Impact of Microfinance Banks' Services on the Profitability of Small and Medium Enterprises in Ilorin, Kwara State

Gbenga F. Babarinde, Tajudeen Idera Abdulmajeed, Matthew O. Gidigbi, Julius T. Ndaghu

Abstract


ABSTRACT

Purpose: This study examined the impact of microfinance banks’ services on SMEs’ profitability in Ilorin metropolis of Kwara State. It specifically studied how and to what extent do both financial and non-financial services affect the profitability of SMEs in Ilorin, Kwara State, Nigeria.

Design/Methodology/Approach: The study employed survey research design and data source is primary data. The population comprised all SMEs in Ilorin metropolis. Questionnaires were administered to all the 113 registered SMEs in the study area as at year 2017. 94 copies of the questionnaires were retrieved and used for the analysis. Probability regression (PROBIT) was used as a tool of analysis.

Findings: Results revealed that SMEs’ access to credits from MFBs positively impacts profitability while interest rate and size of business negatively impact SMEs' profitability.

Research limitations: Only SMEs in Ilorin metropolis were surveyed and primary data via questionnaire were used. Similarly, only SMEs were considered. Hence, if other sectors of the economy in the entire state were surveyed, and if secondary data as well as other primary data source like interview are used, the results may vary.

Practical implications: The paper concluded that MFBs positively contributed to SMEs profitability in Ilorin metropolis. It is therefore recommended that small and medium entrepreneurs should source for loans from MFBs to boost their business activities for profitability. In addition, interest on loans should be reviewed downward by MFBs such that SMEs will be able to repay their loans and have some margins on the net returns. Finally, seminars and workshops should be organized by the MFBs to educate SMEs operators on their policies and on judicious use of funds.

Originality/Value: Most previous studies on the subject usually consider only financial services, meanwhile, this study included non-financial services of MFBs and empirically examined the influence of both services on SMEs performance in terms of profitability. 

 

Keywords: MFBs; Profitability; SMEs; Life Cycle Theory.

 

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Título: "Impacto dos serviços dos bancos de microfinanças na lucratividade de pequenas e médias empresas: evidências de Ilorin, estado de Kwara"

Resumo

Objetivo: este estudo examinou o impacto dos serviços dos bancos de microfinanças na lucratividade das PMEs na metrópole de Ilorin, no estado de Kwara. Ele estudou especificamente como e em que medida os serviços financeiros e não financeiros afetam a lucratividade das PMEs em Ilorin, Estado de Kwara, Nigéria.
Desenho/metodologia/abordagem: O estudo empregado no projeto de pesquisa e fonte de dados são dados primários. A população compreendia todas as PMEs da metrópole de Ilorin. Os questionários foram administrados a todas as 113 PME registradas na área de estudo no ano de 2017. 94 cópias dos questionários foram recuperadas e utilizadas para a análise. A regressão de probabilidade (PROBIT) foi utilizada como ferramenta de análise.
Resultados: Os resultados revelaram que o acesso das PMEs aos créditos das MFBs afeta positivamente a lucratividade, enquanto a taxa de juros e o tamanho da empresa impactam negativamente a lucratividade das PMEs.
Limitações: Somente as PME da metrópole de Ilorin foram pesquisadas e dados primários via questionário foram utilizados. Do mesmo modo, apenas PME foram consideradas. Portanto, se outros setores da economia em todo o estado forem pesquisados e se forem utilizados dados secundários e outras fontes de dados primárias, como entrevistas, os resultados poderão variar.
Implicações: O artigo concluiu que os MFBs contribuíram positivamente para a lucratividade das PMEs na metrópole de Ilorin. Portanto, recomenda-se que pequenos e médios empreendedores obtenham empréstimos de MFBs para aumentar suas atividades comerciais em busca de rentabilidade. Além disso, os juros sobre empréstimos devem ser revistos em baixa pelos MFBs, para que as PME possam reembolsar seus empréstimos e ter algumas margens nos retornos líquidos. Por fim, os MFBs devem organizar seminários e workshops para educar os operadores de PMEs sobre suas políticas e sobre o uso criterioso dos recursos.
Originalidade/valor: a maioria dos estudos anteriores sobre o assunto geralmente considera apenas serviços financeiros; entretanto, este estudo incluiu serviços não financeiros de MFBs e examinou empiricamente a influência de ambos os serviços no desempenho das PMEs em termos de lucratividade.

Palavras-chave: MFBs; Lucratividade; PME; Teoria do Ciclo de Vida.


 


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References


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