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Volume 12 Issue 4, October-December 2024 
ISSN: 2836-9416 
Impact Factor: 5.57 
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IMPACT OF MICROFINANCE BANK ON GROWTH OF SMALL 

AND MEDIUM SCALE ENTERPRISES. 
 

1Eke Robert I. Ph.D., FCA. 2Ozabor Lydia Osatohanmwen and 3Iriogbe 

Cynthia Bose 

1&2Department of Accounting and Finance, School of Social and Management Sciences, Wellspring 

University Benin City, Edo State. 
3Department of Business Administration, School of  Social and Management Sciences, Wellspring  

University Benin City, Edo State. 

Email: Robbyeke19@yahoo.com; Robert.eke@wellspringuniversity.edu.ng (+2348034712733). 

Iozabor2@gmail.com (+2348061516532); boseiriogbe@gmail.com (+2347051930883). 

   DOI: https://doi.org/ 10.5281/zenodo.13961356 

 

 

Abstract: The broad objective of this study was to examine the impact of Microfinance Banks on 

Growth of Small and medium Scale in Nigeria.  The study adopted the survey research design and 

data was gotten from owners and staff of SMEs operating in Edo state via structured questionnaire.  

A total of three hundred and twenty three (323) copies of the questionnaire was used to perform the 

analysis. The Chi-square statistical analysis was used to test the hypotheses of the study. The findings 

of the study revealed that microcredits granted by Microfinance banks has positive and significant 

impact on growth of SMEs in Nigeria. Secondly, the study found that Microfinance Payment Services 

has positive and significant effect on on growth of SMEs in Nigeria. Thirdly, the result of the study 

revealed that Savings mobilization role Microfinance Banks has positive and significant impact on 

growth of SMEs in Nigeria. The study recommended that Government should create an enabling 

environment for Microfinance Banks to perform its primary role of savings mobilization, payment 

services and granting of microcredits to Small and medium Scale Enterprises in Nigeria. 

Keywords: Microfinance Bank, Microcredit, Payment Services, Savings Mobilization, Small and 

Medium Scale Enterprises. 

 

INTRODUCTION 

In Nigeria credit has been recognized as an essential tool for promoting the growth of small and medium 

scale enterprises ( Ajagba and Bolaji 2013). The introduction of microfinance bank in Nigeria is as a 

result of the inability of Nigerian deposit money bank (DMN) to provide sufficient financial service to 

the rural and urban poor people (central bank for Nigeria 2005). Microfinance banks’ lending has 

proven to be a potent tool for poverty reduction by helping the poor to becoming entrepreneurs. As 

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American Research Journal of Economics, Finance and Management 
Volume 12 Issue 4, October-December 2024 
ISSN: 2836-9416 
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2 | P a g e  

entrepreneurs increasing their income, smooth consumption, build assets and minimizing their 

vulnerabilities in time of contingencies and economic shock (Dauda 2007). Despite the abundant 

natural resources, the country still finds it very difficult to discover her developmental bearing since 

independence (CBN 2001). Most of the poor unemployed Nigerians in a bid to improve their standard 

of living have resorted to the establishment of their own businesses and making entrepreneurship fast 

becoming a household name in Nigeria (Ogunleye and Akanbi 2014). 

The impact of microfinance bank on small and medium scale enterprises (SMES) have raised the bar 

of entrepreneurship in most sectors of the Nigeria economy (central bank of Nigeria,2005). Nigeria has 

the largest population in sub-Sahara Africa with estimated population of about over 200 million out of 

total of 1.5 million in African (Oluwuyii et al 2010). Based on data provided by the Nigerian bureau of 

statistics (NBS) the unemployment rate in Nigeria has increased from 7.4% in first quarter to 8.2% in 

second quarter and 9.90% in third quarter of 2015, while 6.4% in the last quarter of 2014 and a decline 

of 24.7% in 2013, compared to 27.4% in 2012, 23.9% in 2011, 21.4% in 2010 and a decline of 24.8% in 

2003, decline of 12.6% in 2002, 13.6% increase in 2001 and 13.1% in 2000 respectively.  

