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Chapter One


Background of the study

Small and medium scale enterprises (SMEs) have played major role in generating employment and advance economic development globally.  SMEs are fundamental part of the economic fabric in developing countries, and they play a crucial role in furthering growth, innovation and prosperity. SMEs have historically been the main players in domestic economic activities, especially as providers of employment opportunities, and hence generators of primary or secondary sources of income for many households (Palmarudi and Agussalim, 2013). Ojokuku and Sajuyigbe (2014) confirmed that SMEs has been recognised globally as engine of economy growth and development. Small and medium enterprises are the solution to the problem of slow economic development among developing countries.  The contribution of SMEs to Nigeria economy has not been felt. According to Olowe, Moradeyo and Babalola (2013), many SMEs in Nigeria could not reach the growth stage of their life cycle due to lack of access to finance. Financing for SMEs is limited, particularly when compared to commercial debt for large firms and microfinance. SMEs are strongly restricted in accessing the capital that they require to grow and expand, with nearly half of SMEs in developing countries rating access to finance as a major constraint especially in Nigeria.  They might not be able to access finance from both money deposit banks and microfinance banks due to high administrative costs, high collateral requirements and lack of experience within financial intermediaries.

Financial inclusion has been identified by researchers (Garang, 2014, Ibeachu, 2010; Onaolapo and Odetayo, 2012; Stephen and Sibert, 2014; Godwin, 2011; Pallavi  and Bharti, 2013) as only solution to Small and Medium Enterprises growth and development globally. In Nigeria, Central Bank of Nigeria is in the driving seat of the national effort to achieve financial inclusion. The bank’s policy recognises the role of Microfinance in providing services to the SMEs operators who are traditionally excluded from or not well served by the conventional financial institutions.

Sarma (2008) defined financial inclusion as a process that ensures the ease of access, process that ensure the ease of access, availability and usage of that formal financial system for all numbers of an economy. According to the author, ease of access is measured by proxies such as number of bank branches or ATMs per 1,000 population. Khan (2011) contended that financial inclusion when promoted in the wider context of economic inclusion can uplift financial conditions and improve the standard of living of the poor and the disadvantaged. He added that financial inclusion can improve the efficiency of the process of intermediation between savings and investments while facilitating change in the composition of the financial system.

1.2  Statement of the problem

Although gradual progress is being made to improve on financial inclusion, critical challenges of low financial literacy, inadequate infrastructural facilities as well as inadequate and inefficient technology- based facilities by financial institutions, has limited the achievement of significant expansion in finance of SMEs

1.3  Objective of the Study

The general objective of this research study is to examine the influence of financial inclusion on SMEs growth and development in Nigeria. The specific objectives are:

  1. To examine the influence of mobile banking on SMEs growth and development in Nigeria.
  2. To determine the influence of banking services on SMEs growth and development in Nigeria.
  3. To examine the influence of banking penetration on SMEs growth and development in Nigeria.

1.4  Research Questions

  1. To what extent does mobile banking influence SMEs growth and Development in Nigeria?
  2. To what extent does usage of banking services influence SMEs growth and Development in Nigeria?
  3. To what extent does banking penetration influence SMEs growth and Development in Nigeria?
    • hypothesized:
  4. H0l: Mobile banking has no significant influence on SMEs growth and development in Nigeria.
  5. H0ll: Banking services has no significant influence on SMEs growth and development in Nigeria.
  6. H0lll:      Banking penetration has no significant influence on SMEs growth and development in Nigeria.

1.6  Significance of the study

The research work will be useful and moreover be a source of information to the followings

  • Government with this research work will be witty and aware of the extent the activities of financial conclusion has contributed in SMEs growth in Nigeria. It will also be of great significant in examining the area of weakness and how best to improve them for effective regulation of fraud.
  • To the academic, the research work will help them formulate more theories and strategies that will enhance the effectiveness of SMEs.

It will also contribute to the enrichment of literature on financial inclusion serve as a body of reserved knowledge to be referred to by researchers.

1.7  Limitation of the Study

This research work would suffer many set-backs due to a lot of reasons. One of such is the inaccessibility of information from SMEs. Presently, they are security conscious and unwilling to disclose information and plans available some write ups and journals which would have been helpful for this research work. Ideally, the work should have involved more states but due to some inherent constraint such as time and money but effort would be made to at least touch a great number of states to have a balance view of this research

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