Abstract
This study investigates the impact of financial inclusion on SMA Business performance, the study of printer business owners in shomolu area. The population of the study comprises all the micro small and medium size enterprises operating in shomolu in Lagos state out of which one thousand and twenty- eight (1,028) MSMEs in shomolu Local Government Ares each in Lagos state, were selected as the sample size of the study. Multiple regression technique of data analysis was employed as a technique of data analysis. The findings of the study indicates that Financial Literacy, Microfinance Banking Services, Government Intervention and credit facilities have a positive and significant effect on the performance of micro, small and medium size enterprises operating in shomolu local government of Lagos state. Based on the findings of the study, the research therefore recommended that: the owners as well as managers of micro, small and medium size enterprises in south western states of Nigeria should embrace financial literacy, save part of their profit, use their Microfinance Banking Services to transact and access and patronize different credit facilities packages as they were found playing prominent role in improving the performance of micro, small and medium size enterprises.
Chapter one
Introduction
1.1Background of the study
Financial inclusion, in general, is defined as a process of engaging all social groups and disadvantaged groups in having access to formal financial systems (Pham et al., 2019). Similarly, Koker and Jentzsch (2012) defined financial inclusion as ensuring access to formal financial services at an affordable cost in a fair and transparent manner. In a broader perspective, Oz-Yalaman (2019) defined financial inclusion as “individuals and businesses have access to useful and affordable financial products and services that meet their needs e-transactions, payments, savings, credits and insurance delivered in a responsible and sustainable way”. These definitions entail that financial inclusion includes accessibility, availability and the usage of financial systems. Financial inclusion has been extensively recognised as a major policy priority, given its significance in fostering economic development (Pham et al., 2019). Access to credit has been identified as one of the main obstacles to the development of private sector in developing countries (Chauvet and Jacolin, 2017; Naumenkova et al., 2019). Prior literature indicated that financial inclusion is linked to country economic development and sustainability. In this regard, Grohmann et al. (2018) indicated that financial inclusion, measured as access to and use of financial services, is an important goal of economic and, in particular, financial development. Consequently, it has been claimed to be a significant policy instrument that can help to achieve the sustainable development goals (SDGs). Financial inclusion, also known as a financial exclusion, is one of the main policy tools to increase welfare, reduce poverty and enhance macroeconomic stability (Oz-Yalaman, 2019; Lee et al., 2019).
Financial inclusion has been identified by some researchers (Beck and Honohan, 2009; Onaolapo and Odetayo, 2012; Stephen and Sibert, 2014; Godwin, 2011; Pallavi and Bharti, 2013) as one of the solution to the development of business. Central Bank of Nigeria (CBN) is in the driving seat to achieve financial inclusion. The bank’s policy recognizes the role of Microfinance in providing financial access to the business operators that are usually excluded from or inadequately served by the available financial institutions. It follows that financial exclusion would be deleterious to the growth and development of business
According to Sarma (2008), financial inclusion is a process which ensures easy access to financial services in an economy. According to the author, ease of access is measured by proxies such as number of bank branches or ATMs per 1,000 adult populations. Khan (2011) contended that promoting financial inclusion, in the wider context of economic inclusion, can improve financial conditions and uplift the living standard of the poor and the disadvantaged.
