Commercial Bank Financing and The Performance of Small and Medium Enterprises in Nigeria

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@article{1723619,
      author = {Eluro Ifechukwde, Dr. Victor Tutuvwe},
      title = {Commercial Bank Financing and The Performance of Small and Medium Enterprises in Nigeria},
      journal = {Iconic Research And Engineering Journals},
      year = {2026},
      volume = {10},
      number = {4},
      pages = {5162-5176},
      issn = {2456-8880},
      url = {https://www.irejournals.com/formatedpaper/1723619.pdf},
      abstract = {This study examined the effect of commercial bank financing on the performance of small and medium enterprises (SMEs) in Nigeria. The study was motivated by the significant contribution of SMEs to employment generation, economic growth, and industrial development, alongside the persistent difficulty many enterprises face in accessing appropriate and affordable financing. Specifically, the study investigated the effects of volume of bank credit to SMEs (VBCSME), interest rate on SME loans (INT), loan tenure (LTEN), credit accessibility index (CAI), and collateral requirement ratio (CRR) on SME output (SMEO) in Nigeria. An ex-post facto research design was adopted, using annual time series data covering the period from 2001 to 2025. Data relating to commercial bank financing variables were obtained from the Central Bank of Nigeria Statistical Bulletin, while SME output data were sourced from the National Bureau of Statistics. Data on the credit accessibility index were obtained from Enhancing Financial Innovation and Access. The data were analysed using descriptive statistics, correlation analysis, diagnostic tests, and Ordinary Least Squares (OLS) regression with EViews 9.0. The findings established that commercial bank financing, when considered jointly, had a significant effect on SME output in Nigeria. However, the individual financing indicators produced varying results. VBCSME exerted a negative and statistically insignificant effect on SMEO, suggesting that increased credit volume alone did not significantly enhance SME performance. INT had a significant negative effect, indicating that high borrowing costs constrained SME output. LTEN showed a positive but insignificant effect, implying that loan duration alone did not significantly determine enterprise performance. CAI exerted a significant positive effect, demonstrating that improved access to credit contributed to SME growth and productivity. CRR had a positive but insignificant effect on SMEO. The study concluded that affordable, accessible, and flexible financing was critical to improving SME performance. It recommended that commercial banks reduce lending costs, expand credit access, provide flexible loan arrangements, and adopt alternative financing approaches that reduce dependence on conventional collateral requirements. The study contributes to knowledge by showing that the accessibility and affordability of finance are more important for SME performance than credit volume alone.},
      keywords = {commercial bank financing; small and medium enterprises; SME performance; SME output; bank credit; interest rate; loan tenure; credit accessibility; collateral requirements; Nigeria},
      month = {October},
      doi = {https://doi.org/10.64388/ire1723619}
  }