Globally, Small and Medium Scale Enterprises (SME) have been regarded as instrumental in the development of a nation due to its huge potential to reduce unemployment rate in a country and engage idle labour in productive activities. In Nigeria, the growth of small and medium scale enterprises has been inhibited by low access to fund and bureaucratic hurdle they are subject to when sourcing for fund. This study investigates the role of commercial banks in financing small and medium scale enterprises in the country considering the growth of credit to private sector given by the bank annually.
The study employed quantitative research design and survey method was used to interview eligible respondent for the study. The population of the study include entire SMEs in Oyo state as well as entire commercial banks in the state. Purposive sampling was used to select fifty small and medium scale enterprises in the states and twenty-five bankers from ten commercial banks were also included in the study as sample. Data were collected using well-structured questionnaires purposely design to elicit the right response from the respondents. Both descriptive and inferential statistics were used to analyze the data collect. For the descriptive, simple percentage method was used while for the inferential statistics, correlation method and chi-square method was used.
Results showed that there is a positive and direct correlation between funds given to SMEs by banks and the growth of the SMEs in the state. The study revealed that SMEs that have access to fund in the state were able to survive their five years of operation when compared to other SMEs that are not optimistic of surviving their first five years due to lack of funds. In light of this findings, the study recommends that government should mandate commercial banks to devote a sizable percentage of their credit to private sector to SMEs in order to have a multiplier effect on the economy.
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