The Role of Microfinance Banks on Growth and Sustenance of SMEs in Nigeria

Abstract

Creation and sustenance of small and medium enterprises (SMEs) is a function of many factors which include funding. The effort to transform innovations into economic goods certainly would require reasonable level of funding which appears elusive due to global economic recession. Accessing credit from conventional money deposit banks has proved irrational due to its attendant cost, hence the need for micro financing which is deliberate initiative to enhance the performance and sustenance of small and medium scale enterprises. This study therefore investigates the role of microfinance on growth and sustenance of small and medium scale enterprises in Nigeria. Primary data are used for this study and the data are sourced from the administration of questionnaire on 300 small and medium entrepreneurs in an annual general meeting. Data are analyzed using descriptive statistics and principal component analysis. The results of the findings show that microfinance is a veritable tool for delivery of financial services to those who are traditionally not served by conventional banks in Nigeria. The study concludes that small scale entrepreneurs hardly have access to credit particularly from the formal sector.

Keywords: Microfinance Banks, SMEs, Growth, Sustainance