Thesis on The Effects of Microfinancing on the survival and growth of Small and Medium scale enterprises in Southwestern Nigeria.

4.2. Quantitative results and outcome

The researcher emphasized the vocal point of the study in this section. First, the socio-economic description of the respondents is discussed. This include the sex, age, educational status, years of the business, sector of the business etc is articulated below.

The socio-economic characteristics of the respondents are analyzed. Firstly, the researcher looked at sex of the respondent’s with respect to south western state. The table 4.1 revealed that the female is greater than male in the entrepreneurship activities. Ogun state has the largest number of female respondents with a number of 64 respondents while the male has 54 in Lagos state. However, the Ogun state has the least of male with 16 and Ekiti state having 36 for the female. The researcher deduced that female strongly participated in entrepreneur economic activities than their male counterparts. This conforms to some works that stated that female are major participant of small and medium activities so as to take their family out of poverty.

Table 4.1

Source:

In addition, age of the respondents is another socio-economic indicators considered as displayed in table 4.2. The major age group that accounted for the largest share of the SMEs are 23-30 and 31-40 having 142 and 143 number of respondents respectively. Therefore, a large number of young entrepreneur are engaged in SMEs between the age bracket of 18 to 40 across all the states in South west Nigeria.

Table 4.2:

Furthermore, the age of the business along with the states in the south west are depicted in the table 4.3 below. The existence age between 1-5years is the dominating age for all the states under examination except for Ogun state. It is followed by the age 6-10 and 21-30years which reveal the survival and growth stage. The researcher can deduced that the number of SMEs started declining from the growth age. This might suggest that SMEs are always many at the existence age and start folding up with time. Therefore, most micro and small businesses does not transform to medium to large enterprises respectively.

Table 4.3:

Also, table 4.4 shows the categories of the business that the respondents undertaken. About 111, 225 and 184 respondents falls under artisan, small and medium enterprises respectively. The small enterprises is the most prominent among the three categories followed by the artisan and the large business. In states such as Ekiti and Ondo, large enterprises dominated the nature of businesses and small enterprises for the other states under the study.

Table

Also, table 4.4 shows the categories of the business that the respondents undertaken. About 111, 225 and 184 respondents falls under artisan, small and medium enterprises respectively. The small enterprises is the most prominent among the three categories followed by the artisan and the large business. In states such as Ekiti and Ondo, large enterprises dominated the nature of businesses and small enterprises for the other states under the study.

Table 4.5 shows the business operation undertaken by the respondents. Their business operations cut across manufacturing, wholesale and retail trade, household goods, agriculture, hotel and restaurants, education, transportation, information technology and health. The most leading business operation is wholesale and retail trade for all the state except for Ogun and Osun state that has household goods and agriculture respectively. The wholesale and retail trade has 177 followed by manufacturing with 86 and then household goods with 83. The reason for the large whole and retail trade might attributed to sales of daily basic needs. However, the health has the least business operation in the South west with just 10. This might be due to a minimum professional requirement in terms of skills and qualification before starting up the business.

Source: SPSS Output, 2016.

The table 4.6 revealed the cross tabulation between the states in the south west and the respondents view if their businesses are insured. About 233 respondents stated that their businesses are insured while 287 stated that their businesses are not insured. Oyo State and Lagos State have the largest number of insured and not insured business respectively. In reality, due to the size and peculiarity, some SMEs do not insured their businesses, the once that do insured are compel to do as a necessary requirement for credit facilities either from commercial banks and microfinance institutions.

Table 4.6: Respondents view business insured

The number of employees is another critical components that need to be looked into as it is used a yardstick for SMEs classification as displayed in table 4.7. The researcher observed that most of the business operators exhibited the traits of SMEs by employees less than 50 employees. The number of employees between 1 to 5 has the largest number of 291 respondents followed by 6-10 that accounted for 143 and 11-20, 21-30 etc in that order for all the states. The researcher deduced that most business enterprises are either micro or small enterprises with few large enterprises considering the size of employees.

