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COMMERCIAL BANKS’ CREDIT AND SMES DEVELOPMENT IN NIGERIA: AN EMPIRICAL REVIEW
ABSTRACT
Access to credit is crucial for the growth and survival of Small and Medium-sized Enterprises (SMEs), this is because the ability of SMEs to grow depend highly on their potentials to invest in restructuring, innovation, etc. And all of these investments need capital, and therefore access to finance. However, the consistently repeated complaints of SMEs about their problem regarding access to finance is highly relevant constraint that endangers the development of the sector in Nigeria. It is on this basis that the study investigated the effect of commercial banks’ credit on SMEs development in the country between 1992 and 2011. Secondary data was employed and the Ordinary Least Square (OLS) technique was adopted to estimate the multiple regression model. The estimated model revealed that commercial banks credit to SMEs and the saving and time deposit of commercial banks exert a positive influence on SMEs development proxy by wholesale and retail trade output as a component of GDP, while exchange rate and interest rate exhibit adversative effect on SMEs development. And in terms of the significance of the variables, using P-value as a test of evaluation; commercial banks’ credit to SMEs and saving and time deposit of commercial banks were found to be significant factors enhancing SMEs development in Nigeria at 5% critical level. Therefore, emanating from the empirical findings, the study proffered among others that adequate savings should be mobilized from the public by emphasizing more on saving and that government should encourage banks to lend to SMEs by providing guarantee, interest rate subsidies and other incentives.
Key Words: Deposit Money Banks, Economic Development, GDP, Investment, Enterprise.