Empirical Analysis of Challenges of Microfinance Banks in Financing Small Scale Enterprises in Nigeria
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The introduction of microfinance banking in most developing economies like Nigeria was borne out of the need to bring financial services nearer to the people, particularly the low income earners given the inaccessibility of such services from conventional banks. This study assessed the problems encountered by the Microfinance Banks (MFBs) in financing Small Scale Enterprises (SSEs) in Osun State, Nigeria. Descriptive survey research design was adopted for this study. The population for the study comprised all microfinance banks and small scale enterprises in Osun State. Ninety (90) management staff members of thirty (30) MFBs were purposively sampled and four hundred and fifty (450) SSEs were randomly sampled. One set of questionnaire designed to collect data was tested for reliability using Cronbach’s alpha: QMFB (r = 0.793). Data was analysed using descriptive statistics such as tables, percentages and pie charts. Findings revealed delay in payment of loans( 21.1%). deviation from the loan agreement (18.9%), diversion of the loan granted (23.4%), non compliance with advice (14.4%) and non repayment of loans granted (22.2%) as challenges facing microfinance bank in financing small scale enterprises in Osun State, Nigeria.
In conclusion, activities of MFBs on the SSEs in the study area were mostly hindered by diversion of the loan granted to non SSEs business activities, therefore MFBs were advised to organize training for the SSEs
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