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ACCESS TO FINANCE AND PERFORMANCE OF SERVICES SECTOR MSMEs IN NIGERIA

Author

Listed:
  • Olawunmi Ifeoluwa Ajayi

    (Business School, Stellenbosch University, Western Cape, South Africa)

  • Oluseye Samuel Ajuwon

    (Economics Department, University of Lagos, Lagos, Nigeria)

  • Sylvanus Ikhide

    (Business School, Stellenbosch University, Western Cape, South Africa)

Abstract

This study examines the subjective and objective effect of access to finance on the performance and growth of MSMEs in the services sector in Nigeria. The study used a cross-sectional dataset from the 2014 World Bank Enterprise Surveys database. The study employed the Ordinary Least Squares regression approach to investigate the effect of access to finance on the ability to create employment by MSMEs in the services sector in Nigeria. This study found that MSMEs face credit constraints as the majority (77.56%) of the sampled firms indicated access to finance as the main obstacle, although in different degrees (subjective effect). Also, the study found a negative and significant relationship between access to finance constraint and employment growths (objective effect). In light of these findings, the study recommends that the government should encourage financial institutions to create cheaper and more accessible credit for MSMEs, through favourable tax regimes or incentives in order to reduce the unemployment in the country. In addition, other policies that encourage a reduction in lending interest rate (such as a credit guarantee scheme) should be put in place so as to enable MSMEs to access more credit at a cheaper interest rate.

Suggested Citation

  • Olawunmi Ifeoluwa Ajayi & Oluseye Samuel Ajuwon & Sylvanus Ikhide, 2021. "ACCESS TO FINANCE AND PERFORMANCE OF SERVICES SECTOR MSMEs IN NIGERIA," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 6(2), pages 8-20, September.
    • Handle: RePEc:ora:jrojbe:v:6:y:2021:i:2:p:8-20
    DOI: http://doi.org/10.47535/1991ojbe125
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    References listed on IDEAS

    as
    1. Berger, Allen N & Frame, W Scott & Miller, Nathan H, 2005. "Credit Scoring and the Availability, Price, and Risk of Small Business Credit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 191-222, April.
    2. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    3. Allen N. Berger & W. Scott Frame, 2007. "Small Business Credit Scoring and Credit Availability," Journal of Small Business Management, Taylor & Francis Journals, vol. 45(1), pages 5-22, January.
    4. José López-Gracia & Francisco Sogorb-Mira, 2008. "Testing trade-off and pecking order theories financing SMEs," Small Business Economics, Springer, vol. 31(2), pages 117-136, August.
    5. Essien, Ubon Asuquo & Arene, Chukwuemeka John, 2014. "An Analysis Of Access To Credit Markets And The Performance Of Small Scale Agro- Based Enterprises In The Niger Delta Region Of Nigeria," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(3), pages 1-16, July.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    More about this item

    Keywords

    Access to finance; Micro Small and Medium-Sized Enterprises; Unemployment; Services sector; Nigeria;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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