Impact of Micro Finance

Topics: Venture capital, Bank, Finance Pages: 15 (5000 words) Published: February 3, 2013

Proceedings of the 7th International Conference on Innovation & Management

Impact of Microfinance on Small and Medium-Sized Enterprises in Nigeria Idowu Friday Christopher School of Management, Wuhan University of Technology, Wuhan, P.R.China, 430070 (E-mail: Abstract The fundamental objective of this study is to assess the impact of Microfinance on Small and Medium Enterprises (SMEs) in Nigeria. Simple random sampling technique was employed in selecting the 100 SMEs that constituted the sample size of the research. Structured questionnaire was designed to facilitate the acquisition of relevant data which was used for analysis. Descriptive statistics which involves simple percentage graphical charts and illustrations was tactically applied in data presentations and analysis. The findings of the study reveal that significant number of the SMEs benefitted from the MFIs loans even though only few of them were capable enough to secure the required amount needed. Interestingly, majority of the SMEs acknowledge positive contributions of MFIs loans towards promoting their market share, product innovation achieving market excellence and the overall economic company competitive advantage. Other than tax incentives and financial supports, it is recommended that Government should try to provide sufficient infrastructural facilities such as electricity, good road network and training institutions to support SMEs in Nigeria. Key words Small and medium enterprises; Microfinance; Loans; Nigeria

1 Introduction
This paper intends to contribute to the array of literature written by different scholars on Microfinance and SMEs development. Like other countries of the world, SMEs in Nigeria have the tendency to serve as sources of livelihood to the poor, create employment opportunities, generate income and contribute to economic growth. Despite its increasing roles, access to credit by SMEs remains one major constraint. The major objective of this work therefore is to find out whether SMEs in Nigeria have access to MFIs loans, and to investigate the contributions of these loans to SMEs performance. Using structured questionnaire to source relevant data, descriptive statistics has been applied in analyzing the respondents’ views. The finding exhibits significant relationship between the Microfinance loans and SMEs performance in Nigeria. The paper is arranged as follows: The second section reviews literatures by different authors on alternative financial sources available to SMEs and challenges facing SMEs in reaching them. The third and fourth sections describe the methods applied in collecting and analyzing data, while the last two sections represent data presentation and findings, and conclusion respectively.

2 Literature Review
SME remains one of the most reviewed topics in literature, especially as its impact on all kind economies cannot be overlooked. World wide, the SMEs have been accepted as the engine of economic growth and for promoting equitable development. The major advantage of the sector is its employment potentials at low capital cost. The labor intensity of the SME constitutes over 90% of total enterprises in most of the economies and is credited with generating the highest rate of employment growth and account for major share of industrial production and exports (Government of India, 2007), and the rapid expansion of small enterprises in economies of developed countries in the 1980s and 1990s has created a widespread conviction that small, new ventures are the most important source of entrepreneurship and as a dynamic and innovative factor, they contribute directly to economic growth. (Piotr and Rekowski, 2008) However, the SMEs sector is faced with many constraints. Among them is the most pressing one known to be financing. 2.1 Small and medium enterprises and access to finance A major barrier to rapid development of the SME sector is a shortage of both debt and equity financing....
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