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Any country’s economy is typically enhanced (or otherwise harmed) by the influence and impact (both good and negative) of small and medium-sized businesses. This is often the type of industry that can be found in both urban and rural areas and serves the immediate requirements of a country’s population. Government regulatory policies are causing enormous difficulty for small and medium-sized businesses.

Most government regulations and other external environmental variables have a negative impact on small and medium-sized businesses, stifling economic growth and development. However, there may be occasions when advantageous policies might serve to improve the standing of small and medium-sized businesses. As a result, this study investigates the role of banks on the development of small and medium-sized businesses in Lagos State.

Banks are privately held institutions that exist to make a profit for their owners. Banks have particular responsibilities to small and medium-sized businesses in order for them to operate efficiently. Accepting deposits, issuing loan and overdraft facilities, agency services standing order, investment advice, and so on are some of their responsibilities.

SME owners confront numerous challenges that impede their growth, including poor record keeping, insufficient funds, poor location, government policies, a lack of business experience, low quality goods and services, and so on. In chapter two of the work,

a literature review and certain references were produced to relate the function of banks in developing SM. Finally, the researcher summarised the conclusions from the data collected and resolved to make appropriate recommendations before concluding.



Banking extends back to the early colonial period, according to Orji (2008). The decrease in the barter system of commerce and the increase in financial transactions of the colonial government necessitate the establishment of a bank for the protection and transportation of monies.

It was for this reason that an African banking firm established in Africa was requested to create a branch office in Lagos in 1892. The African Banking Corporation was thus the first modern commercial bank to open a branch office in Lagos, but its survival was jeopardised by the trade downturn that struck Lagos that year.

Its operations were taken over by the Bank of British West Africa in 1894. The Royal Niger Company established the Bank of Nigeria in 1899. The Bank of British West Africa absorbed the Bank of Nigeria in 1912, establishing a monopoly over banking in Nigeria.

Barclays Bank began operations in Nigeria in 1925, and commercial banks followed suit later.

The indigenization process effectively ended the presence of expatriate banks in Nigeria. Their existence was ended due to the following factors.

Because each individual bank is not generally compelled to maintain a fixed ratios between its obligations and different classes of assets, these institutions relied on the mandates of the home office.

Bank integration with parent banks implies involuntary reliance on developed monetary and security markets for liquid assets and surplus reserve investment, as well as a delay in the establishment of local money and capital markets.

The bank is assured of credit accommodation due to its interlocking relationship with major transnational banks.
The banks’ operations failed to take into account Nigeria’s credit needs.

Nigerians’ discrimination in obtaining credit from these banks prompted them to attempt to establish their own banks. The federal government indigenized the banking system in 1973 by acquiring 40% of the equity of foreign banks in Nigeria. This indigenization of banking effectively ended the existence of foreign-owned banks in Nigeria.

Banks are privately held businesses that exist to make a profit for their owners. They engage in financial intermediation, which involves mobilising funds from surplus units (those with surplus funds) and channelling them to deficit units (those looking to invest in productive activities).

The government of this country is encouraging people to start their own small businesses in order to minimise the country’s unemployment problem and also to reduce the pace of importation of goods in order to develop exportable items over time. A clear definition of small and medium industries has remained an unresolved topic.

The criteria used to characterise small size organisations contributed to the lack of a comprehensive definition of SME. The main criteria used to classify small business ventures, however, are initial capital outlay,

ownership structure, management style, profit level, market share, number of employees, total asset size, type of market share, type of industry, relative position of the firm within its industry, or a combination of two or more of the above criteria.

The diverse definition appears to be guided in most situations by the perceived interest, the aim of the definition, and the stage of development in which the definition is applied. A small firm is generally defined as one that is owned, managed, and influenced by the family in decision making, has no distinct organisational structure, has a limited market share, and employs less than fifty (50) people.

Manufacturing companies employing fewer than ten (10) persons or investing less than six hundred thousand naira (N600,000) in machinery and equipment are classified as small size firms in the third National Development Plan.

