The Role of Deposit Money Banks’ Loan Facilities in Financing Small and Medium-Scale Enterprises in Nigeria

Abstract

The credit money banks whose obligation is to contribute money-wise to small and medium scale enterprises (SMEs) to oblige an essential utensil in decreasing the dismal paucity and enhancing pecuniary change in Nigeria. This paper examines the role deposit money banks’ loan facilities plays in funding SMEs businesses in Nigeria. The study employed the cross-sectional method of survey research. Ten (10) years financial performance index report of SMEs businesses was extracted from the Central Bank of Nigeria (CBN) statistical bulletin between the periods of 2008 – 2017 were selected. The index captured dependent and independent variables. Gross domestic product (GDP) is a proxy to SMEs while fund deposit, loan facilities and return on equity were proxies to deposit money banks variable. Data collected was analysed using descriptive statistics and ordinary least square techniques. The study revealed the positive co-efficient value of 17.19434 and 15.84082 for fund deposit and loan facilities variables; and the negative co-efficient value of −3.442694 for the returns on equity variable which affect the growth of SMEs in Nigeria. The recent economic recession experienced in Nigeria also affect SMEs businesses because the return on equity from SMEs was not encouraging. Therefore, financial regulators should adhere to stability and sustainability of fiscal guidelines that will readdress the loan facilities requirements of 65% to SMEs in the nation’s economy. This will aid enhancement of the country’s economy from the deficiency of funds that impedes investment.

Macroeconomic Business Environment and the Development of Small and Medium Enterprises in Nigeria

“…This indicates that 1% increase in both gross domestic product and rate of dollar to naira exchange in Nigeria has no significant change in the growth of SMEs in the long run. The findings commensurate with the findings of Aribaba et al (2019). Source: Author (2020).…”

“…Small-Scale and Medium-sized Enterprises play significant roles in an emerging and developed economy in the process of socio-economic changes and development. Apart from the swelling per capita income on purchasing power parity, SMEs generate employment opportunities, enhance regional economic stability through manufacturing dispersion and promote effective utilization of the resource in considering economic development (Aribaba, Ahmodu, Oladele, Yusuff & Olaleye, 2019).…”

Deposit money bank’s credit to private sector and economic growth in Nigeria

“…In their study, Foluso, Abdul-lateef, Rotimi, Adesina, and Ridwan (2019) In their study from 1994 to 2017, Akintola and Adesanya (2021) concentrated on the connection between Nigeria's deposit money banks (DMBs) and economic growth. According to the study's findings, deposit money institutions significantly influenced Nigeria's economic growth through money supply, credit to the private sector, and interest rates charged on loans to borrowers.…”

Improve the Loan Pricing Model Based on the Calculation and Analysis of the Credit Decision Data of Small, Medium and Micro Enterprises

“…In foreign research, Fengzhi Zhang [3] proposed that big data should be used to solve the problems of SMEs in defining property rights and hierarchical privacy, so as to meet their financing needs. Foluso Olugbenga Aribaba [4] and others used crosssectional survey research methods to study the role of deposit bank loan instruments in providing funds for Nigerian SMEs. Liu Xing-yu [9] and others deeply analyzed the financing status of China's small and medium-sized enterprises, the reasons for financing difficulties and the countermeasures to solve the financing difficulties of small and medium-sized enterprises.…”