INFLUENCE OF MICRO FINANCE BANKS ON SMALL AND MEDIUM SCALE BUSINESS FINANCIAL PERFORMANCE IN IBADAN METROPOLIS

ABSTRACT The study examine the impact of microfinance on the growth and development of Small and Medium Scale in Oyo, while the specific objectives also designed to examine the effect of microfinance banks on the growth of SMEs in Nigeria; ascertain the extent of the effect of strict conditions of finance houses in granting loans for the development of micro and small scale enterprises; find out the degree of accessibility of funds by Small and Medium Enterprises (SMEs) from Micro Finance Banks (MFB); and assess the effectiveness of the mechanisms put in place by micro finance banks to ensure judicious use of loans granted to beneficiaries (SMEs). Primary data was adopted for the research. 60 staff of both MFbs and SMEs were sampled. Demographic variables were subjected to descriptive analysis, while the Pearson’s correlation and anova methods were used for the analysis of the hypotheses. The study establish that there is a significant relationship between financing and SMEs growth (r = .452*, N= 60, P < .05). This implies that a 1% attention of micro finance banks on SMEs will increase SMEs growth by 45.2%. Further findings reveal that the interactive effect of loan conditions on SMEs development is statistically significant at .05 level. From other findings r = .518*, N= 60, P < .05. the result shows that a 1% access to loan facility will increase performance of SMEs by 51.8%. Hence, it could be deduced that accessibility of loan by SMEs could trigger performance. In another vein, the relationship between finance mechanism and SMEs growth is significant (r = .785*, N= 60, P < .05). The implication of this result is that a 1% source in financing mechanism improves the growth of SMEs by 78.5%. The study conclude that there is a positive contributions of MFIs loans towards promoting SMEs growth, performance and development. Therefore, this study suggests that policies aimed at promoting the growth of micro and small enterprises should adopt a sectoral approach and, within that, address specific issues that affect enterprises at the lower and upper ends of the spectrum of growth and expansion. Thus, approaches and resources should address the most critical determinants of growth in focal sub-sectors, aiming to augment access to critical resources and, perhaps, overcome the disadvantages that cannot be easily varied.