In order to boost employment in Nigeria, the government has focused on the area of delivery to the 

poor and small and medium enterprise (SMEs (Khandker 2013). Efforts in this respect include 

developing policies and creating institutions for mobilizing and deploying capital funds to SMES to 

encourage employment and productivity (Akinboyo 2007) 

The population explosion in Nigeria and the inability of government and the conventional financial 

institution (bank) to handle the ever increased demand for finance of businesses, gave birth to the 

micro-finance banking system. These micro finance bank policies are such that they are geared towards 

eliminating poverty by committing to the empowerment of low income Nigerians through creation of 

access to responsive financial services on a suitable basis. This is transmitted to applicants in a cost 

effective and inventive way. The establishment micro finance banks, was created in the year 1987 to 

assist citizens of the country (Nigeria) break out of the problem of poverty (Okpara 2010). However, 

the extension for the creation of the institution is not being actualized due to some economic indices 

(inflation, eco-recession and depression) and the operation of the organization.  

Generally micro finance banks require certain percentage of loan granted to be repaid monthly by 

borrowers in course of servicing their borrowings, e.g LAPO will require 5% of loan disbursed to be 

returned monthly. In this situation, except there is so much profit made within the staggered period 

their deposit liabilities is expected to shrink with in the period, in the presence of inflation, this 

procedure portends trouble for the entrepreneurs. As a result most microfinance institutions will not 

be able to extent credit facilities to small and medium entrepreneurs which can affect their operation 

adversely. Also, there are several cases of unserviced loans, while others totally default in their 

repayment. Overall consequence is that, all this hinder the activities of the microfinance banks. While 

the above are problems exists, another issue is that the process of accessing loan is tedious and require 

guarantors to access the loan as by way of  policy they may not  demand collateral. Experiences of the 

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past (loan collectors absconding after accessing loans) has made guarantors be in short supplies these 

days. Inability to access loan and use them when required have serious effect on the SMEs and the 

economy in general. 

All these has led to question being raised on whether Micro Finance banks has been supporting SMEs 

in their quest to grow. This study is carried out to find out if the objective of setting up microfinance 

bank is still being achieved.    

Objective of the Study  

The objective of this study is to evaluate how micro finance bank can strengthen micro enterprise and 

encourage best practice among operators of small and medium scale Enterprises (SMEs). 

The specific objectives are; 

 To investigate how micro credit extended to SMEs has impacted on SMEs growth. 

 To examine how micro finance banks assist SMEs in payment services. 

 To find out how micro finance banks assist SMEs in saving their surplus funds. 

LITERATUURE REVIEW 

 Conceptual of Microfinance 

Microfinance  is  majorly  envisioned  to  provide financial  services  for  poor  and  low  income 

enterprises  offered  by different  types  of  service  provided.  Microfinance Institutions (MFIs) 

commonly tend to use methods developed over the last 30 years to deliver very small loans to 

unsalaried borrowers, taking little or no collateral. These methods include group lending and liability,  

pre-loan  savings  requirements,  gradually  increasing  loan  sizes,  and  an  implicit guarantee of ready 

access to future loans if present loans are repaid fully and promptly. 

From a global perspective, microfinance organizations envision a world in which low income 

households have permanent access to a range of high quality and affordable financial services offered 

by a range of retail providers to finance income producing activities, build assets , stabilize 

consumption, and protects against risks. 

  Microfinance is the provision of financial services adapted to the needs of low income people especially 

the provision of small loans, acceptance of small savings deposits, and simple payments services 

needed by micro and small entrepreneurs and other poor people (USAID, 2000). Oluwuyi, et. al. 

(2010) noted that microfinance is about providing financial services to the active poor who are 

traditionally not served by the conventional financial institutions. The concept of microfinance was 

perceived as the provision of financial and non-financial services by MFBs/MFIs to low income 

groups without tangible collateral but whose activities are linked to income-generating ventures 

(Ogunrinola 2007). Furthermore, Ogunrinola (2007) viewed microfinance as an economic 

development approach intended to benefit low income women and men. It means that the purpose 

of microfinance is to reach the low income entrepreneurs with financial services that will enable 

them creates wealth without any discrepancy as to sex of such person (Oguleye and Akanbi, 2014). 

Uche (2008) cited in Babajide (2011) describes microfinance as banking the “unbankables”, bringing 

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credit, savings and other essential financial services within the reach of people who are poor to be 

served by regular banks, due to lack of sufficient collateral. Therefore, microfinance is the practice of 

offering small and short term loans to entrepreneurs who otherwise would not have access to capital to 

begin small business or other income generating activities. Microfinance idea became popular in the 

development discourse of the early 1980s . In general,  microfinance  has  five  features  that  distinguish  

it  from  credit  supplied  by  the conventional financial institutions. First, the loan size is small; 

however, this general feature differs from one country to another and depends upon the differences 

in the levels of the country’s socio-economic development. Secondly, the primary customers of these 

loans are the people who have little access to conventional banking facilities. Thirdly, the purpose of 

these loans is to create income-generating activities. Fourthly, tangible collateral is not necessarily 

required for taking this kind of loan. 

