The Effect of External Agencies’ Financial Assistance and Bank Credit on the Development and Growth of Small and Medium Enterprises in Nigeria.

Abstract

Like most developing and developed countries, Nigeria sees the Small and Medium Enterprises as potential catalysts for national economic growth and development, and, so partners with many external donor agencies and local NGOs to boost the performance of the SMEs’ sector and its contributions to national growth. Using bank credit to SMEs and SMEs’ investment data, this paper examined the impact of external agencies’ financial assistance and bank credit on the development and growth of small and medium scale enterprises in Nigeria. Although findings show that bank credit to SMEs and SMEs’ investment have been on the rise throughout the period studied, it suggests that government efforts to boost the sector’s performance did not yield significant impacts as there is low co-variability between the foreign financial assistance and the SMEs’ growth and development. Though a positive relationship exists between foreign financial assistance and the SMEs’ growth, the explanatory variable (financial assistance needed by the SMEs during the period) did not have a significant impact on their growth and development. This will be explained by the inability of the SMEs to have reasonable access to the foreign and domestic financial assistance available during the period. The SMEs’ inability to perform creditably could be attributed to the endogenous and exogenous limitations they faced.

Keywords: Small and Medium Enterprises, External Agencies, Official Development Assistance, Financial Assistance, Bank Credit, Growth and Development