Another essential components used for SMEs classification is annual revenue from businesses in table 4.8. The net annual revenue between #10,000-#50,000 accounted for 170 respondents followed by 132 for revenue group #50,001 - #100,000 and #100,001- #250,000. The researcher observed that as the net annual revenue keeps increasing for the revenue group the number of respondents keep declining. The result is paradoxical because the large number of micro and small business enterprises accounted smallest revenue while smallest number of medium and large enterprises consisted the largest revenue. Lagos state has the largest number of enterprises that earn annual revenue that is above #2,000,001 with 13 enterprises, Ekiti with 7 and Ondo with 2.

Table 4.9 revealed the respondents view on their relationship with banking. About 377 business enterprises in South West have relationship with financial institutions either with commercial banks or microfinance institutions. This means that huge number of respondents are financially enlightened and aware of the role of financial institutions on the economy and in their enterprises. However, 143 respondents claimed their business does not have relationship with the financial institutions. The researcher opined that most of these businesses falls under the artisan that are assumed to be too small in terms of size and output. Oyo state produced the highest number of enterprises that banked with financial institution while Ondo produced the highest enterprises with non-banking institutions in South West.

Table 4.9:

The response from table 4.9 led the researcher to the next question of if the enterprises have obtained loan from microcredits institutions as reported in table 4.10. About 317 enterprises claimed that they have obtained loan and financial assistance from microcredit while 203 stated that they are yet secure loan or any financial assistance from microcredits.

Out of the 377 respondents that had interaction with financial institutions about 317 have obtained loan from Microcredit institutions while 203 are yet to seek or obtains loan from micro credit institutions across all the south western states. About 110 enterprises had secured loan from micro credits once in 6 months, with 135 with once in a year, 45 and 17 with once in two and five years respectively. The Lagos state has the highest enterprises that has never obtained loan from micro credits with Oyo state having the least.

The personal savings has remain the most prominent source of fund to most SMEs in the south west as reported in table 4.10. This is followed by borrowing from micro credits and then from friends and families. About 236 enterprises stated that savings was sued to kick start their businesses, the 219 by microcredits and 65 from friends and families. The researcher inferred that the zeal and passion for entrepreneur has made the owner of such enterprises to save with the intention of starting their own businesses.

Table 4.10:

This study moves further to evaluate how government policy has affected the SMEs both most favourably and unfavourably. The researcher observed among the major government policy that have affected SMEs positively the most is exchange and interest rate, followed by infrastructure then subsidies, political stability and access to finance in that order respectively. The exchange and interest rate constituted 57% with infrastructure accounting for about 21.7% while subsidies ranked third with 18.3%. The political stability has 12.3% and access to fund constituted about 10.8% in influencing the SMEs performance in South west, Nigeria. The SMEs operators strongly believed that the decision or policy of the government with respect to exchange and interest rate are determinants in affecting the access to credit that will have a huge impact on SMEs survival and growth overtime. This is shown in table 4.11 and complemented by figure 4.1. Therefore, the researcher deduced that SMEs valued exchange and interest rate as key determinants to credit above all other government policies because it’s one of the major factors that determines their survival and growth. Once finance cannot be guarantee in a life cycle of a business, the lifespan of the business is greatly threatened.

Table 4.11: Government policies that affect business most favourably

Figure 4.1: Government policies that affect business most favourably

On the other hand, table 4.12 depicts some of the government policies that has affected SMEs performance most unfavourably that might have compromise their survival overtime. The policies considered include environmental sanitation, imposition of taxes, banning of importation of raw materials, exchange rates& interest rate, political instability, demolition and lack of adequate infrastructure. The respondent claimed that the imposition of different taxes dominated one of the most unfavourable policy of the Government on SMEs in South West SMEs in Nigeria. The banning of raw materials, exchange and interest rate and environmental sanitation ranked second, third and fourth respectively. The infrastructure entails electricity, regulation, enabling environment and other indicators that enhance the ease of doing business ranked fifth. The lack of adequate infrastructure tend to raise the cost of production which makes it very hard for the micro and small firms to cope, compete and transformed to small and medium enterprises respectively.