Finally, this is another aspect of micro credit program that distinguishes itself from conventional 

banking. But the microfinance ventures have integrated loaning and savings mobilization functions, in 

order words, regular savings are a pre-condition for granting loans (Eke and Idogun 2022). 

Microfinance, with regard to this study, is the practice of offering financial and non-financial 

services, to entrepreneurs who hitherto cannot access the conventional financial institutions, at a fee 

that is affordable and economic to the users of such services. This will enable them to start or build up 

their own enterprises. The Microfinance Policy defined the framework for the delivery of these 

financial services on sustainable basis to the Micro, Small and Medium Enterprises (MSMEs) through 

Microfinance Banks (CBN, 2005). 

Microfinance  Bank,  according  to  the  Central  Bank  of  Nigeria  (CBN,  2009  &  2012),  is  a company 

licensed to carry out the business of providing microfinance services such as savings, 

Loans, insurance, money transfer and other financial services that are needed by the economically poor, 

micro, small and medium enterprises.  

The Concept of Small and Medium Scale Enterprises 

The concept and definition of small and medium scale enterprise is dynamic in nature and varies with 

time and also varies among institutions and countries. However, the basic definitional parameters are 

not the same. They include numbers of employees, Assets and turnover. 

Siebel (2011) stated that, it is evidence around the world that small and medium scale enterprise 

provide an effective means of stimulating indigenous entrepreneurship, enhancing greater employment  

opportunities  per  unit  capital  invested  and  aiding  the  developing  of  local technology. Small scale 

enterprise: An enterprises with a labour size of 11-100 workers or a total capital of not more than 50 

million including working capital but excluding cost of land while medium scale enterprises is an 

industry with a labour size of between 101-300 workers or a total cost of over 50 million, but not 

more than 200 million including working capital but excluding cost of land (Berger, 2012). 

SMEs and NERFUND (2004) define SMEs as an enterprise with an asset base not exceeding 

N200,000,000.00 excluding land and working capital with staff strength of not less than 10 and not 

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more than 300. A cursory glance a the structure of SMEs in Nigeria reveals that 50% are engage in 

distributive trade, 10% in manufacturing, 30% in agriculture and the rest 10% in services. A special 

feature of Nigeria SMEs is that distributive trade component is generally considered more 

commercially viable than the manufacturing component hence they attract more funding from bank 

and other financial institutions (Ibru, 2004). In summary SMEs can therefore be said to be conducted 

in the following terms: 

i. As a proprietorship: Single ownership. 

ii. As a partnership: Where (2-20) two to twenty people polled their resources together 

iii. As a legally, incorporated Entity: having the characteristics of a legal person and this could be a 

private limited sole company. 

However, in Nigeria more than 83% of the SMEs operate under the first two businesses type, while the 

third one operate mainly as family business (Ibru, 2004). 

According to Babajide (2012) SMEs and entrepreneurship are now recognized worldwide as key source 

of economic growth and development. Okpara (2010) opined that small and medium scale enterprises 

play a very important role in developing economies. This view was also supported by Ajagba and Bolaji 

(2013) when they upheld that the promotion of micro enterprises in developing countries is justified 

in their abilities to faster economic growth, alleviate poverty and generate employment. According to 

the Nigeria’s national Council on Industry; an SME is define in terms of employment i.e. as one with 

between 10 and 300 employees.  

The benefits of SMEs cannot be overemphasized as they include; contributions to the economy in terms 

of output of goods and services, and creation of jobs at relatively low capital cost.. It is a medium for 

the reduction of income disparities thus developing a pool of skilled or semi-skilled workers as a basis 

for the future industrial expansion; improve forward and backward linkages between economically, 

Socially and geographically diverse sectors of the economy provide opportunities for developing 

and adapting appropriate technological approaches and also offer an excellent breeding ground for 

entrepreneurial and managerial talent. 

2.2       Theoretical Underpinning 

  This study in anchored on financial growth theory. The theory was developed by Berger and Udell 

(1998). According to them, as a business matures over the years, its financial obligations and 

financing options metamorphose having more information available to the public. 