Similarly, the national economic reconstruction fund (NERFUND) defined small and medium industries as those with fixed assets worth less than ten million naira (N10,000,000),

whereas the central bank of Nigeria considers any enterprise with an annual turnover of less than five hundred thousand naira (N500,000) to be a small and medium business. In a policy proposal made to the federal government in June 1982, the Centre for Management Development defined small and medium industry as follows:

“A small and medium-sized enterprise (SME) is a manufacturing, processing, or service industry that employs up to fifty (50) full-time workers in a factory or production type of operation.” Investment in plant and machinery, excluding land and buildings, shall not exceed N500,000. Power plants and machinery are used in its operations (Ani and Nwandu 2007).

There are as many different definitions of SME as there are authors. It is clear from the above description that all of the authors place a premium on identifying the number of employees, sales volume, capital outlay, ownership structure, and so on.

Banks provide specific obligations for SMEs in order for them to run their businesses properly. Some of these duties include:

Deposit Acceptance
Loan and overdraft facilities are made available.
delivering station reports
Services provided by the agency
Standing order offers investment guidance, among other things.

Small and medium-sized businesses are able to organise their businesses efficiently, keep enough records, and maintain proper accountability thanks to the role played by banks. pursue planned expansion, utilities professional support, and formal education and apprenticeship programmes to expand their understanding.


This research has a number of issues to resolve, which include:

Identifying the issues that small and medium-sized businesses face.
The difficulty of establishing the role of banks in the development of small and medium-sized businesses.
Identifying the characteristics of SMEs and the various types of business ownership.
To ascertain the reasons why people start small and medium-sized businesses.
The difficulty of assessing the contributions of small and medium-sized businesses to the growth of the Nigerian economy.


Every research project must have objectives; in the case of this study, the objectives are as follows:

To thoroughly explain the functional role of banks to small and medium-sized businesses.
To ascertain the issues confronting SME operations in Lagos state.
Understanding the many types of business ownership.
To discover some of the motivations for people to start their own businesses.
To identify the distinct characteristics of small and medium-sized businesses.
Determine the role of small and medium-sized businesses in the Nigerian economy.


This research will be utilised for educational purposes. It would broaden the minds of other scholars on the challenges surrounding SME and their impact on Nigeria’s growth and development.

It will also serve as a foundation for future work by some students who are interested in small and medium-sized businesses. Because this is a dynamic study, it cannot be said to have been entirely addressed in a single work like this.


It is a privately held commercial bank.

founded for the purpose of producing profit for their owners. They are businesses that issue financial obligations (such as demand deposits) to raise capital from the general public. They combine these money and make them available in bigger sums for investment to businesses, governments, and individuals.

It can also be defined as institutions that transfer funds from lenders to borrowers in the form of short-term, medium-term, and long-term financing from lenders. In other terms, it is a financial intermediation organisation where money is mobilised from surplus units (those with surplus cash) and channelled to deficit units (those seeking to engage in productive activities).

When they are unable to repay a loan, they are regarded as having credit troubles.

be reimbursed. It is a facility provided by a bank that is meant to be used to finance a specified purpose. Almost every firm has a credit arrangement with a financial institution, particularly a bank. Some businesses rely on short-term loans on a regular basis to meet their temporary working capital needs.

Others utilise long-term loans largely to finance capital expenditures, new acquisitions, or permanent capital increases. Regardless of the form of loan, all credit requests require a thorough examination of the borrower’s ability to repay.

The primary goal of credit analysis is to evaluate the risk associated in granting loans to bank customers.

It might be regarded as an increase in obligation or as a fund.

A decline in the asset account is reflected in the equity account. Individuals, corporate organisations, and even public authorities, in the layman’s view, represent the sum of money or possession by individual organisations and government for the purpose of making payment and receipts for products and services offered to society.

Finance is the possession of funds when they are required.

in order to make an investment. Academics define finance as the science of fund management, which encompasses the institutions involved in fund sourcing, such as money market institutions, insurance market institutions, and mortgage market institutions, among others.

Based on the foregoing, finance can be correctly defined as the science that analyses the exploration, exploration, and investment of funds, as well as the distribution of proceeds.

Credit is a type of account payable that is unique.

The most common source of short-term finance for small and medium-sized businesses in developed and developing economies. It entails purchasing products and services and deferring payment until a later period agreed upon.

The function of a role, according to the Oxford Dictionary, is


limited and medium business: a business that produces goods and services for society, is owned, managed, and controlled by the proprietor, has a relatively limited market share, and can employ two (2) to fifty (50) people.

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