The Effect of Pre-Post Bank Consolidation on the Accessibility of Finance to SMEs in Nigeria (original) (raw)
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This paper examined the impact of bank consolidation on credit access and availability to small and medium scale enterprises (SME's) in Nigeria for the period 1999-2012. The main objectives are (1) To examine whether or not bank consolidation in Nigeria brought about increased lending to SME's.(2) Determine the level of lending risk to SME's .(3) Determine if there is any significant difference between SME's financing in pre and post consolidation in 2005.Data on commercial bank loans to SME's as percentage of total credit was the main variable used and were obtained from CBN Statistical Bulletin 2012. The mean, standard deviation descriptive statistics and the t-test tool were used for the analysis. The study found out that bank consolidation in Nigeria led to a drastic reduction of SME's financing to less than one percent (0.37%) on average. The lending riskiness of banks to SME's in post consolidation reduced while there is no significant difference between SME's financing in pre and post consolidation era. The results however go contrary to the much taunted belief that bank consolidation will lead to increased SME's financing in Nigeria. The study recommends improved transparency of SME's accounting and reporting of their activities, banks should relax some of the stringent lending measures to SME's while government should design policies that should group SME's in such a manner for proper identification and planning (specifically according to trade and industry) so that it can guarantee credit facilities and ensure prompt repayment through designated agencies.
Evaluation of Effects of Banking Consolidation on Small Business Finance in Nigeria
Prior to the 2004 reform in the Nigerian banking sector, banks neglected the small and medium class saver and concentrated more on big corporate savers. Many banks abandoned their essential intermediation role of mobilizing savings and inculcating banking habit at the household and micro enterprise levels. This paper presents empirical findings on the effects of the 2005 bank consolidation on small business finance in Nigeria. The main objective of this paper is to assess the response of flow of credit from the banking sector to small and medium enterprises in Nigeria. Data for the study were sourced from the list of the 25 post consolidation banks in Nigeria. Panel data covering a period from 2004 to 2011 were analysed using the Levin, Lin and Chu panel unit root test analysis to ascertain the authenticity and accuracy of the data series as well as its reliability on policy issues. The study adopts panel regression approach comprising of fixed and random effect models and used Hausman Taylor (1981) option in selection of a more efficient estimator for the model equation. The study shows a percentage increase in post consolidation asset base by over 9 percent for the banks and profit maximization increases by 72 percent which could translate to increased bank propensity and readiness to lend. There is also a significant increase in SME credit supply accessible by firms resulting to increase investment and consolidated effort to encourage the development of more SME driving enterprise. The study therefore recommends that credit policy effect should ensure that banks reorganize their asset portfolios so as to create more provision for lending to small firms rather than implementing policies that allow for more stringent conditions and requirements that discourage future development of SME investments in the economy.
Bank Consolidation and Small Business Financing in Nigeria
Prior to the 2004 reform in the Nigerian banking sector, banks neglected the small and medium class saver and concentrated more on big corporate savers. Many banks abandoned their essential intermediation role of mobilizing savings and inculcating banking habit at the household and micro enterprise levels. This paper presents empirical findings on the effects of the 2005 bank consolidation on small business finance in Nigeria. The main objective of this paper is to assess the response of flow of credit from the banking sector to small and medium enterprises in Nigeria. Data for the study were sourced from the list of the 25 post consolidation banks in Nigeria. Panel data covering a period from 2004 to 2011 were analysed using the Levin, Lin and Chu panel unit root test analysis to ascertain the authenticity and accuracy of the data series as well as its reliability on policy issues. The study adopts panel regression approach comprising of fixed and random effect models and used Hausman Taylor option in selection of a more efficient estimator for the model equation. The study shows a percentage increase in post consolidation asset base by over 9 percent for the banks and profit maximization increases by 72 percent which could translate to increased bank propensity and readiness to lend. There is also a significant increase in SME credit supply accessible by firms resulting to increase investment and consolidated effort to encourage the development of more SME driving enterprise. The study therefore recommends that credit policy effect should ensure that banks reorganize their asset portfolios so as to create more provision for lending to small firms rather than implementing policies that allow for more stringent conditions and requirements that discourage future development of SME investments in the economy.
Research Journal of Finance and Accounting, 2015
This study investigated how the interactions between bank consolidations and positively changing bank deposits have affected banks’ lending to small businesses in Nigeria. In the famous Monti-Klein model of banking firm, variables such as consolidations are considered random and uncorrelated with other fundamental domains and as such are not considered among the factors that can determine banks’ lending behavior. However, studies have emerged that found consolidations imperative in determining banking behavior. With subsequent bank consolidations that have occurred in Nigerian banking sector, where deposit demands have changed due to the consolidations, concerns have been raised concerning how interactions or associations between consolidations and deposits could influence bank lending to small credit users. That is, whether this influence differs when the changes in deposits were not direct merger interference. From all ramifications, this kind of clue could enhance good policies o...
This study examined the role of deposit money banks on the growth of SMEs in Yakurr Local Government Area, Cross River State, Nigeria. The objectives of the study were to examine the degree of relationship between deposit money banks credit, multiple taxations and government policies on the growth of SMEs. In order to achieve these objectives, three research hypotheses were tested at 5% level of significance. The survey research design was adopted and a well structured questionnaire was constructed to gather data for the study.