According to them, firms that are smaller, younger and possess more ambiguous information must 

depend on initial internal funding, trade credit, or a type of financing called angel finance. (Angel 

finance is one that occurs when an individual or organization provides a limited amount of financial 

backing for a startup business with more favourable repayment plan). As the firm grows, it qualifies for 

acquiring both venture capital and midterm loans as sources of both intermediate equity and 

intermediate debt respectively. Further aging of the firm makes it to become bigger and less 

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information ally murky. This thus qualifies the firm to have access to both public equity and long 

term loans as sources of both long term equity and long term debt respectively. 

The capital structure of SMEs is thus very different from that of bigger firms because SMEs rely more 

on informal financial market which limits the type of financing they are able to secure. The SMEs initial 

use of internal financing leads to a peculiar state of affairs whereby capital structure decisions are 

heavily dependent on  the limited financing options. Therefore, SMEs possess varying capital 

structures and are financed by various sources at different stages of their development (Berger and 

Udell, 1998). 

Empirical Review 

Eke and Idogun (2022) examined the Impact of Microcredit availability on the growth of Small and 

Medium Scale enterprise in Nigeria. The study adopted survey research design and a sample of 325 

questionnaire was distributed. Data collected was analyzed using both inferential and descriptive 

statistics. The findings confirmed a significant contribution of microcredit to SMEs in the area of asset 

acquisition, raw material acquisition and provision of working capital. The study recommended that 

Central bank of Nigeria should create enabling environment for Microfinance banks to perform its 

primary role of providing microcredit to SMEs in Nigeria. 

Ajagba and Bolaji (2013), access the impact of Microfinance bank loans on the socioeconomic standard 

of living of commercial motorcycle riders in Ilorin-west Local Government Area of Kwara State, Nigeria. 

From the results obtained, the study concludes that there is a significant relationship between the 

microfinance bank loans and economic growth by improving the standard of living of commercial 

motorcycle riders in Ilorin west local government area of Kwara State, Nigeria.  

Oluyombo (2010) attempt to investigate the contributions of microfinance banks credit to Nigeria’s 

economic growth and employs credits disbursed by the microfinance institutions as a proxy for their 

operational activities. The study employs the Ordinary Least Squares (OLS) regression technique and 

finds a weak, though positive relationship between Nigeria’s microfinance banking operations and the 

nation’s economic growth. Consequently, it recommends that microfinance institutions should channel 

very high proportion of their credits to the productive and real sectors of the economy for valuable 

impact of their operations on Nigeria’s economic growth.  

Babajide (2012) studied the effects of micro financing on micro and small enterprises (SMEs) in South 

West Nigeria using Diagnostic Test Kaplan-Meier Estimate, Hazard Model and Multiple Regression 

Analysis. The study indicates that microfinance enhances survival of small business in South West 

Nigeria; that microfinance does not enhance growth and expansion capacity of MSEs in Nigeria; that 

microfinance impacts significantly on the level of productivity of MSEs operators in South West Nigeria 

and that the provision of non-financial service by microfinance institutions enhances the performance 

of micro and small enterprises (MSEs) in South West Nigeria.  

Okpara (2010) examines the critical factors that induce poverty among the enterprising poor in Nigeria 

and the extent to which micro credits have assisted in alleviating poverty. The study’s selected causative 

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factors for poverty include low profit, high cost of start-up or expansion funds for business and low rate 

of business growth. Employing two-stage regression technique within a quadratic equation framework, 

the study finds that in the first or take-off stage of microfinance banking, poverty was observed to have 

increased, though at a declining rate with increase in micro credits. In the second stage of the study 

which started from the year 2001, persistent increases in disbursed micro credit facilities are observed 

to have significantly lowered the poverty index in Nigeria. Consequently, the study calls for policy 

measures to establish microfinance institutions in every community in Nigeria. 

Microfinance Bank Investment and Economic Growth 

Olakojo and Olanipekun (2011) empirically examined the impact of microfinance bank investment on 

the Nigerian economy. They employed pooled regression and ordinary least square econometric 

technique on annual time series data for the period 1992-2008. The empirical findings show that the 

current level of sectoral output is positively influenced by loans and advances from the banking sector. 

