THE IMPACT OF MICRO-FINANCE BANKS ON THE GROWTH OF

SMALL AND MEDIUM ENTERPRISES IN NIGERIA

(A Case study of Highland Micro-finance bank Bukuru)

BY
EMMANUEL BONIFACE ADAH
PSP/SABS/ACC/HND/18-19/8074

BEING A RESEARCH PROJECT SUBMITTED TO THE

DEPARTMENT OF ACCOUNTANCY, SCHOOL OF
ADMINISTRATION AND BUSINESS STUDIES, PLATEAU STATE
POLYTECHNIC, BARKIN-LADI, IN PARTIAL FULFILLMENT OF
THE REQUIREMENT FOR THE AWARD OF HIGHER NATIONAL
DIPLOMA (H.N.D) IN ACCOUNTANCY

OCTOBER, 2021.

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 DECLARATION

I, EMMANUEL BONIFACE ADAH of Plateau State Polytechnic Barkin

Ladi, from the Department of Accountancy testify that the Project was fully

researched by me in accordance with the requirement of the Department.

___________________________ _______________
EMMANUEL BONIFACE ADAH Date

ii
 APPROVAL

This research work has been approved by the undersigned:

____________________ ______________
Project Supervisor Date

____________________ ______________
Coordinator Date

____________________ ______________
External Examiner Date

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 DEDICATION

This project is dedicated to God Almighty for being with me all through my

life.

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 ACKNOWLEDGEMENTS

My gratitude and appreciation goes to Almighty God for his divine

guidance and opportunity to have successfully undertaken this research work.

I am grateful to my project supervisor Mr John Dabuk for his proffered

support and assistance during the period of writing this project.

My acknowledgement also goes to my Head of Department Mr Nkem

Nandom, who made my stay in school worthwhile.

Finally, I must recognize the efforts of Benjamin Alu, my friend Paul

Okere who contributed immensely in my life. To my well-wishers, I love you

all and may the Almighty God bless you richly.

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 TABLE OF CONTENTS
i. Title - - - - - - - - - - i
ii. Declaration - - - - - - - - - ii
iii. Approval - - - - - - - - - iii
iv. Dedication - - - - - - - - - iv
v. Acknowledgement - - - - - - - - v
vi. Table of Contents - - - - - - - - vi
vii. Abstract - - - - - - - - - - vii
CHAPTER ONE: INTRODUCTION
1.1Back Ground of the study - - - - - - - 1
1.2Statement of the problem - - - - - - - 2
1.3Research Questions - - - - - - - - 2
1.4Objectives of the study - - - -- - - - 3
1.5 Statement of Hypotheses - - - - - - - 3
1.6Significant of the Study - - - - - - - 3
1.7Scope of the study - - - - - - - - 4
1.8Limitation of the study - - - - - - - 4
1.9Historical background of the study - - - - - - 5
1.10 Definition of Terms - - - - - - - 5
CHAPTER TWO: LITERATURE REVIEW
2,1 Introduction - - - - - - - - - 6
2.2Conceptual Framework - - - - - - - 6
2.2.1 Meaning of small scale business - - - - - 6
2.2.2 Overview of microfinance institutions in Nigeria - - - 10
2.2.3 Activities of Microfinance Banks and Financing Small Scale
Businesses - - - - - - - - - 11
2.2.4 Sources of finance for small scale businesses - - - - 12
2.2.5 Procedures for obtaining funds from Microfinance banks - 13
2.2.6 Problems confronting microfinance institutions in financing SMES in

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 Plateau State - - - - - - - - 14
2.2.7 Solution of the problems confronting SMEs in Plateau State - 15
2.3 Theoretical Review - - - - - - - - 16
2.3.1 Financial growth theory - - - - - - - 16
2.3.2 Pecking order theory - - - - - - - 17
2.3.3 Bank capital channel theory - - - - - - 18
2.4Empirical Review - - - - - - - - 18
2.5 Summary of Literature Review - - - - - - 19
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design - - - - - - - - 21
3.2 Target Population - - - - - - - - 21
3.3 Sample Size - - - - - - - - - 21
3.4 Sampling Techniques- - - - - - - - 22
3.5 Method of Data Collection - - - - - - - 22
3.6 Method of Data presentation and Analysis - - - - 22
CHAPTER FOUR: DATA ANALYSIS
4.1 Data presentation - - - - - - - - 24
4.2 Data Analysis - - - - - - - - - 24
4.3 Test of Hypotheses - - - - - - - - 29
4.4 discussion of finding - - - - - - - - 33
CHAPTER FIVE: SUMMARY OF FINDINGS CONCLUSION AND
RECOMMENDATION
5.1 Summary of findings - - - - - - - - 34
5.2 Conclusion - - - - - - - - - 35
5.3 Recommendation - - - - - - - - 36
5.4 Suggestion/Need for Further Research - - - - - 37
References - - - - - - - - -
Appendices.

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 Abstract
The overall objective of the study was to examine the impact of micro-finance
on the growth of Small and Medium Enterprises in Nigeria. The study was
guided by the some objectives; To determine the effect of financial services of
MFBs on the growth of SMEs, To identify the problems encountered by the
small and medium scale enterprises in obtaining loans from the banks, To find
out whether Micro-finance banks have helped to solve the problem of financing
SMEs, To establish the important of Micro-finance banks on the growth of
SMEs in Nigeria, and To identify the problems encountered by the banks in the
process of administering loans to SMEs. Data was collected using a
questionnaire and interview guide, and during data collection purposive
sampling method was used. Simple percentage was used to analyze data as a
sample size of 30 respondents was used. The study concludes that the use of
MFBs has potentials for enhancing the performance of small businesses in two
ways- regular participation in micro-financing and offering of non – financial
services. This suggests that government policies aimed at promoting the
performance of SMEs should also address the financial and non-financial
activities of the MFBS. The study recommended that SME operators should
utilize the benefits of MFBs to promoting their business outfits so that the
economy as a whole is improved in performance, Government should regulate
and monitor the activities of MFBs to redress the identified weaknesses,
Government and MFBs themselves should enhance the out-reach of
microfinance through creating awareness of the activities and operations to
SMEs especially those in rural and semi-urban areas that are yet to appreciate
the benefits of the scheme, and Government should also ensure active
operation of the SME Credit Guarantee Scheme to improve credit providers’
exposure to longer term debt issued by small firm managers, in such areas as
business plan development, feasibility studies, project monitoring and analysis,
book keeping and accounting, performance evaluation etc. this could be
organized before entry into business or early in the business when it is having
access to equity finance.

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