CHOICE OF CREDIT FACILITIES: A STIMULANT FOR FINANCIAL PERFORMANCE OF SMES IN NIGERIA

  • Modupe Olayinka Ajajyi Federal University of Technology Akure
Keywords: credit facilities, Smes, Financial Performance

Abstract

The study examined the effects of choice of credit facilities on the financial performance of SMEs in Nigeria while the specific objectives are to establish the influence of interest rate on loan and service on performance of registered SMEs in Ekiti State; investigate the influence of trade credits on performance of registered SMEs in Ekiti and examine the effect of asset financing on performance of registered SMEs in Ekiti State.

The population of the study comprised 1704 SMEs operators from 16 local government areas in Ekiti State Nigeria. The stratified sampling technique was used to select the sample size from the captive population. The total sample size is 324 SMEs. This is the minimum to go to field with. 10% of 324were added to the sample size, summing up to give 356 because of non-response rate.

To achieve the set objectives and hypotheses, both descriptive and inferential statistics were employed. In the descriptive analysis, the use of percentages comes to bare; more importantly in the areas of frequency of respondents to their views on the questions of research instrument. In specific terms, to achieve the objectives ANCOVA analysis were adopted.

The results revealed that interest loan and performance between the groups revealed that a statistically significant main effect [f(16.961, 14.244) = 9.207, p < .05], loan and performance between the groups revealed that a statistically significant main effect [f(8, 1) = 2.952, p < .05] and bonds and performance between the groups revealed that a statistically significant main effect [f(16, 1) = 4.998, p < .05].

The study concluded that there is improvement in businesses of the customers who use Micro-Credit loans, loan repayment is a smooth process and Cash and deposit account at depository institutions, the short term loan, there is no special terms granted, no, special terms occasionally granted and term frequently granted, capital provided by the owners or shareholders of the enterprise are credit worthiness that is your track record of repaying past debts.

References

Abereijo, I.O. & Fayomi, A.O. (2005). Innovative approach to SME financing in Nigeria: A review of small and medium industries equity investment scheme (SMIEs).J. Soc. Sci., 11(3), 219-227.
Abor, J. (2007). Corporate governance and financing decisions of Ghanaian listed firms,
Corporate Governance.International Journal of Business in Society, 7(1), 83–92.
Adebusuyi, B.S. (1997). Performance evaluation of small-medium enterprises (SMEs) in
Nigeria. Central Bank of Nigeria Bullion, 21(4), 46–52.
Afolabi, M.O. (2013). Growth effect of small and medium enterprises (SMEs) financing in
Nigeria.Journal of Macroecoomics Review, 3(1), 193–205.
Akingunola, R.O. (2011). Small and medium scale enterprises and economic growth in Nigeria:
An assessment of financing options.Pakistan Journal of Business and Economic Review, 2(1), 78–97.
Aremu, M.A. & Adeyemi, S.L. (2011). Small and medium scale enterprises as a survival strategy
for employment generation in Nigeria.Journal of Sustainable Development, 4(1), 200–206.
Ayuba, B. & Zubairu, M. (2015). Impact of banking sector credit on the growth of small and
medium enterprises (SME’s) in Nigeria.Journal of Resources Development and management, 15, 1-9.
Beck, T. (2017). Financing constraints of SMEs in developing countries: Evidence, determinants
and solutions. Journal of International Money and Finance, 31(2), 401-441. International Journal of Development and Sustainability, 6(10), 1400-1417.
Beck, T. & Demirguc-Kunt, A. (2006). Small and medium-size enterprises. Access to finance as
Growth Constraint.Journal of Banking and Finance, 30(11), 2931-2943.
Beck, T., Demirguc-Kunt, A. and Levine, R. (2005). SMEs, growth, and poverty: cross-country
evidence”, Journal of Economic Growth, 10(3), 199-229.
Berger, A.N. & Udell, G.F. (1998). The economics of small business finance: The roles of
private equity and debt markets in the financial growth cycle”, Journal of Banking and Finance, Vol. 22 No. 6, pp. 613-673.
Binks, M.R., Ennew, C.T. and Reed, G.V. (1992), “Information Asymmetries and the Provision
of Finance to Small Firms”, International Small Business Journal, Vol. 11 No. 1, pp. 35-46.
Brian, G.F. and Shingirayi, M. (2014), “Challenges faced by small to medium scale enterprises:
A case study of Chitungwiza, Zimbabwe”, Greener Journal of Business and Management Studies, Vol. 4 No. 4, pp. 103-107.
Central Bank of Nigeria (2006), Statistical Bulletin, Central Bank of Nigeria, Abuja.
Central Bank of Nigeria (2015), Statistical Bulletin, Central Bank of Nigeria, Abuja.
Chinweuba, E.T. and Sunday, O.C. (2015), “Quantitative analysis of the impact of small and
medium scale enterprises on the growth of Nigerian economy (1993-2011)”, International Journal of Development and Emerging Economics, Vol. 3 No.1, pp. 26-38.
Chughtai, M.W. (2014), “Impact of small and medium enterprises on economic growth:
Evidence from Pakistan”, Standard Research Journal of Business Management, Vol. 2 No. 2, pp. 19-24.
Edet, B.N., Anoka, A.F. and Antakikam, A.E. (2014), “Bank lending, macro-policy variables
and the growth of small scale industries in Nigeria”, International Journal of Business and Social Science, Vol. 5 No. 9, pp. 284-290.
Ekpeyong, D.B. and Nyong, M.O. (1992), “Small and medium scale enterprises development in
Nigeria”, Seminar paper on economic policy research for policy design and management in Nigeria”, NCEMA /AEPS, 24–25 April, Nigeria.
Floyd, D. and McManus, J. (2005), “The role of SMEs in improving the competitive position of
the European Union”, European Business Review, Vol. 17 No. 2, pp. 144-150.
Ihua, U.B. (2009), “SMEs key failure-factors: a comparison between the United Kingdom and
Nigeria”, Journal of Social Science, Vol. 18 No 3, pp. 199-207.
Iloh, J. and Chioke, N. (2015), “Commercial bank credit availability to small and medium scale
enterprises (SMEs) in Nigeria”, paper presented at 3rd International Conference on Business, Law and Corporate Social Responsibility (ICBLCSR’15), 5 May-6 May, Bali, Indonesia, available at: http://icehm.org/upload/6920ED0515051.pdf (Accessed 30 November 2016).
King, R.G. and Levine, R. (1993), “Finance and growth: Schumpeter might be right”, Quarterly
Journal of Economics, Vol. 108 No. 3, pp. 717- 738.
Makorere, R.F. (2014), “Factors affecting loan repayment behaviour in Tanzania: Empirical
evidence from Dar es Salaam and Morogoro regions”, International Journal of Development and Sustainability, Vol. 3 No. 3, pp 481-492.
Kadiri, I. B. (2012) Small and Medium Scale Enterprises and Employment Generation in
Nigeria: The Role of Finance. Kuwait Chapter of Arabian Journal of Business and Management Review, 1(9), 79-93.
Iloh, J. & Chioke, N. (2015). Commercial Bank Credit Availability to Small and Medium Scale
Enterprises (SMEs) in Nigeria. rd International Conference on Business, Law and Corporate Social Responsibility (ICBLCSR’15) May 5-6, 100-106.
Owolabi, O. A. & Nasiru, A. (2017). Deposit money bank credit to small and medium
enterprises, socio-economic performance and economic growth in Nigeria. International Journal of Development and Sustainability, 6(10), 1400-1417.