Figure 4.13: Government policy that affect businesses unfavourably

Lastly, the respondents stated that financing/financial assistance is their top priority that is needed in order to transform their enterprises and enhance growth. They realizes that financial assistance is a huge relief that debar their growth and compromise their survival in the long run. Apart from financing assistance the second on their agenda is infrastructure, the lack of basic infrastructure has forced most enterprise to shut down or providing no options to the surviving ones except to produce those infrastructure so as to remain in business. The perception of the respondents is depicted in table 4.13

Figure 4.13: Top priority of assistance needed by the enterprises

The discussions above examined the socio-economic features of the respondents as well as other supporting evidence from the respondent with respect to the microfinancing and SMEs survival and growth in South west, Nigeria. The researcher considered the section b of the administered questionnaire to provide answers to the objectives of this study by examine if there is relationship between microfinancing and SMEs survival and growth in South west, Nigeria. The researcher employed Chi square test which is usually used to test for the independence of two categorical variables.

The researcher used the first five questions to address if microcredit institutions have aided business startup capital or not. The cross tabulation was carried and the chi square result is display in below

Table 4.14: Chi Square Test of the cross tabulation between microfinance and enterprises startup capital

The results revealed in table 4.14 that the Chi Square are greater than the tabulated chi square values. Using the probability value as against the rule of thumb, that reject the null hypothesis if the probability value is less than 0.05 (i.e. 5%). This implies that there is a significant relationship between the microcredit institutions and the new startup capital for SMEs. Intuitively, the researcher inferred that microcredit institutions have aided the establishment of most micro, small and medium enterprises.

Therefore, as the microcredit institution funds increases, there is likelihood that more SMEs would emerge. This result is supported that SMEs should approach the microfinance institutions instead of running to commercial banks (Olagunju, 2015). She stated that microfinancing is better platform for SMEs for raising startup capital.

To complement the chi square the correlation test was carried out to establish a link between microfinance and enterprises startup capital in South west Nigeria. The result shows that all the questions are related and confirm that microfinance play a he role in enterprises startup capital.

Table 4.15: Correlation

In addition, the link between microcredit institutions and business survival is evaluated. The result of the Chi Square shows that microfinancing intuitions have helped SMEs to survive and rescue SMEs from folding up. All the related questions used shows that Chi Square is statistically significant a positive relationship is established through the Pearson Correlation value (See appendix). The respondents claimed that at a point in time their enterprises had problem of finance and microcredit saved the business from folding up. The Chi Square is 145.14 and is found to be statistically significant. The researcher opined that microfinance institutions through advisory and credit availability has sustained SMEs from folding up, thereby ensuring their survival overtime. However, a caution needs to be taken here because this is only applicable to SMEs that bank with microfinance and did not default.

Table 4.16:

In a similar manner, the correlation test was conducted to establish if microfinancing has enhance and sustain SMEs survival in the South West, Nigeria. All the questions are correlated and confirm that the intervention of microfinance in terms of access to credit and funds have sustained and led to the survival of SMEs when they had problems. Therefore, the researcher deduced that microfinance institution have rescued SMEs from collaping in the South West, Nigeria.

Table 4.17:

Lastly, this looked at the link between microfinance institution and business growth. This is to examine whether microfinance has enhance SMEs growth. The microfinance have helped to provide startup capital to small business and ensure such businesses does not fold up giving advisory and financial assistance with low interest rate. This has prepared a basis that the role of microfinance has been huge on SMEs survival. Microfinance has encouraged most respondents to save so as to grow and expand their businesses.

Table 4.18: Chi Square Test of the cross tabulation between microfinance and SMEs growth.

In conclusion, the researcher makes some deduction from the tables and information gotten from the respondents on microfinancing and SMEs survival and growth in Nigeria. This has helped in providing answers to objectives (ii) as stated in chapter one.

