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Examining the Impact of Micro-Credits Financing on Small Scale Enterprises'

(SSEs) Survival in an Emerging Market

Article · May 2019

DOI: 10.14738/abr.75.6555

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ArchivesofBusinessResearch–Vol.7,No.5PublicationDate:May.25,2019DOI:10.14738/abr.75.6555.

Obadeyi, J. A., Adesuyi, I. O., & Olubodun, I. E. (2019). Examining the Impact of Micro-Credits Financing on Small Scale Enterprises’ (SSEs) Survival in an Emerging Market, Nigeria. Archives of Business Research, 7(5), 182-193.

ExaminingtheImpactofMicro-CreditsFinancingonSmallScaleEnterprises’(SSEs)SurvivalinanEmergingMarket,Nigeria.

J.A.Obadeyi

DepartmentofAccountingandFinance;ElizadeUniversity,Ilara-Mokin,OndoState,Nigeria.

I.O.Adesuyi

DepartmentofBusinessAdministration,ElizadeUniversity,Ilara-Mokin,OndoState

I.E.Olubodun

DepartmentofBusinessAdministration,ElizadeUniversity,Ilara-Mokin,OndoState

ABSTRACT

There were tens of thousands of small scale enterprises (SSEs) operating withinbusiness environment in Nigeria, but continuous under-development, inability toaccessloanablefunds,lackofinnovationandweakcapitalbasehavecharacterizedtheinformal market and chances of survival have become doubtful and bleak. To thisextent,thestudyexaminedtheimpactofmicro-creditsfinancingonSSEs’survivalinanemerging market, Nigeria. Primary source of data was through questionnaire. Aregression method - simple Ordinary Least Square (OLS) method was adopted toanalyze the responses gathered through the research instrument.The result showedthat R2 = 0.846, which explained the variations in SSEs survival by micro-creditbehavioral funding pattern of micro-banks; while overall result was statisticallysignificant (p˂0.05). The paper concluded that SSEs were often used as indices tomeasure the level of industrialization. The paper however recommended thatpolicymakersandotherstakeholderssxhouldconsistentlyreviewpoliciesguidingtheestablishment and operations of informal market in order to achieve the expectedtargetofsustainability.Keywords:Smallscaleenterprises,Survival,Financing,Micro-credits,Nigeria.

INTRODUCTION

SmallScaleEnterprises(SSEs)inmanyemergingmarketsanddevelopingcountrieshavesinceshown importance in the industrialization process; but many emerging markets anddeveloping economies have been making concerted efforts to promote the development ofSSEsviauninterrupted, steadyand increasing funding (Ogbimi,1997andObitayo,2001). InNigeria, the lowcredit ratingof this classof enterprisewasattributable to lowproductivity,porousregulatory framework, lackof innovationsandweakcapitalbase. ItwasobviousthatforSSEstoplaytheirroleeffectively,anewandappropriateperceptiontofinancingthemmustbe put in place. SSEs accounted for substantial proportion of employment in most all theeconomies in the world (Aremu, 2010). Anyanwu (2001) asserted that the SSEs have beenidentifiedasthemeansviawhichtherapidindustrializationandothereconomicdevelopmentgoalsofacountrycanberealized.SSEsconstitutedthebestavenueforgovernmentstoachievepoverty alleviation programs objectives; undoubtedly, Obitayo (2001) reported that SSEsstructurewasnevercapitalintensive.ThedynamicphenomenonoffinancingSSEsinemergingmarket (Nigeria inclusive) via various government financing schemes could not be overemphasized.However thegovernmenthaspaid lessattention to thedevelopmentof SSEs in

