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The primary goal of this research was to investigate informal microfinance and small-scale company in the Makurdi Local Government Area: a daily contribution analysis. A survey study design was used with a sample size of 160, and a four (4) point Likert rating scale was used to present a questionnaire to the sampled respondents.

The data was analysed using simple descriptive and inferential statistics, as well as the Chi-square test to test the hypotheses at the 0.05 level of significance.

The findings revealed that microfinance institutions are unconcerned with the finances of small businesses and only make loans to them when they believe the small firm has enough collateral to cover the loan.

In fact, they do not provide any financial advise or monitoring to their customers. It also shows that much of the initial financing for small-scale firms originated from the operators’ personal resources and formal financial institutions, with additional financing coming primarily from informal sources.

The study found that everyday contributions are the most effective for the survival of small firms. Based on the study results, the researcher recommended that owners of SMEs access financial sources in order to improve their business’ performance;

the government should establish more microfinance banks in the state and compel them through legislation to focus more on small scale businesses; and the government should relax interest rates, particularly for those who are in small scale businesses, in order to improve their business performance and thus reduce the crime rate.

Chapter one

1.1 Introduction.

The contribution of Micro, Small, and Medium Enterprises (MSMEs) to economic growth and sustainable development is widely recognised (Central Bank of Nigeria (CBN), 2004).

Small-scale businesses (SSEs) are increasingly recognised for their critical role in job creation, income redistribution, and wealth building (NISER, 2004).

MSMEs account for approximately 87% of all firms operating in Nigeria (United States Agency for International Development (USAID), 2005). Non-farm micro, small, and medium enterprises account for more than 25% of total employment and 20% of GDP (SMEDAN, 2007), in contrast to countries such as Indonesia, Thailand, and India, where Micro, MSMEs contribute a greater percentage of GDP (IFC, 2002).

In Nigeria, lending has been recognised as an important tool for encouraging small-scale businesses. Around 70% of the population works in the informal sector, or in agricultural production and aquaculture, using extension money to finance their operations (Aderibigbe 2001).

The majority of Nigeria’s micro and small enterprises (MSEs) are still in their early stages of development, particularly in terms of job generation, wealth creation, and value production.

This is because traditional financial institutions fail to service 65% of the active population, the majority of whom are entrepreneurs (Aderibigbe, 2001).

The large range of credit options available reflects the complexity of SME characteristics and financing requirements (Department for Business Innovation and Skills 2012). It demonstrates that looking for a specific sort of money source is related to each stage of business development.

Access to finance is a critical determinant for company start-up, development, and growth for small and medium-sized firms (SMEs), and they have very distinct needs and confront different obstacles in terms of financing than large organisations.

European Commission (2013). Small and medium-sized enterprises (SMEs) are regarded as one of the pillars that keep the nation’s economy together. It can be compared to a propeller that propels the nation’s economic engine towards growth and progress.

Historically, small and medium-sized businesses received little or no attention from the government due to their small population and the finding of crude oil (Oladele et al., 2014).

However, recognising SMEs began to garner attention from both the corporate and state sectors immediately after the worrying increase in population, which had outstripped the oil sector’s capacity for employment.

Ironically, with oil money in the country, individuals are struggling to exist, and at this point, it is unavoidable for both the private and public sectors to ignore the issue of SMEs in Nigeria.

The importance of small and medium-sized enterprises (SMEs) has been recognised by all parties (government, private, individuals, and professionals) in the national economy as the primary engine room for long-term growth and development (Oladele et al., 2014).

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