MICROFINANCE BANKS AND SMALL SCALE ENTERPRISES IN EDO STATE, NIGERIA.

ABSTRACT

Traditionally, commercial banks lend to some medium and large scale enterprises, which are judged to be creditworthy. They avoid doing business with the poor and the micro enterprises because they believed the associated cost and risks involved are relatively high. Microfinance Banks (MFBs) are financial institutions majorly established in Nigeria to empower and provide financial services to the poor and Small Scale Enterprises (SSEs) in the rural and urban areas. The study therefore, examined the impact of microfinance banks on the performance of Small Scale Enterprises (SSEs) in Edo State, Nigeria. The research design used for the study was x field survey research design.The population of the study includes all owners/managers of small scale enterprises who are customers of Microfinance banks in Edo State, Nigeria. A sample of 200 SSEs were selected and copies of questionnaire were distributed to the selected sample. The data was analysed through regression analysis and descriptive statistics. The findings of the study revealed that: (i) Microfinance credit has positive and significant effect on the performance of small scale enterprises in Edo state; (ii)Microfinance insurance has positive but none significant relationships with the performance of small scale enterprises; (iii) Microfinance savings products has positive and statistically significant effect on the performance of small scale enterprises. Based on the findings, the study concluded that MFBs impact positively on the performance of SSEs in Edo, Nigeria. The study recommends that MFBs should improve on their microinsurance service to SSEs; MFBs should find more refined means of monitoring and relating with their SSE credit customers; MFBs should embrace electronic banking services to enable them deliver timely and efficient banking services to SSEs; MFBs should sustain and improve on their already efficient micro-savings scheme and also, MFBs in Edo state should exploit the international window for grants and cheap funds to enable them reduce their interest charge on microfinance credit to SSEs.