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ABSTRACT
Micro Finance is a living idea and Nigeria and the rest of the world cannot do without Micro finance and SMEs in their bid to improving the living conditions of citizens and the alleviation of poverty around the world. The objectives of this research are, to; examine the impact of MFBs loans and advances on the net profit of SMEs, examine the impact of loans and advances on shareholders’ funds of SMEs and examine the impact of loans and advances on investment levels of SMEs in Nigeria. The ex post facto research design was adopted to enable the researcher make use of secondary data and determine cause-effect relationship. The data were analyzed using simple linear regression model. The results as revealed by the hypotheses tested indicated that; there was a negative non-significant impact of loans and advances on profitability; there was a positive significant impact of loans and advances on shareholders’ fund and lastly, there was a positive significant impact of loans and advances on the investment level of SMEs. It was also revealed from the study that since the introduction of Micro finance banking in Nigeria in December 2005, SMEs financing options have increased productivity and growth. Also, government policies on Micro finance have been effective, thus, Micro Finance banks have an impact on Small and Medium Scale Enterprises in Nigeria.
TABLE OF CONTENTS
Title page . .… … … … … … … … … … … … … … … … i
Certification .… … … … … … … … … … … … … … … … ii
Dedication . … … … … … … … … … … … … … … … … iii
Acknowledgements . … … … … … … … … … … … … … … iv
Abstract. … … … … … … … … … … … … … … … … … v
Table of Contents. … … … … … … … … … … … … … … vi
List of Tables. … … … … … … … … … … … … … … … ix
CHAPTER ONE: INTRODUCTION
Background of the Study: … … … … … … … … … … 1Statement of the Problem: … … … … … … … … … … 3Objectives of the Study: … … … … … … … … … … 5Research Questions: … … … … … … … … … … … 5Hypotheses : … … … … … … … … … … … … … 6Scope of the Study: … … … … … … … … … … … 6Significance of the Study: … … … … … … … … … … 6Limitation of the Study: … … … … … … … … … … 7Definition of Terms: … … … … … … … … … … … 8
References: … … … … … … … … … … … … … … … 9
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction: … … … … … … … … … … … … … … 10
2.2 Justification for the establishment of microfinance bank
in Nigeria: … … … … … … … … … … … … … … … … …10
2.2.1 Weak Institutional Capacity: … … … … … … … … … … 10
2.2.2 Weak Capital Base: … … … … … … … … … … … … 11
2.2.3 The existence of high un-served market: … … … … … … … … 11
2.2.4 Economic Empowerment of the poor Employment Generation and
Poverty Reduction: … … … … … … … … … … … … … … 12
2.2.5 The Interest of Local and International Communities in
Microfinancing: … … … … … … … … … … … … … … 12
2.3 Nigeria Microfinance Policy: … … … … … … … … … … … 12
2.3.1 Policy Objectives: … … … … … … … … … … … … … 12
2.3.2 Policy Targets: … … … … … … … … … … … … … … 13
2.3.3 Policy Strategies: … … … … … … … … … … … … … 14
2.4 The Goals of Microfinance Banks in Nigeria: … … … … … … … 15
2.5 Organic Growth Path for Microfinancing in Nigeria: … … … … … 15
2.6 Policy Measures and Instruments in the establishment of the framework
for Microfinance banks: … … … … … … … … … … … … … 17
2.7 Justification for the Capital Requirement for Microfinance banks
In banks: … … … … … … … … … … … … … … … … 18
2.8 The Nigeria Small and Meduim Scale Enterprises
Definitions, Size and Scope: … … … … … … … … … … … 19
2.9 Importance of Small and Medium Scale Enterprises: … … … … … 20
2.10 Nigerian Government Agencies that have promoted SMEs: … … … 20
2.11 Overview of Small and Medium Scale Enterprises in Nigeria
Financial provider : … … … … … … … … … … … … … … 23
2.12 Empirical Review on the role Microfinance in the Improvement of SMEs
Operations In Nigeria by USAID Funded Prisms: … … … … … … … 24
References: … … … … … … … … … … … … … … … … 26
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design: … … … … … … … … … … … … … 27
3.2 Nature and Source of Data: … … … … … … … … … … … 27
3.3 Sampling Size: … … … … … … … … … … … … … … 27
3.4 Sampling Techniques: … … … … … … … … … … … … 28
3.5 Statistical Techniques: … … … … … … … … … … … … 28
3.6 Techniques of Analysis: … … … … … … … … … … … … 30
