Financing Small and Medium-Scale Enterprises for Sustainable Growth and Development in Nigeria: A Case Study of Zaria, Kaduna State

Abstract

Economic growth and development can not be achieved without putting in place well – focused programmes to create employment opportunities, generation of income and reduction in poverty. This can be achieved through provision of credit facilities to small and medium-scale enterprises. This study therefore, has attempted an investigation into the role of financial institutions in financing Small and Medium – Scale enterprises in Zaria Local Government Area of Kaduna State. Using multivariate Logit regressions to analyze a sample of cross sectional data across 40 enterprises, and testing the hypothesis using the log-likelihood statistics, the study reject the null hypothesis that the total amount generated by financial institutions and disbursed to SMEs is not positively correlated with the development of the SMEs sub-sector. The study reveals that boardroom politics, loan repayment records, competition, interest rates value of fixed assets and bureaucratic procedures are some of important factors that determine the ability of prospective entrepreneurs in obtaining loans from financial institutions. It concludes with the recommendations that establishment of functional micro insurance schemes, granting loans to well established firms, removal of all structural and institutional bottlenecks and adoption of the ability to pay criteria in the disbursement of loans are necessary conditions to ensure vibrant SMEs in the country.

Keywords: Financial Institutions, Credit Facilities, Small and Medium Scale Enterprise Sustainable Growth and Development, Entrepreneurs.