The effects of microfinance banks on indigenous manufacturing smes access to finance in Nigeria

Small and medium sized enterprises (SMEs) play a significant role in sustainable economic development; this role can be severely hindered by difficulties of access to credits for their operations. Studies continue to show that SMEs still experience limited access to finance in the form of credits from traditional sources such as commercial banks and this remains a stumbling block to their development. In recognition of these challenges, the Nigerian government in 2005, through the Central Bank of Nigeria (CBN) enacted guidelines for the establishment of Microfinance banks (MFB) to improve microfinance lending to SMEs in the country. In this study conducted a year after the 2013 announcement of revision to these guidelines, the authors seek to assess the effects of microfinance lending on SME access to finance. Data were obtained from a questionnaire survey of indigenous manufacturing SMEs in two states (provinces) within the country. The result shows a positive contribution of microfinance lending to the development of SMEs. However, a number of factors such as cumbersome loan processes, poorly packaged business plans and high interest rates limit indigenous SMEs’ access to credit.