1 reveals 244 male respondents (48.8%), 256 females (51.2%), age bracket of 18-27(29.6%), 28-
37(37.2%), 38-47(21.8%), and 48 and above (11.4%), while the levels of respondents certificate possession shows
WAEC and ND (41.4%), First degrees (49.4%), higher degrees (9.2%). Therefore, majority of the respondents are
both literate, and matured in mind to respond to the research questions objectively and reasonably too. With
5. Business, Management and Economics Research
66
reference to the gender ratio of 48.8%:51.2%, the sample reflects the growing dominance of the female population in
all profession. Thus, the sample is highly objective for the present study. Similarly, the age distribution in the table
shows that majority of the sample belongs to the societal productive age that need credit or capital to invest and/or
expand for growth and development purposes.
4.2. Findings From Responses To Questions
Table-2. Results of SPSS Analyses of responses to questions
S/n Research questions Grand
Mean
Stand.
Deviat.
Standard
Error
Tests of Between-
Subjects Effects
Sig. Pairwise
Comparisons
1
You raised your initial
business capital from your
personal account
1.86 .767 .013 1674.652
.001 &
.023
@ 95%
confidence
Interval, no
adjustments
2
Your initial business capital
was raised by your parents,
relations, friends and/or
business master
4.44 .445 .087 870.206 ..006
@ 95%
confidence
Interval, no
adjustments
3
You have increased or
expanded your capital base
through trade credit/debt
system.
4.21 .109 .106 102.003 .000
@ 95%
confidence
Interval, no
adjustments
4
You have increased or
expanded your capital base
through bank loans/credit
2.32 1.245 .076 100.007 .000
@ 95%
confidence
Interval, no
adjustments
5
Commercial banks demand
Land property, building, and
Educational certificate as
collateral and condition for
issuing credits
4.64 .018 .556 634.520 .004
@ 95%
confidence
Interval, no
adjustments
6
Commercial banks‟ high
demand for collateral,
guarantor, nature of
business, and business
registration discouraged you
from applying for credit
4.18 1.352 .082 491.467 .004
@ 95%
confidence
Interval, no
adjustments
7 You applied for credit but
was not granted because of
lack of collateral, guarantor,
and business registration
certificate
2.02 1.245 .076 416.907
.002
&
.000
@ 95%
confidence
Interval, no
adjustments
8 High interest rates for
commercial banks‟ credit
facilities and risk of non-
repayment due to bad
economy discourage you
from applying for loans
4.42 .721 .022 519.111 .000
@ 95%
confidence
Interval, no
adjustments
9 You have not applied for
loans due to lack of
information/knowledge
about banking reforms and
commercial banks loan
activities.
2.81
.
154 .011 1036. 006 .016
@ 95%
confidence
Interval, no
adjustments
1
0
Availability of government‟s
poverty and business or
market intervention funds
provided alternative source
of funding your business.
2.09 .415 .081 109.312 .004
@ 95%
confidence
Interval, no
adjustments
11 Reducing the cost of
procuring short term fund
(i.e. interest rate) from the
commercial banks will
enable you apply for loan
4.03 .857 .058 163.839 .000
@ 95%
confidence
Interval, no
adjustments
12 Relaxation or reduction of
the listing requirements for
SMEs and conditions given
to guarantors will enable
them apply for soft credits
will enable apply for loan
4.04 1.264 .038 127.021 .001
@ 95%
confidence
Interval, no
adjustments
Source: SPSS analysis of responses to questions
6. Business, Management and Economics Research
67
5. Discussion
5.1. Research Question 1: Has Entrepreneurs of SMES Relied on Commercial Bank Loans
for Investments and Expansion?
The SPSS Univeriate analysis of responses to questions‟ results in table 2 above reveals that majority of the
respondents did not rely on their personal individual account in establishing their firms. Their responses grand mean
of 1.86 representing „Disagreed‟ in our likert scale and whose sig. difference of .001 & .023 confidence interval were
not subject of modification led to this conclusion. However, majority of the respondents agreed (a grand mean of
4.44) with no sig. difference (i.e. .006) that their initial business capital was raised by their parents, relations, friends
and/or business master. The table also reveals that majority of the respondents (i.e. a grand mean of 4.21) agreed
with no sig. difference (i.e. .000) that they have being increasing or expanding their capital base through trade
credit/debt system.
