The Impact of Deposit Money Banks Credit to Small and Medium Scale Enterprises on the Economic Growth of Nigeria

Fred Rotimi, ABIODUN; Adeyemi Wasiu, ALABI1*; Adewale Joel, ADEBISI1 & Festus Oladipupo, OLAOYE2

1Bristol Business School, University of the West of England, Bristol, United Kingdom
2Department of Accounting, Ekiti State University, Ado Ekiti, Nigeria
DOI – http://doi.org/10.37502/IJSMR.2021.4503

Abstract

SMEs has become a popular subject of discuss for developing economy globally, and the present study examined the influence of SMEs bank finance on the economic growth of Nigeria. The specific objectives examined in this study were to; (i) to examine the effect of loan and advances to agriculture, forestry and fishing industry on economic growth; (ii) to identify comparison between loan and advances to general commerce industry with that of agricultural-related industry. The study analyzed data collected from eleven indigenous deposit money banks in Nigeria from 2010 to 2019. Secondary sources of data were explored to achieve the stated objectives of the study. Fixed and random Effect regression analysis methods were adopted for the analysis. The study found that loans and advances to SMEs in the agricultural sector have significant positive effect on economic growth with (p-value 0.016, P < 0.05). The study also found the positive insignificant impact of loan and advances to the general commerce sector on GDP. The findings also revealed that the inflation rate has a significant negative relationship with economic growth. Therefore, we recommend that all stakeholders in Nigeria should ensure that affordable loans are made available to the agricultural sector, and the rate of inflation need an aggressive measure to reduce it to the barest minimum.

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