EFFECT OF BANK CREDIT ON FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN MAIDUGURI, BORNO STATE

ABSTRACT This study examines the effect of bank credit on the financial performance of Small and Medium Enterprises (SMEs) in Maiduguri, Borno State, Nigeria. SMEs play a vital role in economic development by generating employment, reducing poverty, and contributing to gross domestic product. However, their growth and sustainability are often constrained by limited access to finance, particularly bank credit. The study aims to assess the extent to which bank credit influences the financial performance of SMEs, identify challenges faced by SMEs in accessing credit facilities, and evaluate the relationship between credit availability and business growth. A descriptive research design was adopted, and data were collected through structured questionnaires administered to selected SME operators in Maiduguri. The data were analyzed using statistical tools such as percentages, tables, and regression analysis. Findings from the study reveal that bank credit has a significant positive effect on the financial performance of SMEs, particularly in terms of increased profitability, business expansion, and improved cash flow. However, the study also identifies major constraints such as high interest rates, stringent collateral requirements, and complex loan procedures, which limit SMEs’ access to bank credit. The study concludes that although bank credit is crucial for enhancing SME performance, there is a need for improved credit policies and supportive financial frameworks. It recommends that financial institutions should adopt more flexible lending conditions, while the government should implement policies that promote easier access to credit for SMEs.