THE EFFECT OF MICROFINANCE BANK LOAN ON PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA

Abass Adekunle Adewale; Abass Adedolapo Adeyemo

Abass Adekunle Adewale Department of Banking & Finance, Faculty of Management Sciences, Osun State University, NIGERIA
Abass Adedolapo Adeyemo Department of Banking & Finance, Faculty of Management Sciences, Osun State University, NIGERIA

Keywords: Microfinance Bank, Loan Disbursement, Small And Medium Enterprises, Loan Payback, Loan Interest Rate

Abstract

This paper evaluates the impact of microfinance bank loans on small and medium enterprises (SMEs) in Osun State, Nigeria. The SMEs encounter major difficulties when trying to obtain financing, which hampers their growth and contributions to the economy. Microfinance banks are crucial as they provide essential financial services tailored for SMEs, facilitating economic growth. A descriptive survey design was used so as to collect data from 150 randomly selected SME operators across various sectors in the Osun State. The findings show that microfinance loans significantly enhance SME performance leading to increased productivity, employment, and business expansion. However, high-interest rates & stringent loan conditions present substantial challenges that hinder optimal loan utilization. Study concludes that while microfinance bank loans positively influence SME growth, addressing these barriers could improve effectiveness & sustainability in SMEs. Enhancing loan terms could boost microfinance banks role in fostering long-term economic improvement in the region. This study empirically links the microfinance bank loans to SME performance, contributing to the literature on SME financing and economic development in Nigeria.