However, a sectorial analysis using OLS reveals that while loans and advances from microfinance banks 

positively affect output of manufacturing, building and construction, mining and quarrying sector, the 

same could not be established for the agricultural sector. They concluded that microfinance banking 

investment is very critical to the well-being of the economy as it does not only provide financial assistant 

to small and medium scale enterprises but also to the real sector of the economy, thereby fast tracking 

economic growth in Nigeria. 

Taiwo (2015) empirically investigated the role of microfinance bank investment to financial sector 

development and economic growth in Czech Republic. He employed Panel data approach in addition 

to Granger causality test for 103 countries for the period 1995- 2008 in order to determine the causality 

between microfinance banks and economic growth. From the review of these prior studies, it is being 

observed that most of the studies found a positive relationship between microfinance bank investment 

and economic growth. While some had significant impacts, others had insignificant impact.  

METHODOLGY 

Research design 

This study employed a survey research design. The target population of this study comprise of owners 

of SMEs and senior staff of microfinance bank operating in Edo State, Nigeria.  

Since the population of SME owners and Microfinance bank staff cannot easily be determined and 

researcher’s inability to reach out to the entire population, and in order to gain the advantage of an in-

depth study and effective coverage, Cochran formula was used for determining the sample size in an 

infinite population was used. Thus, the sample size is determined using the Cochran formula as follows; 

n=Z2PQ 

      e2 

n= Sample size; 

Z= The value gotten from Z-table; 

Q= 1 – P 

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P= Numerical probability of success70% i.e 0.70 

E= The margin error limit stated at 5% 

Assigning values to these symbols, the sample size calculated thus: 

                             n=       1.962 x 0.7 x (1-0.7 

(0.05)2 

      n= 3.8416 x 0.7 x 0.3 

              0.0025 

        n=   0.806736 

                0.0025 

n= 322.6944 ≈ 323 

Table 3.1: Number of questionnaires distributed to local governments in Edo State 

Local Government Area Numbers Distributed 

Akoko Edo 16 

Egor 22 

Esan Central 15 

Esan North-east 15 

Esan South-east 12 

Esan West 15 

Etsako Central 16 

Etsako East 12 

Etsako West 13 

Igueben  17 

Ikpoba Okha  30 

Irrua  16 

Oredo  35 

Orhionmwon 21 

Ovia North east 23 

Ovia South west 12 

Owan West 13 

Uhunmwonde  20 

TOTAL 323 

Source: Researcher’s compilation (2024) 

Questionnaire was designed to collect data from the respodents. The questionnaire was divided into 

two sections, the first is to elicit the respondent’s demographic data, while the second is to elicit their 

responses to the research questions. The questionnaire was made up of close ended questions, the 

respondents are required to rate their responses on a 5-point Linkert scale consisting of Strongly Agree 

(SA), Agree (A), Neutral (N), Disagree (D), and Strongly Disagree (SD). 323 questions were 

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administered out of which 300 returned completed questions. The data were analysed using tables and 

simple percentages while chi-square was used to test the hypothesis. 

Data Analysis 

The data is analyzed using tables, simple percentages, mean and frequency distribution while the 

hypothesis was tested using least square regression. 

Effect of Microcredits on SME growth 

Table 1: Effects of microcredits on SME’s growth 

S/N ITEMS SA A N D SD 
1. Micro finance banks extend credit facilities to 

SMEs to acquire assets 
114 
(42%) 

23 
(7%) 

24 
(8%) 

63 
(21%) 

66 
(22%) 

2. Microcredits extended by Microfinance 
banks to SMEs have assisted them in 
financing their business activities 

147 
(49%) 

39 
(13%) 

30 
(10%) 

36 
(12%) 

48 
(16%) 

3. SMEs has improved their working capital 
through credits from Microfinance Banks   

186 
(62%) 

27 
(9%) 

9 
(3%) 

36 
(12%) 

39 
(13%) 

4. Profitability of SME business has improved 
through Financing from Microcredits from 
Microfinance banks. 

69 
(23%) 

126 
(47%) 

24 
(8%) 

30 
(10%) 

36 
(12%) 

Source: Fieldwork, 2024 

Data presented in Table 1 on responses relating to the effects of microcredit on growth of SMEs showed 
that 42% of the respondents strongly agreed that Microfinance banks extend microcredits to SMEs to 
acquire assets, 49% strongly agreed that majority of SMEs have financed their business through 
microfinance bank, 62% strongly agreed that Micro finance bank improved working capital of SMEs, 
and 47% agreed that profitability of SMEs micro credits from microfinance banks. This implies that 
microfinance bank through microcredit has great impact in the growth of SMEs. 
Table 2: Impact of Microfinance Banks on Payment Services of SMEs 

