THE EFFECT OF ACCESS TO FINANCE ON THE GROWTH OF SMALL AND MEDIUM SCALE ENTERPRISES WITHIN DAMATURU METROPOLIS YOBE STATE
Abstract
ABSTRACT
Small and Medium Scale Enterprises (SMEs) play a critical role in employment creation, poverty reduction, and economic diversification within emerging economies. Despite their importance, many SMEs in Nigeria—particularly those operating within Damaturu metropolis, Yobe State—continue to face significant financial constraints that limit their ability to expand and operate efficiently. This study examines the effect of access to finance on the growth of SMEs within Damaturu metropolis with a focus on how credit availability, cost of finance, collateral requirements, and financial institution support influence business performance and expansion. The study adopts a survey research design, using structured questionnaires administered to owners and managers of selected SMEs across major business clusters in Damaturu. Data were analysed using descriptive statistics and regression techniques to determine the relationship between access to finance and SME growth indicators such as sales performance, employment generation, asset acquisition, and profit levels. Findings reveal that limited access to formal credit, high interest rates, stringent collateral requirements, and low financial literacy significantly hinder SME growth in the area. Conversely, SMEs that have access to microfinance, cooperative loans, and flexible credit facilities experience higher levels of expansion and improved operational capacity. The study concludes that access to finance exerts a strong positive and statistically significant effect on SME growth in Damaturu metropolis. It is recommended that financial institutions ease collateral conditions, design SME-friendly loan products, and expand their outreach within the metropolis. In addition, government policies should support credit guarantees, improve financial infrastructure, and promote entrepreneurship development programmes to strengthen the financial ecosystem for SMEs in Yobe State.
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