2016
In recent times, small and medium scale enterprises (SMEs) have assumed the centre stage in the industrial development agenda of Nigeria. But to a large extent the existence and survival of these SMEs depend on adequate financing. The paper therefore examined the role played by commercial banks’ credit in facilitating the growth of SMEs in Nigeria. It adopted co-integration and error correction mechanisms in carrying out this empirical examination. The findings revealed that Commercial Banks’ credit has not contributed significantly to the growth of Small and Medium Scale Enterprises in Nigeria. To support the growth of SMEs by Commercial Banks, so that they can be properly positioned to play a catalytic role in rapid industrial take off and development in Nigeria, the paper recommended as follows: SMEs should be made to have easy access to credits by commercial banks, to achieve this, the monetary authority should ensure that the lending rate at which commercial banks lend to the S...
World Journal of Innovative Research
This study investigated the influence of commercial banks in financing small and medium scale enterprises in Nigeria to determine the extent to which SMEs access relevance services and credit facilities from Fidelity and First banks as well as their contributions to economic growth in Ibadan metropolis. Descriptive research design was adopted. Purposive sampling technique was used to sample 200 owners of SMEs in Oluyole Local Government Area of Oyo state. Data collected were analysed using frequency counts, simple percentage score and regression analysis. The study showed that only 9.37% of the respondents had access to the banking services whereas 37.1% had no access to the banking services being provided by Fidelity and First banks in Ibadan metropolis. From the findings, 2.3% of the respondents strongly agreed that they obtained loans frequently whereas 32.1% strongly disagreed; 8% of them strongly agreed that bank charges on loans are moderate and affordable 38.9% refuted the position. The findings generally revealed that SMEs do not have adequate access to loan facilities from the commercial banks. It is therefore recommended that commercial and microfinance banks should offer financial services like credit facilities at moderate rate of interest with less stringent conditions to SMEs to grow their businesses and generate more employment within the economic hub of the country.
Impact of Banking Sector Credit on the Growth of Small and Medium Enterprises (SME's) in Nigeria
Journal of Resources Development and Management, 2015
This study examines the impact of banking sector credit on the growth of small and medium enterprises in Nigeria. The main objective of the study is to investigate whether banking sector credit has significant impact on the growth of small and medium enterprises in Nigeria. As part of the methodology, annual data between 1985 and 2010 was collected and used in the study while descriptive statistics, correlation matrix and error correction model was used to test the formulated hypotheses which reveals that banking sector credit has significant impact on the growth of small and medium enterprises in Nigeria as it has positive impact on some major macro-economic variables of growth such as inflation, exchange rate, trade debts etc. The study however, recommends that financial lending institutions (Monetary Authorities) should relax the stringent conditions associated with credit facility in the funding of SMEs in the country so as to encourage easy accessibility of loans which will hel...
International Journal of Development and Sustainability, 2017
Small and Medium Enterprises (SMEs) have popularly been argued to contribute positively to economic growth of countries of the world through their positive effect on socioeconomic development of the countries. However SME access to credit remains essential for SMEs continued positive contribution. In the case of Nigeria, unemployment and poverty are two major socioeconomic performance indicators in which she has performed poorly over the years, despite efforts by the Nigeria government to boost credit availability to SMEs. In that light, this study explores, the relationship between SME credit and each of Unemployment and poverty respectively, using Pearson's correlation, and further examines the impact of Deposit money bank credit to SMEs on economic growth in Nigeria using Ordinary least squares regression. Data employed for this study was annual data from 1992 to 2015 obtained from the Central Bank of Nigeria Statistical Bulletin. The Pearson's correlation revealed a negative but insignificant relationship between SME credit and Unemployment, and a negative and highly statistically significant relationship between SME credit and poverty. The results of Ordinary Least Squares regression revealed that SME credit has a negative and highly statistically significant impact on economic growth in Nigeria. Based on the results of the study it is recommended that the Nigeria government should support SMEs with necessary training in risk management so as to increase SME capability to effectively manage the risk of their operations, the Nigeria government should increase provision of infrastructural facilities in order to reduce the operating costs of SMEs, and Nigeria deposit money banks should be equipped with necessary technology to effectively assess the creditworthiness of SMEs in applying for loans, amongst other recommendations.
International Journal of Accounting and Economics Studies, 2013
This article deals with the question whether the process of banking consolidation worsens small medium enterprises (SME) access to credit in Central African Monetary and Economic Union (CAMEU). We utilized cross-sectional data originated from post consolidation banks in CAMEU over the period 1990 to 2010. From a pooled regression in panel data analysis, we find-contrary to public fear-that banking consolidation in CAMEU does not have a significant negative impact on the financing of small medium enterprises. In particular, our results confirm that consolidation process induced changes in banks structure in terms of size and capitalization which positively influence availability of credit for small medium enterprises in the Union. For policy, the need to strengthen the CAMEU banking system becomes fundamentals if the potentials of the bank consolidation exercise will be fully realized.