S/N ITEMS SA A N D SD 
5. Majority of SMEs effect payment of their 

clients through Microfinance banks. 
117 
(39%) 

102 
(34%) 

36 
(12%) 

12 
(4%) 

30 
(10%) 

6. Microfinance banks now offer applications to 
their customer for payment services.  

63 
(21%) 

39 
(13%) 

33 
(11%) 

138 
(46%) 

27 
(9%) 

7. Majority of Microfinance banks are now 
connected to NIBBs that ease interbank 
transfers. 

138 
(46%) 

63 
(21%) 

0 (0%) 66 
(22%) 

33 
(11%) 

8. Microfinance banks offer their customers 
cheque services that can pass through CBN 
clearing system. 

51 
(17%) 

129 
(43%) 

27 
(9%) 

42 
(14%) 

51 
(17%) 

Source: Fieldwork, 2024 

Data presented in Table 2 showed the responses on the Influence of Microfinance banks on payment 
services of SMEs. It was observed that 73% of the respondents agreed that SMEs effect payment of their 

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clients through microfinance banks, 46% strongly disagreed Microfinance banks offers them bank 
application with which to make payment services. 67% agreed that Microfinance banks offer online 
real-time services to SMEs, and 60% agreed that Some SMEs process their chq deposits through 
microfinance banks who assists them to clear the cheque. The summary of the responses agreed that 
Microfinance banks has assisted to improve on payment services of SMEs. 
 

Table 3: Role of microfinance bank on SMEs saving of surplus fund 

S/N ITEMS SA A N D SD 
9. SMEs has developed interest in savings through 

maintaining account with Microfinance banks. 
18 (6%) 39 

(13%) 
48 
(16%) 

150 
(50%) 

48 
(16%) 

10. Savings Interest rates offered by Microfinance 
Banks are attractive to SMEs 

39 
(14%) 

57 
(19%) 

12 (4%) 63 
(21%) 

126 
(42%) 

11. Through savings with Microfinance banks, SMEs 
has improved their working capital. 

66 
(22%) 

33 
(11%) 

63 
(21%) 

63 
(21%) 

138 
(46%) 

12. Fixed Deposits maintained by SMEs in 
Microfinance banks can be used as collaterals for 
borrowing short term fund from the bank. 

21 (7%) 126 
(42%) 

0 (0%) 90 
(30%) 

63 
(45%) 

Source: Fieldwork, 2024 

Data presented in Table 3 showed the responses on the impact of Microfinance bank on savings 

mobilization of SMEs. It was observed that 66% of the respondents disagreed that SMEs developed 

interest in having savings with microfinance banks, 46% strongly disagreed that savings through 

microfinance banks improved the working capital of SMEs, 46% disagreed that Majority of SMEs does 

not go to insolvency position due to micro credits they can fall back to, 75% of respondents disagreed 

that they use fixed deposits with microfinance banks as collateral to obtain loans. The summary of the 

respondents shows that microfinance banks does not support the savings aspect of SMEs finance. 

Hypotheses testing 
In analyzing the three (3) hypotheses derived from the objectives, Chi-Square statistical tool were used 
to test the hypotheses. Below are the analysis and the results of the hypotheses formulated to guide the 
study. 
Decision rule: 
Reject the null hypotheses if the X2 calculated value is greater than the X2 critical table value and accept 
the null hypotheses if the X2 calculated value is lower than the X2 critical table value. 
Hypothesis one  
Ho: There is no significant relationship between microcredits and business growth of SMEs. 
To test the hypothesis, the response to questions 1-4 in the questionnaire as found in Table 1 was used. 
The Chi-Square statistical tool was used as shown below. 
Table 4: Chi-Square Computation Table 
S/N SA A N D SD Mea

n 
(X) 

SD df 

X
2
 C

a
l 

X
2
 

C
r

it
. 

Sig Decisi
on 

1. 114 21 24 63 66        

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2. 147 39 30 36 48  
 
 
2.81 

 
 
 
1.42 

 
 
 
9 

 
 
 
46.91 

 
 
 
11.085 

 
 
 
0.05 

 
 
Reject 
H0 

3. 186 27 9 36 39 
4. 69 126 24 30 36 

Source: Authors Computation, 2024 

The Chi-Square analysis (X2c<X2t; α = 0.05) was observed and based on the decision rule, microcredits 

has significant impact on SMEs growth. Therefore, we accept the alternative hypothesis and reject the 

null hypothesis since the X2 calculated value (46.91) is greater than the critical table value of 11.085. 

