THE IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISES FINANCING ON NIGERIAN GROSS DOMESTIC PRODUCT
The availability of finance to small and Medium Scale Enterprises (SMEs) in Nigeria is one of the myriads of challenges facing SMEs quest for survival and meaningful contribution to economic growth. This is on the backdrop of high cost of funds which makes most SMEs incapable of accessing these needed funds. This paper therefore examines the impact of Small and Medium Scale Enterprises financing on the Gross Domestic Product. The study adopted the use of time series data obtained from Statistical Bulletin of Central Bank of Nigeria spanning over a period of twenty one (21) year from 1992 to 2011. The study employed ordinary least squares economic tool to estimate the model. The result shows that loans by microfinance banks to small scale enterprises have a significant impact on Gross Domestic Product while interest rate has a negative impact on Gross Domestic Product. Consequently, the study recommends that commercial banks should be given incentives to extend financing to SMEs at a single digit and reduced interest rate in order to increase the contribution of SMEs to Gross Domestic Products. The microfinance banks should also be encouraged to extend more finance to SMEs in Nigeria.
