The Impact of Financial Crisis on Small and Medium Scale Enterprises Access to Credit in Nigeria

Abstract

In every economy of the world, the impact of the SME is not taken for granted as for all healthy economy, there must be a healthy SME due to the fact that, their contribution to the production volumes in terms of exports, innovations and the entrepreneur skills is vital for every economy to grow. There is a reasonable level of agreement among policy makers, theorists, economists, and business experts that small and medium enterprises (SMEs) are drivers of economic growth. SMEs’ access to credit has been a serious subject of debates to policy makers and researchers of both developed and developing economies based on the pivotal and significant role of SMEs’ in growing the private sector as well as the global economies as an extension to the nations. Hence, there is a need to  examine the bank lending capacities to the SMEs’ in Nigeria and its effects on the Nigerian business environment, the impact of financial crisis in Nigeria on SMEs’ access to bank credit, in addition, to determine the impact of SMEs’ on the Nigerian economy. The study employed the use of secondary source of data in the relevant literatures and data generated from the Central Bank of Nigeria Bulletin, 2016 on Credit Accessibility to the SME sector in Nigeria from the year 1992-2015. An econometric analysis was used specifically  regression analysis. The result confirmed that Bank lending capacity as one of the factors of financial crisis does affect the SMEs access to credit, and there is a strong and positive relationship between the SMEAC, Foreign Direct Investment, Interest Rate and Inflation while there is a strong and negative relationship between the SMEAC, GDP Total, CBTC and the Money Supplied. However, there is a weak relationship between the SMEAC and the SMEGDP and CBLSME. The result indicates that, as the Interest Rate and Inflation continue to increase it has a negative influence  on  the SMEs access to credit through the commercial banks. It is recommended to the Nigerian government that, economic policies that would favour the establishment of more SMEs with access to flexible credit facilities be made. In addition, the government needs to improve on the commercial bank lending capacities to the SMEs as this when positively managed will positively influence the contribution of the SMEs GDP

Keywords: Financial Crisis, credit Accessibility, small and medium enterprises

DOI: 10.7176/RJFA/10-22-09

Publication date: November 30^th 2019