Hypothesis two 

Microfinance bank does not support the payment services of SMEs. 

To test the hypothesis, the response to question 5-8 in the questionnaire as found in Table 2 was used. 

The Chi-Square statistical tool was used as shown below. 

Table 5: Chi-Square computation table 

S/N SA A N D SD Mean 
(X) 

SD df 

X
2
 

C
a

l 

X
2
 

C
r

it
. 

Sig Decisi
on 

5. 117 102 36 12 30  
 
 
 
 
3.44 

 
 
 
 
 
1.71 

 
 
 
 
9 

 
 
 
 
58.13 

 
 
 
 
11.085 

 
 
 
 
0.05 

 
 
 
Reject 
H0 

6. 63 39 33 138 27 

7. 138 63 0 66 33 
8. 51 129 27 42 51 

Source: Authors Computation, 2024 

From the above, the Chi-Square analysis, (X2c= 58.13 <X2t= 11.085; α = 0.05) was observed and it was 
found that Microfinance bank has significant impact on payment services of SMEs. Therefore, there is 
relationship microfinance bank and payment services of SMEs. We accept the alternative hypothesis 
and reject the null hypothesis since the X2 calculated value (58.13) is greater than the X2 critical value 
(11.085). 
Hypothesis three 
Microfinance bank does not have significant relationship with savings culture of SMEs 
To test the hypothesis, the response to question 9-12 in the questionnaire as found in Table 3 was used. 
The Chi-Square statistical tool was used as shown below. 
Table 6: Chi-Square computation table 

S/N SA A N D SD Mean 
(X) 

SD df 

X
2
 

C
a

l 

X
2
 

C
r

it
. Sig Decisi

on 

9 39  48  
 

150 
 

48  18   
 
 
 
 
3.09 

 
 
 
 
 
1.52 

 
 
 
 
9 

 
 
 
 
9.56 

 
 
 
 
11.085 

 
 
 
 
0.05 

 
 
 
Accept 
H0 

10 
 

57  12  63  126 39 
 

11 33  63 
 

63  138  66  

12 126  0  90  63 21  

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Source: Authors Computation, 2024 

The Chi-Square analysis, (X2c= 9.56 <X2t; = 11.085; α = 0.05) was observed and based on the result, 

there is no significant relationship between microfinance banks and savings culture  of SMEs. It could 

be deduced that microfinance banks does not have significant impact on SMEs savings culture. 

Therefore, we accept the null hypothesis and reject the alternate hypothesis since the X2 calculated 

value (9.56) is less than the X2 critical value (11.085). 

Summary and Conclusion 

This study looked how microfinance bank acts as an instrument of growth of SMEs in Nigeria. It 

explored various ways in which access to credit has assisted small and medium scale enterprises in 

achieving their growth strategy. The objectives of the study focused on how microcredits has assisted 

SMEs in the area of payment services, access to microcredits and acting as a reservoir for surplus funds 

for SMEs. At the end of the investigation and based on the test of hypothesis, the following were 

discovered; 

 Microcredits granted to SMEs by Microfinance banks has significantly impacted on growth of SMEs. 

 Microfinance banks has positively impacted on payment services of  SMEs 

 Microfinance banks has not significantly improved the savings mobilization for SMEs. 

We therefor conclude that microcredits being made available to SMEs through microfinance banks and 

other channels has greatly and positively influenced the operations of that sector of the economy. SMEs 

in turn has also contributed significantly to the growth of the economy of our country through its 

contribution to GDP growth. 

Recommendations 

Based on the outcome of the findings, the following recommendations were made; 

1. There should be more enlightenment campaign on SME operators to enable them develop 

savings culture. On their part microfinance banks should make savings attractive by giving an interest 

rate that will be competitive to commercial banks. 

2. Government should also create enabling environment for microfinance banks to operate by 

liberalizing its operation for greater efficiency. 

3. Access to credit should not be made stringent to SMEs to enable them access the necessary funds 

for their operation. In this line, government through CBN should guarantee to some extent credit 

extended to SME sector.  

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American Research Journal of Economics, Finance and Management 
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