This study is basically concerned with the analysis of the prospects of small and medium scale enterprises under the microfinance regime of the present government.  The attempts made by various personalities and institutions towards explaining the concept was given proper attention.  Moving ahead, the researcher in his efforts aimed at carrying out a paper research made use of various methods/instruments of data sourcing and analysis, that comprised of primary and secondary sources of data which included face to face discussions, oral interviews, questionnaires and the use of relevant textbooks, magazines, journals, libraries, internet, e.t.c.  The research was conducted with a known total population of two thousand eight hundred persons and a determined sample size of three hundred and fifty relevant persons.  Equally, some research questions were put forward to direct investigation in conducting the research, while tables together with percentages were employed to provide comprehensive data analysis and presentation.  The findings from the study revealed among other things, that the activities of MFIs has a tremendous role to play in revamping SMEs in the country.




Title page         –       –       –       –       –       –       –       –       –       i

Certification     –       –       –       –       –       –       –       –       ii

Dedication       –       –       –       –       –       –       –       –       iii

Acknowledgement    –       –       –       –       –       –       –       iv

Abstract   –       –       –       –       –       –       –       –       –       v

Table of Contents     –       –       –       –       –       –       –       vi



1.1   Background of the Study –       –       –       –       –       1

1.2   Statement of Problem      –       –       –       –       –       5

1.3   Objectives of the Study    –       –       –       –       –       7

1.4   Research Questions –       –       –       –       –       –       7

1.5   Significance of the Study –       –       –       –       –       8

1.6   Scope of the Study   –       –       –       –       –       –       11

1.7   Limitation of the Study    –       –       –       –       –       11

1.8   Definition of Terms –        –       –       –       –       –       –       12

References       –       –       –       –       –       –       –       14



2.1   The definition of small scale enterprise – –       –       15

2.2   Challenges/constraints of funding SME operations

in Nigeria         –       –       –       –       –       –       –       –       22

2.3   Potentials of small and medium enterprises (SMEs)        22

2.4   Microfinance: Concept and need     –       –       –       25

2.5   Characteristics of microfinance institutions in Nigeria 27

2.6   Microfinance Policy in Nigeria –       –       –       –       28

2.7   Microfinance Suppliers (Sources of Fund)       –       –       32

2.8   Potentials of Microfinance in Nigeria               –       –       40

2.9   Challenges of Microfinance in Nigeria      –       –       41

2.10 The use of microfinance institutions to finance SMEs 45

References       –       –       –       –       –       –       –       51



3.1   Introduction –  –       –       –       –       –       –       –       53

3.2   Sources of data        –       –       –       –       –       –       54

3.3   Sample size determination       –       –       –       –       55

3.4   Methods/Instruments of Data Collection         –       –       56

3.5   Tools/Techniques for Data Analysis        –       –       –       57

3.6   Validity and reliability      –       –       –       –       –       57



4.1   Questionnaire: Respondents analysis      –       –       58

4.2   Survival Strategies for Nigerian SMEs      –       –       73




5.1   Summary of findings       –       –       –       –       –       77

5.2   Conclusion      –       –       –       –       –       –       –       78

5.3   Recommendations   –       –       –       –       –       –       81

5.4   Areas for Further Study   –       –       –       –       –       83






The Nigeria economy appears to have been reaping the advantages obtainable from Small Scale Enterprises. These include stimulation of indigenous entrepreneurship, transformation of traditional industry, The experiences in many parts of the world point to the direction that Small Scale Enterprises can make positive impact on the economies of many nations both developed and developing.

It is for this reason that the government of Nigeria (Federal and State) started showing interest in Small Scale Industries (SSIs) from the 70s to date some of the positive actions taken by government in this regard include providing funds for some form of research into these industries, creating SSI divisions or departments as well as small scale credit schemes in the various states and at the federal level.

The implementation of the programmes that have been outlined for the development of the Small Scale Industries in the past have often been hampered by the lack of information concerning the industries, most especially with the constraints to their development, what and what motivates them, their economic contributions and so on.  Hence, the need for adequate research into them to provide the basic data for planning effectively for them. Detailed and extensive nationwide research on these industries in Nigeria have generally been lacking until the pioneering work of the Industrial Research Unit of the University of Ife, now Obafemi Awolowo University Ife in the early 1970s.

The first in the series of surveys carried out by the Ife unit on SSIs, covered the then Western States, Kwara State and former mid western state. A survey of SSIs in the former north eastern states was also carried out by the unit.  The University of Zaria now Ahmadu Bello University Zaria, also carried out similar studies in the remaining states of the country at that time.

The objectives of those studies were similar and were meant to study and analyze the structures of the SSIs, the pattern of ownership management and control in the SSIs as well as the size of employment, marketing procedures, level of education and training in the industries, the studies also sought to examine the extension services available to the industries and the impact of public policies on their general performance.

Also, after 1970s, the number of Microfinance Institutions (MFIs) around the world proliferated at a fast pace. In view of the dismal performance of the conventional finance sectors, policy makers, practioners and international organizations advocated micro financing as the tool for poverty reduction. Today, there are more than 7000 micro lending organizations providing loans to more than 25 million poor individuals across the world, the vast majority of who are women. The United Nations Capital Development Fund declared 2005 as the year of micro credit. The success of Grameen bank model in Bangladesh, which offered loans to poor people through group collateral, was emulated in many countries worldwide.

The Nigerian Microfinance Industry has come a long way; it boasts of the entire four well – known models in the industry. A CBN study identified, as at 2001, 160 registered MFIs in Nigeria with aggregate savings worth N99.4 million and outstanding credit of N649.6 million, indicating huge business transactions in the sector, Anyanwu (2004:8). Institutional structures for the provision of micro credit vary and may be any of the following: government or public sector – oriented, NGO supported, traditional or a mixture of two or more of these

A research conducted by UNDP in collaboration with Nigerian Government on: Development of a sustainable pro-poor financial sector phase II, indicated that with a population of about 140 million and GDP/capital of $641 (2006), two–thirds of Nigeria’s people are poor. Nigeria has the third highest number of poor people in the world. Most of these poor people are dependent on micro and small – scale farm as well as off – farm enterprises for their livelihood. As such, their entrepreneurial contributions are strategic to the Nigerian economic development and their growth has great potential to contribution to income generation and poverty alleviation.

One of the challenges microfinance currently faces in Nigeria is for the MFIs to reach a greater number of the poor. The CBN survey indicated that their client base was about 600,000 in 2001, and there were indications that they may not be above 3.5 million in 2007.   The existing microfinance in Nigeria serves less than 1 million people out of 60 million potential people that need the service, CBN (2005:6). Also, the aggregate micro credit facilities in Nigeria, account for about 0.2 percent of GDP and less than one percent of total credit to the economy. The effect of not appropriately addressing this situation would further accentuate poverty and slow down growth and development.

Another challenge is that most of micro finance funding goes to the commercial sector to the detriment of the more vital economic activities, especially agricultural and manufacturing whose sectors provide the foundation for sustainable growth and development. Currently, only about 16.1 and 5.5 per cent of total MFI funding went to these sectors, respectively, while the bulk 78.4 per cent, funded commerce.



Despite the fact that there is an increase in the number of small and medium scale enterprises in Nigeria, the country still witnesses under-industrialization. Unemployment has become a common phenomenon, with the institutions of higher learning producing fresh graduates each academic year without appropriate job opportunities for a lot of them.