Chapter one

Introduction
Access to finance and credit plays a significant role in sustaining livelihoods and developing
microenterprises. Inaccessibility of such credit continues to hinder this development. The
formal financial institutions view these enterprises as risky and unprofitable and are,
therefore, hesitant to provide such credit to them (Sanya, & Polly, 2017). The fundamental
role of MFBs is that of the provision of financial intermediation. This is the transfer of capital
or liquidity from those who are in surplus to those in deficit (Ekpete & Iwedi, 2017). MFBs
play important roles in the economic growth and development of any government because of
their potentials in poverty reduction (Adama, Duru, & Diyoke, 2017). Globally, SMEs are
known for their leading role in promoting grassroots economic and equitable sustainable
development (Wairimu & Mwilaria, 2017). According to Chetama, Dzanja, Gondwe &
Maliro, 2016, a vibrant micro, small, and medium enterprise (MSME) sector is key to poverty
alleviation and growth in, especially in sub-Saharan Africa.

Statement of t he Problem
I t is incontrovertible that the SMEs are the bedrock of every economy, the micro finance
banks in Nigeria are established to assist the SMEs in relations to demand for funds to
support their businesses. Factors such as institutional inadequacies and under capitalization
affects the financial capability of these institutions. One of the greatest obstacles that Small
Medium Enterprises (SMEs) have to deal with is access to funds. This is further compounded
by the fact that even where credit facilities are available, little awareness as well as high
interest rates and short repayment period.
SME’s are in need of modern banking services such as domestic fund transfers services that
will help the growth of small medium enterprises. This factors among others connote a big
problem to the small medium enterprises in Nigeria.

Objectives of the Study

The main objective of this study is to investigate the effect of micro finance bank on the
performance of small medium enterprises. The specific objectives of the study are:
i (i) To examine the effect of domestic fund transfer on the growth of small medium
enterprises.
ii (i) To determine the effect of repayable loans on the performance of small and
medium enterprises.

Research Questions
The following research questions were formulated for the study:
iii (i) Is there any significant relationship between domestic fund transfer and the growth
of small medium enterprises?
iv (ii) Is there any significant relationship between repayable loans and the performance
LITERATU RE REVIEW
Concept of Micro Finance
The Central Bank (2005) defines “Microfinance bank as any company licensed to carry out
the business of providing microfinance services such saving loans, domestic funds transfer
and other financial services to the economically active poor,low income earners , small and
medium enterprises to conduct or expand their businesses.
Ojo ( 2007) defines micro finance as a small-scale financial services that are provided to rural
and informal small scale operators for farming, fishing, trading and building of houses and to
engage in any other productive and distributive activities.
Meehan (2004 ) defines micro finance as banking the unbankables, bringing credit, savings
and other essential financial services within the reach of millions of people who are too poor
to be served by regular banks due to lack of sufficient collateral.
It is also important to note that micro finance banks renders financial assistance to some
neglected groups who may find it difficult to get financial services from the conventional
banks, consequent upon the establishment of microfinance banks, this neglected groups
majorly in the informal sector of the economy are able to have access to more financial
support which has enabled them to engage in income generating activities including credit
facilities and savings.
H02 There is no significant relationship between repayable loans and the performance of
small medium enterprises.

Chapter two
The Concept of Small and Medium Enterprises (SME’s)
It is undoubtedly accepted that small scale business forms the bedrock of any nation’s
industrial take-off especially in a typical developing country like Nigeria. There is no
generally accepted definition of SMEs. The World Bank describes SMEs as enterprises with
a maximum of 300 employees, $15 million in annual income, and $15 million in assets
(Govori, 2013). Small scale enterprises can be viewed in relations to the value of assets
available at its disposal. Small scale businesses can be defined in terms of turnover and
number of staff employed. Several criteria are used throughout the world to describe small
scale business, they are: Initial capital outlay, financial strength, Relative size etc.
Ofoegbu, Akanbi and Joseph (2013) opines that SMEs are the panacea for the economic
growth and development of many developing countries including Nigeria. Aruwa (2004)
observed that small and medium enterprises (SMEs) have various financing options but
access to the funds have been difficult in spite of several government initiatives, the
unregulated informal finance institutions support the SMEs much more than the formal
sources and they make up more than half of the SMEs’ mix funds, the informal sources needs
to be invigorated to cater for the needs of micro financing. Savings in them should be
encouraged through regulation and government intervention by way of active participation of
community and development banks in local business associations. Small and medium
enterprises needs credit for the growth of the economy and for accumulation which in turn
promotes performance and economic growth (Ubesie etal, 2017).

