THE IMPACT OF BANK LOAN ON SMALL AND MEDIUM SCALE ENTERPRISE IN NIGERIA
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ABSTRACT
This study was carried out to examine the Impact of Bank Loan On Small And Medium Scale Enterprise in Nigeria using selected banks and SMEs in Lagos state as a case study. Specifically, the study examined the impact of commercial banks on small and medium scaled enterprises development in Nigeria, examine the extent to which small scale enterprises in Nigeria have been able to obtain loans and advances from Commercial Banks for business development, examine the relationship between commercial bank loans and development of SMEs in Nigeria, and examine the relationship between commercial bank deposit and development of SMEs in Nigeria. The study employed the survey descriptive research design. A total of 200 responses were validated from the survey. From the responses obtained and analysed, the findings revealed that there is significant relationship between Total asset of commercial banks and development of SMEs in Nigeria, there is significant relationship between commercial bank loans and development of SMEs in Nigeria, and there is significant relationship between commercial bank deposit and development of SMEs in Nigeria. The study therefore recommends that the government should cut down the interest rate since interest rates are not favorable to investors in the sense that the cost of funds could undermine profits and cause a loss of the investment. Interest rates in Nigeria officially are as high as 23.6% and this has a 84 negative impact on the ability of small and medium scale industries to obtain credit from the banks. Also, the government should be consistent in its industrial policies so as to enable manufacturing firms to factor tariff measures into their trade decisions. Moreso, the government should provide adequate infrastructural facilities like electricity, roads and water supply for the SMEs as this will reduce the high cost of doing business. This will encourage banks to fund the SMEs as their investment will be recouped. Furthermore, the government should regard SMEs should regard SMEs as the ‘eggs’ that hatch big businesses. Apart from the adequate incentives in above, the government should support SMEs by bulk purchasing their products and retailing them both for the domestic market and for exports.
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