Effect of Microfinance Banks Loans on Performance of Small and Medium Scale Enterprises in Nigeria

Abstract

This study examined the effect of microfinance bank loans on the performance of small and medium scale enterprises in Nigeria. These businesses are essential to the country's economic growth, job creation, and poverty alleviation, but many of them struggle to obtain financing from traditional banks because of barriers like a lack of collateral. Microfinance banks are meant to bridge this gap by offering financial services tailored to these businesses' needs. The main goal of this study is to evaluate the effect of microfinance bank loans on the performance of small and medium scale enterprises controlled by lending rate. The study used a quantitative research design and secondary data from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) to gather information. The information spans ten years, from 2013 to 2023. The effect of microfinance bank loans on the performance of small and medium-sized businesses was investigated using multiple regression analysis. The outcome demonstrated that loans from larger microfinance banks considerably improve the performance of small and medium scale enterprises. According to the study, small businesses should receive better financial support and favourable lending terms. To sum up, this study emphasizes how crucial microfinance is to helping small and medium-sized businesses close the financial gap so they can prosper and support the national economy.