THE EFFECT OF FINANCIAL INSTITUTION ON THE DEVELOPMENT OF SELECTED SMALL AND MEDIUM SCALE ENTERPRISE.

ABSTRACT This study aimed at assessing “The Effect of financial institution on the development of selected small and medium scale enterprise”. Though the success of SMEs has never been linked to the accessibility of financial services by various scholars, yet the way financial institutions influence success of SMEs has never been explored. To undertake the study ten financial institution were involved which included commercial banks, microfinance institutions. A total of 95 SMEs were randomly selected from a population of SMEs found in Warri metropolis. Two sets of questionnaires were constructed one set for SMEs owners and other for the financial institution. The responses of the participants were analyzed using the statistical package for social sciences (SPSS). The study found that financial institutions have little influence on SMEs financing because most of SME owners or managers frequently used retained earnings or profit (self-financing) and funds from relatives/friends to finance their business as a source of fiancé. The study recommends to financial institutions to rigorously market their services to SMEs which have not subscribed to their services. The study also recommends the relaxation of lending conditions so that SMEs can access loans at affordable interest rates. The study further recommends future research to be done that shall incorporate a wide range of SMEs, with a bigger sample size.