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


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
Methodology 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. 94 copies of the questionnaires were retrieved and used for 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 only primary data via questionnaire were used. Similarly, only SMEs were considered. Hence, if other sectors of the economy, the entire state were surveyed, and if secondary data as well as other primary data sources like interview, focus group discussion 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 While most other previous studies on the subject usually consider only financial services, this study adds to this, non-financial services of MFBs and empirically examined how both services jointly influence the performance of SMEs in terms of profitability.  
Keywords: MFBs; Profitability; SMEs; life cycle theory
Article classification: Research Paper  

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