Microfinance Banks Operations and Performance of Small and Medium Enterprises (SMEs) in Ibadan, Oyo State
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Date
2024-12
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Lead City University, Ibadan
Abstract
This study explores the impact of microfinance bank operations on the performance of small and medium enterprises (SMEs) in Ibadan, Oyo State, Nigeria, addressing critical areas such as financial performance, growth, and profitability. Focusing on four hypotheses, this research assesses the effects of loan repayment terms, loan accessibility, and interest rates on SME outcomes. A quantitative approach, utilizing multiple regression and correlation analyses, revealed key findings regarding these relationships. The first hypothesis demonstrated a moderate positive influence of microfinance operations on SME performance, with an R-value of 0.483 and R² of 0.233, indicating that 23.3% of performance variability is explained by loan-related factors. Loan accessibility emerged as the sole statistically significant predictor (p < 0.001), while repayment terms and interest rates did not significantly impact overall performance. In evaluating the second hypothesis, a significant positive relationship was found between loan repayment terms and SME financial performance, as shown by an R-value of 0.560 and R² of 0.313 (p = 0.005), indicating that favorable repayment conditions positively affect financial stability. The third hypothesis established a strong correlation between loan accessibility and SME growth, with a Pearson correlation coefficient of 0.598 (p <0.001), underscoring the importance of access to financing for business expansion. Finally, the fourth hypothesis revealed a limited effect of interest rates on profitability (R² = 0.247, p = 0.115), suggesting other factors may play a more decisive role in profitability outcomes. The study concludes that microfinance bank operations play a moderate but impactful role in enhancing the performance of SMEs in Ibadan, with loan accessibility emerging as a critical determinant of success. While favorable loan repayment terms positively influence financial performance, interest rates did not demonstrate a significant effect on profitability, indicating the potential importance of other factors in determining SME profitability.
Keywords: Microfinance Bank Operations, Performance, Small and Medium Enterprises.
Word Count: 294
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Keywords
Microfinance Bank Operations, Performance, Small and Medium Enterprises.
Citation
Kate Turabia