FORMAL FINANCING OPTIONS AND SMALL AND MEDIUM SCALE ENTERPRISES PERFORMANCE. THE CASE OF OTA, OGUN STATE NIGERIA

Abstract

Many efforts have been made in recent years to increase small and medium-sized performance in the Nigerian economy. Despite the efforts and investments, SME’s are still on the chase towards improved growth level. It is important to address this because Micro, Small and Medium Enterprises (MSME’s) employ approximately 84.02% of the total workforce, constitute 96% of businesses in Nigeria and contribute 48% to the Gross Domestic Product (GDP) of the nation. Financial resources are scarce for small SME’s. As a result, many governments, and donors prioritize interventions that increase small and medium-sized enterprise (SME) access to capital. The study has explored the effect of formal financing options on small and medium-sized businesses in the Ado-Odo Ota, Local Government Area (LGA) of Ogun-State Nigeria. The study has utilized survey methodology via questionnaire and analyzed using the Statistical Package for Social Sciences (SPSS). The Analysis of Variance (ANOVA) and regression results were applied to test the study’s hypothesis. The study discovers that formal financing options have significant impact on SME performance in Ado-Odo, Ota, Nigeria at 5% significance level. The finding further showed that a one percent increase in formal financing options would lead to a 1.36 percent increase in SME performance. The study recommends that formal financial resources are considered significant factors influencing the growth and development of SME’s in Ado-Odo, Ota, and Nigeria by implication. The study recommends that formal financing institutions which include commercial banks, business angels, venture capital, microfinance banks should be considered as significant sources of finance for SME’s. On the other hand, formal financing institutions should assist SME’s through friendly interest rates and flexible packages to ensure that SME’s find them as attractive options for forcing sourcing for purposes, which include purchase of equipment and others that can enhance SMEs’ growth and development.