Effect of Financial Factors on the Performance of Small Medium Enterprises in Abuja Nigeria

Abstract

Finance in any organization plays an important role to the up-liftment of the organization. Accordingly, SMEs sector has been attracting enough attention based on its potentials in the economic transformation of the country. The study therefore investigates financial factors on the performance of SMEs in Abuja, Nigeria. Statistically, for every five new SMEs, there is a record of three failed SMEs within the first year of existence because of inadequate of accessible finance, collateral and insufficient finances to acquire technological capability for business performance and growth. The research design employed was survey and the population of the SMEs in Abuja was 2690. Using the Taro Yamane formula of 1967, the population was reduced to 348, which formed the sample size of the study. The tools of analysis employed was descriptive statistics and the OLS method of regression was used to analyse the data giving to the respondents. With this, findings revealed that financial factors (proxy: access to finance, insufficient financing and collateral) has no positive significant effect on the performance (efficiency) of SMEs in Abuja, Nigeria. Based on this finding, the study therefore recommends that SMEs in Abuja should put together healthy practice of financial management, which include usage and planning of financial facts in SMEs operations. Furthermore, Government of Nigeria should do more to complete remove the gap in financing encountered by SMEs by being directly involved such as interventions from the government, which include credit guarantee schemes, support financing through public banks among others.