CHAPTER FIVE

SUMMARY, CONCLUSION, RECOMMENDATION

5.0 INTRODUCTION

The growth and survival of SMEs is very vital in any developing economy as one of its determinant has been funding through microfinancing. Theoretical findings, empirical evidences and field survey results has helped further justify this study as it has been seen of the significant correlation between the two variables (SMEs and microfinancing).

The researcher’s observation from field survey shows that many small businesses today operates on either loan from microfinance banks or self-funding; but microfinance banks still remains top of the two sources of business funds chart. Most entrepreneurs find microfinance loans easily accessible with no collateral and low competing interest rate charge for loan repayment.

The South West Nigeria is a place where several small scale enterprises are predominant; mostly fight for business growth or survival due to lack of funding even with the numerous microfinance banks strategically situated in this location due to population outburst and business ideas that’s needs to be fed with the use of funds through loans.

5.1 SUMMARY AND FINDINGS

The study revealed the following findings in the course of carrying out this research which will be highlighted for further discussions as follows;

i. Most business operations in South West Nigeria in all sectors of the economy rely on loans from micro credit institutions for either business growth or survival.

ii. Accessibility to credit is the major challenge of SMEs growth and survival in South West Nigeria amongst other impediments of SMEs growth.

iii. To ensure proper utilization of credit by loan customers, microfinance guides her customers on areas to invest and some of these microfinance banks conduct training programs to loan customers in order to ensure funds are correctly directed towards business that will cause return on investment.

iv. Microfinance has helped most small scale enterprise from collapse through their funds to loan customers who have beckoned on microfinance banks as their last resort in having funds to make their business which is at the verge of foldup operational.

v. Microfinancing, with its low interest and no collateral requirement makes lending easier for loan customers who seek to improve their business or have business idea for start-up as entrepreneurs are less bothered of high interest rates and unfavorable collateral requirements.

These findings were not just arrived at through literatures reviewed but with the outcome of the field survey which confirmed other scholarly article’s submissions.

Many articles have supported the impact of microfinance on SMEs towards growth and survival. It is believed the lack of access to fund remains the major reason for most business fold-ups as entrepreneurs rely solely on microfinance banks to assist in form of loans to avoid the collapse of their business or, for new innovative businesses to be actualized. This was also confirmed from the survey result which shows that small scale enterprises depend on loans from microfinance banks for business startup or existing business survival. Most of the respondents who have small scale businesses in South West agreed that microfinance has helped their business one time or the other and is still helpful.

The field survey also revealed that most small scale enterprise will prefer accessing loans from microfinance than from commercial banks due to unattainable collateral request, interest rate, low probability to be granted such loans which is unlike that for microfinance banks which require no collateral, non or reasonable interest rates charge on loans and more assurance that such loans will be secured if all requirements are met by credit customers.

5.2 CONCLUSION

It is no longer farfetched of the significance of SMEs in any given economy and also, the engine roller of SMEs which is funding through microfinance banks. As said in the early chapter of this research work that microfinance and SMEs are complementary of each other which means, the growth and survival of SMEs depend majorly on provided funds by microfinance banks to entrepreneurs who have business innovations or who require funds to avoid business foldup.

From the study carried out on the South West which the researcher of this work has been able to buttress her point, SMEs in Nigeria requires more microfinance institutions in order to secure the lifespan of Small Scale Enterprises who are at the verge of collapse and also for the encouragement of newer ones which requires capital for start-up.

5.3 RECOMMENDATIONS

With the unending gear for funds for the survival and growth of SMEs in Nigeria, the government should create other avenue sources where entrepreneurs will be able to access funds which could be in the form of cooperatives in different sectors for the strengthening of these small enterprises towards growth and economic stability.

The microfinance banks needs to be further strengthened by the government through the regulatory agencies working under the Central Bank of Nigeria to strategically position microfinance banks in locations where small businesses are situated so that loan funds will be accessible.

Microfinance banks seem to be closer to small scale enterprise than other loan institutions. The government can use microfinance banks to perform the role of nurturing and training of small scale enterprise so as to reduce the mismanagement of secured loans as a result of wrong investment.