References: … … … … … … … … … … … … … … … 32
CHAPTER FOUR: PRESENTATION ANDANALYSES OF DATA
4.1 Introduction: … … … … … … … … … … … … … … 33
4.2 Presentation of Data: … … … … … … … … … … … … 33
4.3 Analysis of Data: … … … … … … … … … … … … … 36
4.4 Test of Hypothesis: … … … … … … … … … … … … … 37
CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1 Summary of Findings: … … … … … … … … … … … … 49
5.2 Recommendations: … … … … … … … … … … … … … 49
5.3 Conclusion: … … … … … … … … … … … … … … 51
Appendices: … … … … … … … … … … … … … … … 52
Bibliography: … … … … … … … … … … … … … … 78
LIST OF TABLES
Table 4.1 Extract of Micro Finance Bank Loans and Advances: … … … 33
Table 4.2 Extract of Particulars of First Smes: … … … … … … … 34
Table 4.3 Extract Of Particulars of Second Smes: … … … … … … 34
Table 4.4 Extract of Particulars of Third Smes: … … … … … … … … 35
Table 4.5 Extract of Aggregate Particular for Smes: … … … … … … 36
Table 4.6 Hypothesis One 1st Smes Descriptive Statistics (Model Summary): … 37
Table 4.7 Hypothesis Two 1st Smes Descriptive Statistics (Model Summary): … 38
Table 4.8 Third Hypothesis 1st Smes Descriptive Statistics (Model Summary): … 39
Table 4.9 Hypothesis One 2nd Smes Descriptive Statistics (Model Summary): … 40
Table 4.10 Hypothesis Two 2nd Smes Descriptive Statistics (Model Summary): … 41
Table 4.11 Third Hypothesis 2nd Smes Descriptive Statistics (Model Summary): …42
Table 4.12 Hypothesis One 3rd Smes Descriptive Statistics (Model Summary): … 43
Table 4.13 Hypothesis Two 3rd Smes Descriptive Statistics (Model Summary): … 44
Table 4.14 Third Hypothesis 3rd Smes Descriptive Statistics (Model Summary): … 44
Table 4.15 Hypothesis One Descriptive Statistics (Model Summary): … … … 45
Table 4.16 Hypothesis Two Descriptive Statistics (Model Summary): … … … 46
Table 4.17 Hypothesis Three Descriptive Statistics (Model Summary): … … …47
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Microfinance banks in Nigeria play very positive roles towards sustaining the economy of the country these are small scale banks that are approved by the federal government of Nigeria through the central bank of Nigeria to give loans to people to use and boost their existing business, or to give to the people to start up their business. The banks also provide a good condition for people like market traders, small scale business operators and even the non-literate to open a savings account with them and also encourage them on how to save their money. Micro-finance banks have help small and medium scale enterprises to increase productivity, create jobs and help alleviate poverty.
Also, in developed economies Small and Medium Scale enterprises (SMEs) represent more than half of their GDP and account for nearly two/ third (2/3) of employment (Sanusi, 2003). But, these Small and Medium Scale Enterprises are largely absent from the formal economic sector of Nigeria. Small and Medium Scale Enterprises are often able to sustain macro-enterprises and huge conglomerates but in Nigeria, their impact are missing because of lack of funding for SMEs, therefore increasing funding for Small and Medium Scale Enterprises could help big firms become a powerful engine of growth not only in Nigeria but in the rest of the world. (Soludo, 2005).
For Small and Medium Scale Enterprises in the developing world, although they are a potentially high impact and high return on investment, only a trickle of capital reaches them. Large business has access to formal, bank-based credit and in some markets, private equities and public markets unlike at the other end of the spectrum. However, over the last 30 years, the micro finance movement has made substantial strides in making capital available to households and micro-entrepreneurs. But, Small and Medium Scale Enterprises have remained under-served and lack access to the tools and finance necessary for rapid expansion, they are the “missing middle” (USAID, 2005).
According to a UN report in 2004, there are indications that SMEs could generate high returns on invested capital. Today, these investments are expensive to find, execute and manage relative to their sizes and the returns on investment often do not match the expense, because the cost of sourcing and completing deals are high. (USAID, 2005)
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