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This study was carried out to asses the accessibility of credit to small and medium scale enterprises in Nigeria (SMEs) it aimed at assessing the accessibility of SMEs to organized private sector credit facilities and government institutional funds and credit scheme.  A sample size of 100 SMEs in the study area was drawn. Questionnaire and interview schedules were analysed in simple percentage forms and tested with (spearman- rho correlation). The main findings of the study are that the organized private sector credit facilities are accessible to SMEs in Nigeria; that the government institutional funds and credit schemes are accessible to SMEs. These financial institutions are willing to extend credit to SMEs because of the enermous economic growth and development brought by SMEs. The researcher recommend that there is every need for the organized private sector and government financial institutions to design and package a credit delivery policy that will suit the peculiar nature of problems of SMEs in Nigeria.     




The dynamic role of Small and Medium Scale Enterprises (SMEs) as engine of growth in developing countries has long been recognized. According to Ukeje (2004), it’s accelerative effect in achieving macro economic objectives, such as full employment, income distribution, development of local technology as well as diffusion of management skills and stimulation of indigenous entrepreneurship, have been well documented in economic literature.

SMEs in Nigeria account for substantial part of the total industrial employment, production, and value-added in Nigerian business concerns (Osuagwu, 2001).

This is the view held by Okongwu (2001), who states that SMEs generate the industrial wealth of Nigeria in addition to being a major agent in the economic, technological, social and political growth and development in Nigeria, not minding the presence of multinational and other large firms in Nigeria.

It is in recognition of this role of SMEs as a veritable tool of economic development that according to Deen (2003), government all over the world have formulated comprehensive public policies to encourage, support and fund their establishment and growth. Also, various Nigerian governments, to some extent, have been involved in encouraging the conceptualization, development, survival and expansion of SMEs (Osuagwu, 2001).

However, in playing their role as a catalyst of economic growth and development, SMEs in Nigeria are bedeviled with a plethora of problems which include:

1.           Lack of adequate financing

2.           Incompetent management

3.           High operating cost

4.           Poor location

5.           Unstable socio-economic climate

6.           High labour turn-over, among others

Of all the problems which SMEs encounter in their day-to-day struggle for survival, lack of adequate financing seems to be the most salient factor to observe. This is the view of Nwana (1995) who observed that an acute problem facing the SMEs is inability to raise enough fund to finance its operations. Also in agreement with this, is the view of Osuagwu (2001) when he states that lack of adequate financing is a common reason for SMEs failures.

The sources of finance open to SMEs include personal funds, organized private sector funds, informal financial institutions funds, government funds, customer financing, as well as trade credit from suppliers and others. The most readily available of these funds to SMEs is the owner’s capital, which is usually insufficient to sustain the business, hence, the need to source for external fund. Experience has shown that SMEs have difficulties in producing external funds. The reasons for this are well documented in economic literature, and include in particular the fact that lending institutions regard them as high risk ventures and shy away from them (Okeke, 2001). According to Mbadiwe (2005), the financial system in Nigeria has been biased against SMEs.

However, in Nigeria, the Federal Government, in recognizing the crucial role of capital to the survival of SMEs, has enunciated series of fiscal policies and incentives aimed at encouraging the establishment, growth and survival of this group of enterprises (Adebusuyi, 1997).

Government financial support given to SMEs comes in form of series of programmes on small and medium scale industries financing through the provision of “soft loan” by government owned development financial institutions. It also include directives to commercial banks on the provision of soft loan to SMEs. In addition, new lending schemes and credit institutions such as the Small and Medium Industries Equity Investment Scheme (SMIEIS), Bank of Industry (BOI), National Economic Reconstruction Fund (NERFUND), Nigerian Export and Import Bank (NEXIM), National Directorate of Employment (NDE), Nigeria Aqricultural and Cooperative Bank (NACB), amongst others and the World Bank SMEs assisted loan scheme have also emerged at both the state and national levels to boost the flow of fund to SMEs.

Unfortunately, inspite of all the available financial institutions and the government’s efforts in ensuring the flow of funds to SMEs, finance has continued to remain a Major problem of SMEs in playing their role as an engine of economic development. Many firms in this group had either ceased operations or are operating for below their full capacity due to lack of adequate financing among other factors. It is in view of this, that the researcher tends to establish the impact of financing on the survival, growth and development of SMEs in the challenging and dynamic Nigeria business environment.

Poor capitalization, which seems to be responsible for the failure of most SMEs in Lagos State as observed by the researcher, is a consequence of low level of owner’s capital and lack of access to external funding.

Therefore, the need has become urgent to assess the access of SMEs to external funding. This implies their access to organized private sector funds, and government institutional funds and credit schemes. Inspite of the acclaimed efforts to the organized private sector and the government to channel funds to SMEs, there is not much on the ground to show for their efforts. This is affirmed, in view of the poor performance of the SMEs and their continued cry for financial assistance from both the organized private sector and the government. This situation has given impetus to carry out this study to determine the access which SMEs have to funding from the organized sector and the government institutional funds and credit schemes.


