Financing of Small and Medium Scale Enterprises: A Panacea To Poverty Reduction in Nigeria (1999-2021)

Abstract

The study examines how the financing of Small and Medium-Scale Enterprises (SMEs) in Nigeria contributes to the reduction of poverty using data from the Central Bank of Nigeria (CBN) Annual Report from 1999 to 2021. The study established that SMEs and poverty reduction have a long-term relationship, using Autoregressive Distribution Lag (ARDL). A Vector Error Correction Model (VECM) technique was used in estimating the variables of the study. Findings revealed that financing of SMEs through Commercial credit (LRCCPSME) and interest (LINT) is incidental to poverty reduction in Nigeria, though not individually significant. The individual significance of Microcredit to SMEs is brought to light with a p-value of 0.042 but not correctly signed. The study concludes, that to address the issue of poverty, microfinance institutions should offer loans and overdrafts to SMEs without insisting on stringent collateral requirements.