Financing Agro-Based Small and Medium Scale Enterprises by Selected Commercial Banks in Enugu State, Nigeria

Abstract

This study analyzed the financing agro-based small and medium scale enterprises by selected commercial banks in   Enugu state, Nigeria. It specifically sought to ascertain the quantum of loans disbursed to the small and medium scale agro-based enterprises by the selected banks in the study area as well as the factors that determined such disbursements. A multi-stage sampling procedure was adopted in this study. Three Banks, namely First Bank of Nigeria (FBN) Plc, Union Bank of Nigeria (UBN) Plc and United Bank for Africa (UBA) Plc were purposively selected because they are among the top lenders to agro-based enterprises and some other economic activities in the state. Data for the study were obtained from both primary and secondary sources and analyzed through the use of descriptive and inferential statistics. The bulk of the sampled small scale agro-based enterprises (76.67%) accessed between N200,000 and N600,000 ($1,256.25 and $3,750) while 56.67% of the medium scale agro-based enterprises obtained a loan of N1,000,000 ($6,250). This amount accessed is too small when viewed against the high cost of doing business in Nigeria. Determinant variables such as age of entrepreneurs, interest rate, enterprise experience, category of enterprises, rate of loan repayment, and business turnover were all found to be critical factors that influence the amount of loan that are given to SMEs. It is therefore the recommendation of this study that there is need for the banks to increase the amount of loan disbursed to agro-based SMEs in other to improve and increase their production.