SMEs encounter various problems in their day-to-day struggle for survival but their financial problem tends to overshadow others. The various financial windows open to SMEs for sourcing funds appear not to solve their problem of access to fund, hence the demise of many SMEs. The government and the organized private sector claim of channeling funds to SMEs appear to conflict with on the spot assessment of the performance of SMEs, as most of them have performed very poorly, while a good number of them have been liquidated as a result of poor financing. Hence, the problem is to determine the accessibility of SMEs to external funding.


The objectives of the study include:

1.     To determine the SMEs credit accessibility from the organized private sector (namely: commercial banks, merchant banks, finance houses, insurance companies and community banks).

2.     To determine the extent to which government institutional funds and credit schemes have contributed to accessibility of fund to SMEs in Nigeria.

3.     To determine the impact of financing in the survival and growth of SMEs in the Nigeria business environment.


The significance of the study include:

1.     The result of the study are useful to the federal government in improving its policies on credit accessibility to SMEs.

2.     It will also assist the organized private sector in improving their credit delivery system to ensure their accessibility to SMEs.

3.     The findings would help owners of SMEs identify factors responsible for their inability to have access to credits from both the organized private sector and the various government credit.

4.     The study will serve as a reference material for future research work.


This study revolves around answering the following questions:

1.           To what extent has the organized private sector credit facilities been accessible to the SMEs in Nigeria?

2.           To what extent has the government institutional funds and credit schemes been accessible to SMEs in Nigeria?

3.           What are the factors militating against credit accessibility of SMEs in Nigeria?

4.           What is the effect of funding on the survival and growth of SMEs in Nigeria?


On the basis of the problems of this study, the objectives of this study and the research questions, the following hypotheses are therefore formulated for testing:

1.     H0:     That organized private sector credit facilities are accessible to SMEs in Nigeria.

        H1:     That organized private sector credit facilities are not accessible to SMEs in Nigeria.

2.     H0:     That government institutional funds and credit schemes are accessible to SMEs in Nigeria.

        H1:     That government institutional funds and credit schemes are not accessible to SMEs in Nigeria.


Since finance, time factor and manpower resources were not sufficient to conduct a large-scale survey of credit accessibility of SMEs, the study is delimited to the accessibility of credit facilities to SMEs from the government institutional funds and credit schemes, and the organized private sector in Surulere LGA, Oshodi/Isolo LGA, Ikeja LGA and Apapa LGA, all in Lagos metropolist.

Since all the SMES in Nigeria operate under the same economic conditions and tackle identical problems, the results of the study will be used to generalize their financial problems.

This research study is limited to the use of administered questionnaire and also restricted to a sample size of 100 incorporated SMEs drawn within the scope of study.


Capital Investment: Acquisition of plants for production purposes.

Commercialization: Conversion of a non profit-making public establishment to a profit-making and self sustaining enterprise.

Credit Facilities: Various external source of funds e.g. loan, debt factoring, customer financing etc.

Credit Schemes: Programmes put in place by government through which external funds can be obtained with ease.

Diversification: Spreading of investments to reduce risk and or to be more competitive.

Entrepreneur: A person who conceptualize a business enterprises or opportunities establishes it, and nurse it to survival and growth.

Equity Financing: Investing fund in a business enterprise by taking up its shares capital. Funding through part ownership.

External Funds: funds obtainable from organized private financial institutions and government loan schemes, other than personal funds (savings).

Financial Funds: funds

Financial Window: Sources (organized private sector and government institutional funds and credit schemes) through which external funds can be obtained.

Liquidate: To close down a business and use any money thus made to pay it’s debt.

Moratorium: The time frame to repay an externally sourced fund.


Adebusuyi, B.S (1997) “Performance evaluation of small and medium enterprises in Nigeria, Lagos, CBN Bullion Vol. 21, No. 4

Deen, M.H (2003) “Small and medium scale enterprises and funding in Nigeria. A paper delivered at a workshop organised by Nigerian investment promotion commission for operators of SMEs in Lagos.

Lawal, A.A et al (1998) Entrepreneurship Development, Lagos: Ade-Oba printing press Ltd.

Mbadiwe, U. (2005) “Small business and entrepreneurship management: An innovative and strategic Approach; Lagos; Nile ventures

Nwadibia, G. (2001)”The theory of money and Banking, Revised Edition” Ibadan: Freeman productions.

Nwanna, L.E. (1995): “Fundamentals of small scale Business Management,” Onitsha: Onwubike Prints Ltd.

Osuagwu, L. (2001): “Small Business and Entrepreneurship Management”, Lagos, Grey Resources Ltd.

Okongwu, D. A. (2001) “Fostering the Innovation Potential of SMEs in the Globalization Era”. WIPO Milan Forum on Intellectual Property and Small and Medium-Sized Enterprises, Milan Ital, February 9 – 10.

Ugwanyi, H. N. (2003) “The Need for Financial Assistance to Small and Medium Scale Industries in Nigeria”, Lagos Business Times, February 8.

Ukeje, E. V. (2004) “’Creating Jobs Through SMEs”. Business Day, May 19.

This material content is developed to serve as a GUIDE for students to conduct academic research

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