Abstract
<p><em>The source of microfinance is important and at the centre of every enterprise survival, profitability and growth that can trigger achievement of the expected roles and objectives. The main thrust of this study, therefore, is to understand the determinants of the choice of microfinance sources and level of support from funds providers. The study employed multi-stage sampling technique in identifying clusters from three cities (Onitsha, Aba and Nnewi) of the South East, Nigeria and generated relevant data through instruments such as questionnaire, personal interviews and Focused Group Discussions (FGDs). Using logit regression, the study found that interest rate, repayment period, amount or volume of capital and proximity to enterprises as the major determinants of the choice of microfinance source used by MSEs in South East, Nigeria. The study concluded that microfinance providers should be located closer to MSEs’ location for quicker response to their financing needs to the extent of taking advantage of social capital existing within the clusters as a possible cushion for the physical collaterals and documentations often requested for loan approvals. The study recommends that microfinance policy framework and interventions should encourage providers to locate closer to the enterprise clusters with the appropriate regulatory guarantee for operators.</em><em></em></p>
Highlights
Micro and Small Enterprises (MSEs) have been referred to as the arm of the industry that could be used to reach out to relatively low scale investors and develop the home industries
An example is seen in Olowe et al (2013) who investigated the impact of microfinance on MSEs growth in Ibadan metropolis of Nigeria
The results showed that high interest rate, collateral security and frequency of loan repayment could cripple the expansion of MSEs in Nigeria
Summary
Micro and Small Enterprises (MSEs) have been referred to as the arm of the industry that could be used to reach out to relatively low scale investors and develop the home industries. It is evident that MSEs do not have adequate access to formal credit facilities and this situation had restricted the sector to informal financing through traditional credit supports like Isusu, trade credits, cooperative societies, market associations, Non-Governmental Organizations (NGOs), government grants and interventions, etc The inadequacies in these forms of credit facilities like reliability volume, training, standards, spread and repayments have limited the performance of such enterprises and their poor contributions to the economic growth and development of the industrial clusters in the South East and the nation as a whole. It is believed that understanding these micro credit problems and providing practical solutions for them would be the right step towards making micro and small enterprises contribute effectively towards growth and development of the industrial cluster in South East, Nigeria and the nation as a whole, like their counterparts in other countries
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