According to him, financial inclusion can both improve the efficiency of intermediation between savings and investments and facilitate change in the financial system configuration. In view of Aduda and Kalunda (2012), financial inclusion is the process of ensuring access to financial products and services needed by all sections of the society in general, but particularly, the vulnerable, weaker sections and low income groups, fairly, transparently at an affordable cost in mainstream institutional players. Understood in this sense, financial inclusion has continued to assume increasing interest among policy makers, researchers and development oriented agencies, across the globe. Accordingly, countries are devising various regulatory strategies and frameworks to ensure that all populations excluded from financial services are reached and served. According to the CBN (2012), access to financial services mobilizes greater household savings (enabling such persons to invest in themselves and families), leverages capital for investments and expands the class of entrepreneurs. Financial inclusion offers incremental and complementary solutions to tackle poverty, promote inclusive development and achieve the UN Sustainable (Millennium) Development Goals (MDGs). It aims at drawing the unbanked population into the formal financial services net so they have the opportunity to access the whole gamut of appropriate financial services. The CBN believes that “financial inclusion is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at an affordable cost” (CBN, 2011, p.vii). Such financial services include, but not limited to: payments, savings, loans, and insurance and pension products. Financial inclusion, which in this paper will be construed as access to appropriate, fair and affordable financial services, varies widely across the globe. According to Demirguc-Kunt and Klapper (2012), survey data suggest that, even in advanced economies, almost one in five adults have no bank account or other form of access to the formal financial sector such that in many emerging and developing economies, the share of unbanked adults can be as high as ninety percent. In Nigeria, inclusion is likely to keep expanding in the coming years, supported by economic development and initiatives of the CBN and other policymakers. These initiatives (CBN, 2015) include nation-wide sensitization campaigns to enlighten the public on financial inclusion, geospatial mapping of financial Access Points, in collaboration with the Bill & Melinda Gates Foundation, to develop a business case for service providers on expanding access points to unbanked and under-served areas was completed. Further work to be done include leveraging on the outcome of 2014 Geospatial mapping survey to develop a business case for service providers on expanding access points to unbanked and under-served areas. Others are: the digital finance inclusion project, executed by the Federal Ministry of Finance, the Central Bank of Nigeria and the Bill & Melinda Gates Foundation to increase the level of financial inclusion in Nigeria and to help achieve the target seventy per cent payments by the 2020. Also, CBN’s Financial Inclusion Secretariat has worked with McKinsey & Co on a proof-of concept (POC) to assess deployment of E-Wallets to farmers, under which payments to farmers were made electronically, with the project providing an opportunity for enrollment of farmers on the Bank Verification Number (BVN) platform. This is in addition to the drafting and release of terms of reference for three research studies on National Savings Mobilization, Scaling up Agent Banking Adoption and Financial Inclusion Product Launch for people living with disabilities (PLWD), among other financial literacy activities. These initiatives are in alignment with the position of Yunus and Weber(2007)that the basic ingredient of overcoming poverty is packed inside each poor person and all we need to do is to help these persons unleash this energy and creativity. For the central monetary authority, financial inclusion matters for several of reasons. Firstly it would afford access to appropriate financial platforms which would allow the poor or otherwise disadvantaged to invest in physical assets and education, thus reducing income inequality and enhancing economic well-being. This would impact on financial development which would invariably aid poverty reduction and long-term economic growth (Burgess and Pande, 2005) and Levine (2005).Secondly, if greater financial access results in rapid credit growth or the expansion of relatively unregulated parts of the financial system, it may expose banks to financial risks as appropriate support capacity may be unavailable for the new level of operations and outreach (Nwanko and Nwanko, 2014). Therefore, to ensure that economic growth performance is inclusive and sustained, financial inclusion is necessary. This is because financial inclusion refers to the totality of initiatives that make formal financial services available, accessible and affordable to all segments of the population (Triki & Faye, 2013). This position implies that financial inclusion dictates deliberate attention to the historically excluded portions of the population from the formal financial sector due to their income levels and volatility, gender, location, type of activity or level of financial literacy.
Statement of the problem
The challenges which are in no small measure affecting their survival and performance, some of which are low income, lack of financial services awareness, lack of access to available sources of finance, inconsistency in Government policies, poor infrastructures, administrative bureaucracy, high charges and penalties. The most pronounced, however, is lack to access to finance/ capital. Access to Institutional Finance has always constituted a pandemic problem for business development in printer business owners in shomolu area. Credit to business owner is limited, particularly when compared to loans granted to larger firms. Figures obtained from the Central Bank of Nigeria (CBN) showed that out of the aggregate loans of N135.9 Trillion disbursed to the economy between 2019 and 2021, only N159.75 amounting to 0.1 per cent went to SMEs. (CBN Statistical Bulletin, 2021). This is because SME are strongly restricted in accessing the capital that they require growing and expanding. Their inability to access finance from both deposit money banks and commercial banks is due to high administrative costs, high collateral requirements and lack of experience within financial intermediaries. Even banks with retained liquidity levels in excess of what is required by law have shown reluctance in extending loans to SMEs especially on long term basis as they are considered highly vulnerable with credit risk. (Sacerdoti 2015)
Accordingly, countries are devising various regulatory strategies and frameworks to ensure that all populations excluded from financial services are reached and served. According to the CBN (2012), access to financial services mobilizes greater household savings (enabling such persons to invest in themselves and families), leverages capital for investments and expands the class of entrepreneurs. Financial inclusion offers incremental and complementary solutions to tackle poverty, promote inclusive development and achieve the UN Sustainable (Millennium) Development Goals (MDGs). It aims at drawing the unbanked population into the formal financial services net so they have the opportunity to access the whole gamut of appropriate financial services. The CBN believes that financial inclusion is achieved when financially excluded (SMEs inclusive) have easy access to a broad range of formal financial services that meet their needs at an affordable cost. Such financial services include, but not limited to: payments, savings, loans, and insurance and pension products etc. Financial inclusion, which in this paper will be construed as access to appropriate, fair and affordable financial services, varies widely across the globe.
