SOURCES OF FINANCE FOR MICRO, SMALL AND MEDIUM ENTERPRISES IN NIGERIA
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Initial attempts of developed and developing countries to eradicate poverty focused on the
development of large scale industries, based on the traditional economy of scale theory. However,
the economic downturn that followed the collapse of the world oil market in 1980s and the
financial crisis in Asia in the 1990s brought to fore the important role of Micro, Small and Medium
Enterprises (MSMEs) in industrial and economic development in any given country. It has
been recognized that among the constraints to effective development of MSMEs in Nigeria is the
limited access of the investors to long term credit. Various credit initiatives have been instituted
in the past to improve the access of MSMEs to long term funds. Analysis carried out in this study
showed that commercial banks loans constituted over 90 percent of sources of funds to MSMEs in
Nigeria and their loans and advances to agriculture and manufacturing sectors combined(where
the MSMEs are dominant) grew from N83.40million in 1970 to N1,129,158.30 million in 2009
and averaged N149,106.08 million per annum thereby constituting 17.81% of total commercial
banks loans and advances to the Nigerian economy on the average between 1970 and 2009,
whereas the MSMEs currently contribute about 50% to the nation’s Gross Domestic Product.
Furthermore, the survey results indicated that MSME operators still do not have enough funds
for their operations as a frequency analysis indicated that inadequate fund/working capital was
the most mentioned problem with a percentage share of 60.7%. In view of the assured role of
MSMEs in economic development and poverty alleviation, it is recommended that all the funding
apparatus directed at the MSMEs in Nigeria, be sustained and intensified.
Keywords
H Social Sciences (General), HB Economic Theory, HG Finance