Sources of Finance and Small and Medium Scale Enterprises’ Performance in Ado-Ekiti Metropolis

Abstract

The objective of the research study was to look into the effects of financial source on small and medium enterprises performance in Ado-Ekiti metropolis. Survey research method was used via structured questionnaire. The questionnaire was administered to 225 respondents in 45 conveniently selected registered SMEs in the Ado-Ekiti metropolis. 4 point Likert Scale was employed to collect the respondents’ data. Since the respondents are the owners and concerned authorities of the business, there is no need for undecided option. Stratified sampling technique was adopted while frequency tables were used to explain the demographic of the respondents. Multiples regression analysis was employed in the study since we have multiple independent variables (like: personal savings, informal and formal sources of finance) and one dependent variable (i.e performance). From the findings, it shows that each of the financial sources has a reasonable level connection with the performance of SMEs. The model summary of each of the sources of finance shows personal savings with R² 33.1%, informal 42.0% and formal 46.7% respectively. However, the overall regression analysis results of the three sources indicate that R² is 35.6% with F-test value of 40.78% attributed to performance. The overall coefficient results show that Mfb in formal source ranked best with t value of 5.933 and 0.00 at 5% level of significance and followed by family in informal source with t value of 3.940 and 0.00 at 5% level of significance and esusu in personal saving with t value of 3.180 and 0.00 at 5% level of significance respectively. The study concluded that there is nexus between sources of finance and business’ performance and from the overall coefficient regression results, it shows that formal source of finance is the most significant independent variables that is enhancing SMEs’ performance in Ado-Ekiti metropolis.

Keywords: Esusu, Family, Friends, Cooperatives, Money lenders and Banks