Deposit Money Banks and Financing of Small and Medium Scale Enterprises in Nigeria

Abstract

Nigeria, as well known, is a country flowing with rich human and natural resources. Yet, like a twist of fortune, a good number of our citizens are living below the agreeable WHO human standard (i.e. in sub-human condition) and in abject poverty. The deposit money banks whose duty it is to assist financially the small and medium scale enterprises (SMEs) that serves as pivotal instrument of reducing abject poverty and enhancing economic growth in Nigeria could just be characterized as generally unstable and unreliable, in meeting the needs of these medium and small scale enterprises.  Many scholars have carried out a lot of research to proffer some possible solutions to areas that are dysfunctional in the deposit money banks in Nigeria especially in the area of meeting the borrowing needs of SMEs. This paper does not attempt to discuss the cause or effects of the inability of this system to meet the above mentioned needs. Its main objective is to sensitize the attention of every reader to the present state of these financial institutions which serves as a touchstone to other aspects of the Nigerian economy by describing and analyzing the efficiency of these institutions with regard to providing resources to meet the borrowing needs of medium and small scale enterprises. To attain this, data were collected from the statistical bulletin of Central Bank of Nigeria ranging from 1995-2012. The paper employed the descriptive method. Findings from the estimation shows that deposit money banks in Nigeria have been lacking in this aspect. As a result, recommendations were made for its stability and sustainability such that the monetary authority should initiate policies that would redirect the channel of deposit money banks’ credits so as to meet the borrowing needs of at least 65% of the medium and small scale enterprises in the economy. This will help to boost economic activities within the country because lack of capital retards investment.

Key Words: Deposit Money Banks, Small and Medium Enterprises, Development