Topics: Poverty, Microfinance, Bank Pages: 12 (3583 words) Published: May 10, 2013
IMPACT ASSESSMENT OF THE ROLE OF MICRO FINANCE BANKS IN PROMOTING SMALL AND MEDIUM ENTERPRISES GROWTH IN NIGERIA Babagana, S. A. School of Business Studies The Federal Polytechnic, Bauchi, Bauchi State, Nigeria E-mail: sbabagana@yahoo.co.uk, sbabagana@gmail.com

The history of industrial Revolution in developed and developing countries have shown that small and medium enterprises are the driving force of industrial and economic development. This paper examines impact of the role played by micro finance banks MFBs) in promoting the growth of SMEs in Nigeria. An empirical study was carried out using Garu Micro Finance bank in Bauchi, Bauchi State being one of the most successful Micro Finance Banks in North East sub region to determine impact of the role of MFBs in promoting small and medium enterprises growth. Out of the total number of employees in the bank, 15 members of staff whom constitute the middle and management staff were used as respondents. Questionnaire was developed and distributed to them which they all filled and returned. The study revealed that MFBs have contributed to the promotion of small and medium enterprises growth in Nigeria. It was recommended that government should further encourage the activities of Micro Finance Banks (MFBs) by creating enabling environment so that they can further support SMEs growth.

International Journal of Economic Development Research and Investment Vol. 1, No 1, April 2010


INTRODUCTION The role of Micro Finance Banks in Promoting Small and Medium Enterprises in Nigeria is more than to be over emphasised. A major characteristic of small and medium enterprises (SMEs) worldwide is that they are generally managed by their owners either as sole proprietorship or partnership (Adamu, 2005). SMEs are also largely local in their areas of operation. They depend on internal sources of capital and are relatively small in size within the industry. Small and Medium Enterprises (SMEs) are predominant in the private sector of the Nigeria economy, but almost all of them are starved of funds. Economic growth cannot be achieved without putting in place well focused and organized programmes to reduce poverty through empowering the people by increasing their access to factors of production especially credit facilities. The latent capacity of the poor for entrepreneurship would be significantly enhanced through provision of micro finance services to enable them engage in economic activities (such as small and medium enterprises) and be more self reliant, increase employment opportunities, enhance household income and create wealth (CBN, 2005). Establishment of Micro-finance banks as an effort by the government to improve the access to loans and savings services for poor people is currently being promoted as a key development strategy to enhancing poverty eradication and economic development (Shreiner, 2005). Micro finance policy depends heavily on the availability and provision of finance. Abimiku (2000) asserted that finance is the main pre-occupation of banking industry that brings together the factors of production such as land, labour and enterprenuer into action. The role of finance in organizing productive activities is no longer conjectural as it has the unique advantage of facilitating economic development. Many today believe that, finance is vital and crucial to the process of economic development. Development Economist posits that, the existence and evolution of banking constitute an important dimension of the process of economic growth and development.The provision of affordable financial services to the rural population according to Mohammed (2005) has been a key component of development strategy for the past International Journal of Economic Development Research and Investment Vol. 1, No 1, April 2010


decades. Direct intervention in rural banking and financial markets through targeted credit programmes, interest subsides and other government...
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