This finding is supported by earlier findings made by scholars such as Eisenhardt and Martin (2000), Keasey
and Watson (1994), which holds that external sources of funding are key to SMEs‟ expansion. However, the finding
made by this paper to the effect that majority of the respondents generated their initial investment capital from
extended family and business masters – external sources - is at variance with earlier findings made by such scholars
like Keasey and Watson (1994), and Shepherd (1997). This finding highlights the importance or role of social
structure and socialist family system in the promotion and sustenance of SMEs in Southeast Nigeria.
The result of the analysis to question 4 in table 2 further reveals that majority of the respondents (i.e. a grand
mean of 2.32 representing disagreed) noted that they have not been relying on bank loans/credits to increase or
expand their capital base or investments. Thus, entrepreneurs of SMEs in Southeast Nigeria have not relied on
commercial bank loans for investments and expansion. This finding is at variance with earlier findings made
scholars like Claessens (2006), and Bates and Hally (1982), and is validated by prevailing position in the literature
that commercial banks are indifferent to providing credits to SMEs due to high risks and unprofitability (Adejoh,
2013; Odife, 2002).
5.2. Has Government Policy Improved the Rate of Small and Medium Enterprises
Procurement of Loans From Commercial Banks in Southeast Nigeria?
The results of SPSS analysis of responses to question 5 in table 2 further reveals that commercial banks are still
demanding land property, building, and educational certificate as collateral and condition for issuing credits to
SMEs. Majority of the respondents i.e. a grand mean of 4.64 representing „agreed‟ in our likert scale and whose sig.
difference of .004 confidence interval were not subject of modification led to this conclusion. The result of analysis
in question 6 further reveals that as a consequence of the high demand for collateral, guarantor, nature of business,
and business registration, majority of the respondents (i.e. a grand mean of 4.18 representing „agreed‟ in our likert
scale and whose sig. difference of .004 confidence interval were not subject of modification) are discouraged to
applying for commercial bank credits. This finding was supported by earlier conclusion reached by Solola (2006),
and others.
Thus, the result of analysis of responses to question 7, which seeks to find out if respondents applied for credit
but was not granted because of lack of collateral, guarantor, and business registration certificate, reveals a grand
mean of 2.02, which represents „disagreed‟ in our likert scale measure. The differences in their responses are < .05 at
.002 & .000 and therefore insignificant with no adjustment to the mean. Thus, the rate or level of commercial loans
to SMEs cannot be determined effectively because entrepreneurs were not applying for it. Therefore, government
credit policy did not improve the rate of small and medium enterprises procurement of loans from commercial banks
in Southeast Nigeria. this finding was supported by earlier findings made by Mamman and Aminu (2013).
This finding can be explained by the fact that government credit policy was not aimed at reducing and/or
eliminating any of the requirements for obtaining commercial banks credits or loans. Rather, according to earlier
research findings made scholars like Eniola and Entebanga (2015), and Essang and Olajide (1974), the policy
pursued the provision of palliative measures to cushion the effects of the requirements.
5.3. What are the Major Factors Militating Against Small and Medium Enterprises
Procurement of Loans From Commercial Banks in Southeast Nigeria?
According to the results of analysis of responses to question 8, majority of the respondents (i.e. 4.42
representing „agreed‟ in our likert scale measure whose level of differences in their response is < .05 at .000 and
therefore insignificant) agreed that high interest rates for commercial banks‟ credit facilities and risk of non-
repayment due to bad economy are major factors militating against their application for loans. This finding is
supported by earlier findings made by Ngwu (2005), and others.
However, the results of analysis of responses to question 9 reveals that majority of the respondents (i.e. 2.81
representing „disagreed‟ in our likert scale measure whose level of differences in their response is < .05 at .016 and
therefore insignificant) observed that lack of information/knowledge about banking reforms and commercial banks
loan activities is not a major factor limiting them from applying for their loans. However, the literature demonstrated
that it is a major that discourage commercial banks from approving and/or advancing loans to SMEs.
Similarly, the results of analysis of responses to question 10 reveal that majority of the respondents (i.e. 2.09
representing „disagreed‟ in our likert scale measure whose level of differences in their response is < .05 at .016 and
therefore insignificant) noted that the availability of government‟s poverty and business or market intervention funds
7. Business, Management and Economics Research
68
does not provide alternative source of funding their business. Therefore, government intervention schemes do not
militate against SMEs‟ access to commercial bank loans.