Microfinance Bank Products for Small Businesses

Microloan : Microloan is an important aspect of microfinance, and it has been described as
the premise of microfinance institutions (Alhassan, Hoedofia & Braima, 2016). These are
funds that are given to small enterprises or individuals business owners over a period of time.
The terms microloan and microcredit are used by SMEs to increase their working capital,
which leads to an increase in turnover and growth in terms of profit, and size of the firm.
Micro-savings: Long before the advent of MFIs, individuals and small businesses have been
engaged in daily, weekly, and monthly contributions referred to as "Esusu." Even many
MFBs in Nigeria are still engaged in this micro savings, whereby the officers of the MFBs go
out to collect contributions daily, weekly, and monthly from individuals and small
businesses. Often banking products are developed for these micro savings. MFBs take care of
the Micro savings needs of the small businesses in the informal markets and rural areas to
help them save, invest, and grow their businesses (Gyimah & Boachie, 2018).
Micro Insurance: This is the insurance of the activities of the customers of microfinance
banks (Oscar & Abor, 2013). Mathur (2012) defines microinsurance as a low-value product
that requires different design and distribution schemes low premium that is based on
community risk rate. Microfinance insurance involves life, health, property, and other
valuable items of business (Gyimah & Boachie, 2018).
Education : MFBs provide educational training to SMEs through efficient utilization of
resources, inventory management, and record keeping. MFBs also trains their customers in
 Chapter three

Methodology

Due to the scope of the research, a primary and secondary source of data was used in
drawing conclusions. Observation and reviews of theoretical and empirical framework lead
to the generalization.
Research design
A questionnaire was designed and administered to selected SME’s in area.
Population size
The population size was targeted to the entire numbers of Small and Medium Enterprises in
the area. But due to the large number of the population sample was taken to generalize the
outcome.
Sample size
The researcher randomly selected 100 SME’s as sample, using a simple random sampling
technique.
Method of data collection
Primary and secondary data was collected through questionnaires, observation and reviewing
the relevant theory.
Method of data analysis
Statistical tables were used in analyzing and presenting the data in this research.
 Chapter four
Data presentation and analysis

Introduction
The data was presented with statistical tables.

Data presentation

Characteristics Frequency Percentage

Industry
Trading 76 76%
Others 24 24%

Legal status
Enterprise 92 92%
Limited 8 8%

Beneficiaries of MF services
Trading 56 73.7%
Others 20 83.3%

Next we move on to understand how micro service has impacted on their financial
performance.

MF Level of Effect For Traders Level Of Effect Others

services for
Frequenc Effecti Skeptic Ineffectiv Frequenc Effecti Skeptic Ineffectiv
y ve al e y ve al e.
Micro 56 32 8 16 20 16 3 1
savings on
financial
performanc
e
Micro 40 33 5 2 17 17 0 0
credit on
financial
performanc
e
Micro 15 4 5 6 10 6 1 3
insurance
Reference Chapter Five

Alhassan,
5.1 summaryE. A., Hoedoafia, M. A., & Braimah, I. (2016). The Effects of Microcredit on Profitability and the Challenges on
Women Owned SMEs: Evidence from Northern Ghana. Journal of Entrepreneurship and Business Innovation, 3(1), 29-47.
doi:10.5296/jebi.v3i1.9244
The micro finance bank has contributed greatly to the financial performance of Small and
Al-Shami, S.S.A., Majid, I, B., Abdul Rashid, N. & Abdul Hamid, M.S.R. (2014). Conceptual Framework: The Role of
Microfinance on the Wellbeing
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Apere, T. [Link]
research (2016).and
The the
Impact of Microfinance
reviewed [Link] on Economic Growth in Nigeria. International Journal of
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Attefah,
5.2 K. J., Mintah, E. K. & Amoako-Agyeman, F. K. (2014) The effect of microfinance institutions on the growth of
Conclusion
small businesses in Kumasi, Ashanti region of Ghana. International Journal of Economics, Commerce and Management,
With confidence from the research conducted, it is acceptable to say the micro finance bank
2(6), 1-39. Retrieved from www. [Link]/
has a positive effect on Small and Medium Enterprises in the community.

5.3 Recommendation
SME’s should utilize the services of MFB to improve their businesses and Micro finance
institutions should develop more services to support the SME’s.
Insurance policies should be restructured for more participation.
The government should as well intervene to broaden the scope of benefits from MFB