Therefore, to ensure that business’ performance is inclusive and sustained, financial inclusion is necessary. This is because financial inclusion refers to the totality of initiatives that make formal financial services available, accessible and affordable to all segments of the population (Triki and Faye, 2013). This position implies that financial inclusion dictates deliberate attention to the historically excluded portions of the population including SMEs from financial services.
Objective of the study
The objective of the study is to investigate the impact of financial inclusion on SMA business performance, using printer business owners in shomolu area as a case study. The specific objectives of the study are;
- To determine the impact of financial literacy of entrepreneurs on accessibility to finance in printer business owners in shomolu area.
- To examine the impact of Microfinance Banking Services on the Sustainability of printer business owners in shomolu area.
- To examine the impact of Government Intervention in terms of Provision of Credit Enhancement Programmes on the Performance of printer business owners in shomolu area
Research Question
The following research questions were formulated;
- What is the impact of financial literacy of entrepreneurs on their accessibility to finance in printer business owners in shomolu area?
- What is the impact of the Microfinance Banking Services on the sustainability of printer business owners in shomolu area?
- Does Government Intervention in terms of Credit Enhancement Programmes have impact on the Performance of printer business owners in shomolu area?
Research Hypotheses
The following research hypotheses were formulated
HO1: There is no significant impact of financial literacy of entrepreneurs on accessibility to finance in printer business owners in shomolu area.
HO2: There is no significant impact of Microfinance Banking Services on the Sustainability of printer business owners in shomolu area.
Ho3: Government Intervention in terms of Credit Enhancement Programmes has no significant effect on the Performance of printer business owners in shomolu area
Significance of the study
The study will be very significant to students and business owners. The study will give a clear insight on the impact of financial inclusion on SMA business performance. The study use printer business owners in shomolu area as a case study. This study will aid Government in moderating the affairs of Financial Institutions, and also see the need to provide enabling environment for business owners to thrive so as to actually become the driver of our economic growth and development. The study enlightens the general public to know that business owner is a vibrant one which can be gainfully ventured into and thus make the economy of the Nation most viable and enviable to foreign investors. The study will also serve as reference to others researcher that will embark on the related topic
Scope of the study
The scope of the study covers the impact of financial inclusion on SMA Business performance. The study will be limited to printer business owners in shomolu area.
Limitation of the study
This project research would have been easier if not for these limitating factors:
Time factor: time was not on the researchers to consult various sectors of the economy to review employees or given out questionnaire to various institutions on the effect of government revenue policies.
As we all know, time is never our friend. The time scheduled for the completion of this research thesis was too short. As a result, generating information/data was strenuous as it coincides with final year examination period, which needed attention.
Finance: this is another barrier that limited the researcher’s work.
Available resources: was unavailable for the research work.
Definition of terms
Financial inclusion: Financial inclusion is defined as the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products
Business performance: Business performance, which is closely tied to commercial effectiveness, is determined by the ability of a company to implement optimal organisation with the aim of offering a product or service that meets the expectations of consumers and customers
This material content is developed to serve as a GUIDE for students to conduct academic research
THE IMPACT OF FINANCIAL INCLUSION ON SMA BUSINESS PERFORMANCE. THE STUDY OF PRINTER BUSINESS OWNERS IN SHOMOLU AREA>
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