5.4. What are The Solutions to the Problems Hindering SMES Access to Commercial Banks
Loans?
The results of analysis of responses to statements seeking to find out if reducing the cost of procuring short term
fund (i.e. interest rate) from the commercial banks will enable SMEs apply for loan reveal a grand mean of 4.03
representing „agreed‟ in our likert scale measure with differences that is < .05 at .000 and therefore insignificant with
no adjustment to the mean. Therefore, the grand mean of 4.03 is upheld and implies that reducing the cost of
procuring short term fund (i.e. interest rate) will motivate and enhance SMEs application for loans.
Similarly, the analysis of response to the statement that the relaxation or reduction of the listing requirements for
SMEs and conditions given to guarantors will enable them apply for soft credits reveals a grand mean of 4.04
representing „agreed‟ in our likert scale measure with differences that is < .05 at .001 and therefore insignificant with
no adjustment to the mean. Therefore, the grand mean of 4.04 is accepted and implies that the relaxation or reduction
of the listing requirements for SMEs and conditions given to guarantors will also motivate and enhance SMEs
application for loans.
These findings are supported by earlier findings or conclusions reached by some scholars such as Solola (2006),
which holds that reducing the cost of procuring short term fund, and the reduction of the listing requirements for
SMEs and conditions given to guarantors promotes SMEs access to commercial bank loans.
6. Implication to Research and Practice
The findings made by this paper have many implications for research and practice. As the primary goal of
commercial banks, which is the fundamental source of fund generation for SMEs, is profit maximisation and SMEs
are threatened by it researchers should investigate or examine further ways of using the socio-traditional structure
and socialist approach to fund and sustain SMEs. This requires the exploration of other none commercial but
external sources of funding SMEs. These have practical policy implication as government shall be required to
develop social policies for collective rural empowerment.
Secondly, the inability of government‟s banking policy reforms to positively drive SMEs‟ access to commercial
bank credits/loans suggests high level weakness and ineffectiveness of such policy. The implication for researchers
is that further assessment of the policy to determine its shortcomings is required, while policy makers should as a
matter of urgency redirect their attention from establishing palliative programmes to the actual reduction of interest
rate, requirements for accessing loans, and conditions given to loan guarantors. This has great implication for the
capitalist economy and requires general economic review, workshops, and seminars with stakeholders.
Finally, the weakness that characterise SMEs, which generate confidence crisis on the part of commercial banks
against granting them loans require scientific study, analysis, and recommendations on restructuring or modernising
SMEs. This has practical implication for policy and economic review. New set of guidelines for registering and
operating SMEs is required. This will cause systemic upgrade for all existing SMEs.
7. Conclusion
This study evaluated the effectiveness of commercial bank loans as sources of funding/capital formation for
Small and Medium Enterprises (SMEs) in Southeast, Nigeria. The empirical results suggest that commercial banks
loans are ineffective sources of funding SMEs n Southeast Nigeria. Both SMEs and commercial banks shy away
from the credit due to different reasons or factors. On the part of SMEs, high interest rate, strict collateral, conditions
for guarantor, and bad economic condition, which makes it difficult to attain reasonable business turnover
discourages them from applying for the loans. For commercial banks, the character of SMEs in Southeast Nigeria
with high risk of instability and low rate of profit turn-up, together with the availability of more profitable
government clients, discourage them from granting loans to SMEs.
Government intervened to sustain SMEs because of their principal contributions to general economic growth.
However, their intervention was focused on establishing palliative institutions and programmes such as SSICS,
NBCI, NERFUND, and SMIEIS, instead of addressing the core issues responsible for SMEs‟ very low access to
commercial bank loans. To resolve the current scenario, government should embark on reforming its economic and
banking policies to allow for actual reduction of loan interest rate, requirements for accessing loans, and conditions
given to loan guarantors. Such reforms should equally establish a new set of guidelines for registering and operating
SMEs in Southeast Nigeria.
8. Future Research
Further research is required in the area of funding SMEs through group or community self-help, which is now
growing in the Southeast Nigeria. These include group thrift system popularly known as „isusu‟ and „daily
contribution‟. The nature, effectiveness, and challenges of these popular systems of raining funds in Southeast
Nigeria should be examined for purposes of standardisation, harmonisation, and formalisation.
8. Business, Management and Economics Research
69
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