Impact of Development Bank Credit Financing on Growth of SMEs in Nigeria

Abstract

Over the years, small and medium enterprises (SMEs) have been considered as engines of growth. This has indeed been observed from available survey data from the World Bank and other development institutions. Access to finance has been recognized as a major factor affecting the growth and success of SMEs all over the world. Small and medium enterprises (SMEs) financial constraints limit their investment opportunity and stagnant growth. Therefore, a quest to find a solution to this necessitated the establishment of Development Banks which is saddled with the responsibility of making credit available to SMEs. Hence, the main objective of this study is to examine the impact of Development Bank credit financing on the growth of SMEs. A Survey research design was employed, 398 SMEs were randomly selected from the beneficiaries of Development Bank of Nigeria (DBN) loans. Binary logistic regression was employed to test the stated hypothesis. The estimated logistic regression showed that variables such as (HSBC) which is an increase in sales of the MSMEs and support and service training for SMEs before loans impacted positively and significantly on the profitability of the SMEs given their beta coefficients of (β)=0.570, 0.384 respectively. Their level of significance is shown by their respective p-values and Wald statistics of 0.049, 0.099, 3.889, and 2.7240. These show that the variables are barely significant at 10%. However, all the other variables such as the age of the entrepreneur (AGE), gender of the entrepreneur (GENDER), amount of loan received (AOLR), and proportion of loan utilized (POLU) do not have a significant impact on the profit of the entrepreneurs.