Afolabi, M. O. (2013). Growth effect of Small and Medium Enterprises (SMEs) Financing in
Nigeria. Journal of African Macroeconomic Review, 3(1),
Ayuba, B. & Zubairu, M. (2015). Impact of Banking Sector Credit on the Growth of Small and
Medium Enterprises (SME’s) in Nigeria. Journal of Resources Development and Management, 15, 1-9.
Okafor, I. G., Ugochukwu, U.S. & Chijindu, E.H. (2016). Impact of Small And Medium-Sized
Enterprise On The Growth Of The Nigerian Economy: A Co-Integration Approach. International Journal of Economics, Commerce and Managemen, 4(6), 678-692.
Ubesie, M. C., Onuaguluchi, I. F., & Mbah, A. M. (2017).Effect of Deposit Money Banks Credit
on Small and Medium Scale Enterprises Growth in Nigeria. International Journal of Finance and Accounting, 6(5), 117-132.
Ikpor, R. N., Bernard, E. & Obaji, S. I. (2017). Bank Lending to Small and Medium Scale
Enterprises and Its Implication on Economic Growth in Nigeria. IOSR Journal of Humanities and Social Science (IOSR-JHSS) Volume 22(12), 14-28.
Yusuf S.A, Amao J.O., & Olawale O.T. (2014).Effects of Microcredit on Small Scale
Enterprises in Osun State, Nigeria. American International Journal of Contemporary Research, 4(6), 190- 200.
Adebiyi1, A.J., Banjo, H.A. Regin, O.O. (2017). Performance of Small and Medium Enterprises
in Lagos State: The Implications of Finance. Acta Universitatis Danubius, 13(5), 72-83.
Aguwamba, S. M.& Ekienabor, E. E. (2017). Bank Lending and its Impact on Small Scale
Enterprises in Nigeria. Imperial Journal of Interdisciplinary Research (IJIR), 3(3), 58-66.
Published
2019-11-24