ROLE OF BANKS IN GROWING SMES IN NIGERIA
Joseph M. Ibbih & Alaku David Stephen
Department of Economics, Nasarawa State University, Keffi, Nasarawa State
Department of Economics, Federal University Lafia, Nasarawa State
Email: jmibbih@gmail.com
ABSTRACT
The research study investigates the role of banks in growing SMEs in Nigeria. The purpose of this study is to know how SMEs can grow through the intervention of the formal sector financing. The hypothesis of the study is to know if there is a relationship between financial loan disbursement to SMEs and the SMEG in Nigeria. Quantitative research design was adopted and the population of the study is the entire SMEs and the banks in Nasarawa State. Questionnaires, telephone interviews and emails were used as primary instrument for data collection. Cluster and judgmental sampling technique was used in selecting sample. Journals, annual reports, NBS reports, CBN reports and SMEDAN reports were used as secondary instrument for data collection. 90 questionnaires were administered but 80 were returned, 10 questionnaires could not be recovered. Tables and sample percentage were used in primary data presentation. Regression analysis was employed in testing the results obtained in both primary and secondary instruments. Two hypotheses were formulated to know if there is correlation between them. The finding reveals that there is a positive correlation between formal financial loan disbursement to SMEs and SMEG. The multicolinearity test shown there is no multicollinearity existing between financial loan duration and SMEG and also there is no heteroskedasticity in the variables. The jarque – Bera test shown there is an error term in the normal distribution of financial loan disbursement. The findings from the analysis made shown there is a positive relationship between the financial loan disbursement and SMEs growth, a positive relationship between loan duration and SMEs growth. Also there is a negative relationship between interest rate and SMEs growth, and finally a negative relationship between collateral security and SME growth. Based on the findings, it was recommended that; the apex bank should mandate banks on the amount to be issued out as loans to SMEs, there is need to apply a monetary policy measure to control interest rate to one digit to favour the SMEs operation, the collateral security should be reduce to single digit percentage to enhance investment and finally banks should endeavour to increase their loans duration to ten years and above to encourage investment. The financial institution needs to put in more effort in financing SMEs, as their role need to be felt by the SMEs in terms of growth and development.
Keywords: banks, financial loan disbursement, interest rate, loan, enterprises, SMEs, SMEG, economic growth, loan duration.
