Abstract
Financial inclusion avails all economic units the opportunity to access financial services needed to boost economic activities. One of the objectives of financial inclusion is to provide access to finance for the poor majority who initially do not use formal financial services. The MSMEs requirement for funds is hampered by their limited access to the financial market. This study however investigated the effect of financial inclusion strategies on access to credit by micro, small and medium scale enterprises (MSMEs) in Nigeria. Data for the study were collected from the CBN Statistical bulletin for the period of 1991 to 2019. The explanatory variables used to develop a multiple regression model captured the market capitalization, pension account, insurance account, microfinance account and e-banking as strategies to financial inclusion. The Autoregressive Distributive Lag model was developed and analyzed for long and short-run dynamics of financial inclusion on access to loan and advances by the MSMEs in Nigeria. The bound test showed that financial inclusion strategies had a long-run relationship with loan and advances of the MSMEs. The coefficient of determination explained 99% of access to loans and advances by the MSMEs in Nigeria. The coefficients of regression revealed that lags of Loan and Advances to MSMEs had adverse endogenous effects on the model. More so, activities in the capital market (MKTC) and pension accounts (PA) at lag 1 have positive and significant effects on credit to MSMEs (LA) in Nigeria; but insurance accounts (IA), microfinance account (MFA) and e-banking innovations (EBDUM) creates unstable significant effects on credit to MSMEs in Nigeria. The study posits that financial inclusion strategies have a long-run impact on MSMEs with the capital market and pension funds the major enhancers of MSME funding. Keywords: Financial inclusion, financial access, micro, small and medium scale enterprises, Nigeria DOI: 10.7176/EJBM/13-13-06 Publication date: July 31 st 2021
Highlights
It has been observed that in Nigeria, conventional banks and other depository financial institutions generally produce services for the exclusive use of big and well-established companies, individuals and institutions while the poor and low-income populations are held in a permanent vicious cycle of poverty (Ibenta & Amana, 2010)
The Central Bank of Nigeria (CBN) and other stakeholders began to implement a National Financial Inclusion Strategy that was intended to reduce the percentage of adult Nigerians that are excluded from financial services from 46.3% in 2010 to 20% by 2020 and the number of Nigerians included in the formal sector from 36.3% in 2010 to 70% by 2020, through a broad range of coordinated interventions, with a high priority on the following:
The results identified technological innovations such as MPESA, Mshwari and Agency banking as the most crucial technology factors which played a crucial part in improving their businesses
Summary
It has been observed that in Nigeria, conventional banks and other depository financial institutions generally produce services for the exclusive use of big and well-established companies, individuals and institutions while the poor and low-income populations are held in a permanent vicious cycle of poverty (Ibenta & Amana, 2010). Many national governments in developing countries adopted various financial inclusion strategies the objective of which is to draw the unbanked population to access formal financial services ranging from savings, payments, and transfers to credits and insurance to promote all-inclusive development and growth of the micro, small and medium scale enterprises (Aduda & Kadunda, 2016). According to the Central Bank of Nigeria (CBN), the objective of financial inclusion is to draw the unbanked population to assess formal financial services ranging from savings, payments, and transfers to credit and insurance to bring about basic and incremental solutions to the problems of poverty and to promote inclusive development, (CBN, 2019). & Schmukler (2007): Exist when a project that would be internally financed if resources were available, does not get external finance due to the presence of a wedge between the expected internal rate of returns of the projects, and the rate of return that external investors require to finance it
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