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the past, but presently improving at a very sluggish rate. The experience of the recentlyindustrializing countries (BRICS –Brazil, Russia, India, China and South Africa) of theworldthat suddenly found the SSEs as the avenue for industrial transformation and development,have aroused necessary change of attitude towards the development and support of SSEs.Akabueze(2002)andAremu(2010)assertedthateverybankhasbeendirectedtosetaside10% of its pre- tax profits for the purpose of financing SSEs in Nigeria shortly before theestablishment of Small andMedium Industries Equity Investment Scheme (SMIEIS) in2001.The Scheme had an accumulated fundwhichwas about N14.5 billion (fourteen billion, fivehundredmillion)asatMarch2003i.e.,withintwoyearsofitsestablishment.Itisagoodwayofsolving the perennial financial problems facing SSEs in Nigeria. The question now is,whichamongthebanksadheretothisdirectivetilltoday? TheFederalgovernmentestablishedtheNigeriaIndustrialDevelopmentBank(NIDB)andtheNigeriaAgriculturalDevelopmentBank(NADB),NigeriaAgriculturalDevelopmentandCreditBank(NADC)etc., toassistsmallbusinessownersbymaking loansavailable to thematveryreasonablerates.Becauseoftheirspecializednature,theycouldmakeloansavailabletoSSEsowners, who were rejected by commercial banks. A SSEs operator(s) who needed creditfacilitiesmust ‘shop’ around for the lender thatwouldmake the loanavailableat theperiodthatwouldsuittheuniquecircumstancesofsmallbusinessoperators(NigerianBanker,2007).Although, people and institutional evidences agreed that inadequate finance was a majorprobleminhibitingsurvivalofSSEs.Furthermore,therewereothercriticalproblemsfacingtheinformal market such as; poor access to credit and capital funding, under- capitalization,infrastructural deficiencies, low entrepreneurial skills and poor management, over- bearingregulatory framework and operational environment setbacks (Onwualah, 1999 and Aremu,2004).

LITERATUREREVIEWSinceindependencein1960,theauthoritiesinNigeriahavebasedindustrializationpoliciesonthewidespreaduseofimprovedrawmaterialstoproducesubstitutefortheimportedfinishedgoods. The policy focus was aimed at large- scale multinational companies (e.g. NigerianBreweriesPlc)whichwerepreferredbytheauthoritiesandthefinancers.Suchpolicyinitiativeinvariably undermined the survival of Small Scale Enterprises (SSEs) and indigenousindustries(Aluko,OguntoyeandAfonja,1972).Bythemid-1980s,thebiasedindustrialpolicyfocusonLargeScaleIndustries(LSls)attheexpenseoftheSmallScaleIndustries(SSEs);thishas created a sector- related gap and sustained an imbalance in industrial growth anddevelopment inNigeria forat least fourdecades.TheNigerianGovernment, likemostofhercounterpartsindevelopingnationshasnotrealizedtheimportanceofSSEsintheireconomicgrowthanddevelopment.Thegovernmenthadnooptionbuttobegintoformulatestrategiesto empower the SSEs to enable them fulfill their excepted roles in industrialization, andeconomicdevelopmentwithoutwhichsurvivalmightbecomedifficult.Ogbimi(1997)arguedthat themaindifferencebetween thedevelopednationsandemergingmarketswas that thelatterwasindustrializedunliketheformer.Therefore,industrializationwouldbethebedrockfor informal market development in Nigeria. It was obvious that until the government ofNigeriawouldtakestepstodevelopSSEslikeinthenewlyindustrializedcountriesoftheworld(e.g.Brazil,Russia,India,China,SouthAfricaetc.),industrializationmightbecomeunrealizable.Ogbimi (1997) opined that over-heightened regulations and complex registration standardsandprocedureshaveplacedincreasedburdensonSSEs.Aremu(2010)claimedthattheresultoflackofstatisticaldata,lackofresearchonindustrialstructure,businessfailure,shortageofskill,pooraccountingstandard,restrictedaccesstobigmarkets(NigerianStockExchange)inemergingmarketswere also part of problems associatedwith SSEs in the informalmarket.

Obadeyi, J. A., Adesuyi, I. O., & Olubodun, I. E. (2019). Examining the Impact of Micro-Credits Financing on Small Scale Enterprises’ (SSEs) Survival in an Emerging Market, Nigeria. Archives of Business Research, 7(5), 182-193.

URL:http://dx.doi.org/10.14738/abr.75.6555. 184

However, SSEs were adjudged to employ a significant part of the working population indeveloping countries.Liedholm (2002)andRaymond (2000) reviewed thatnationalsurveysconducted in several African Countries estimated between 17% to 27%of theworking agepopulationthatemployedinSmallEnterprises;thatis,almosttwicetheemploymentofLargeScaleEnterpriseswhichoftenemployedaone-thirdoflabourforceinlowincomecountries.Nigeriawasintheprocessofopening-upitseconomythrougheconomicliberalizationpolicies(Nnanna,2001;Obibiaku,2005). TheConceptualIssuesonSmallScaleEnterprisesThepromotionofSmallScaleIndustrieswasawell-recognizedandmuchheraldedstrategyofindustrial development in many less developed countries. It was a wide consensus amongbusinessscholarsthatSmallScaleEnterprises(SSEs)werelabourintensiveandcouldenhanceemploymentgenerationaswell asadvanceawidevarietyofotherdevelopmental goals likeimprove income distribution, the generation and the diffusion of local technology andindustrialskill,increaseutilizationoflocalresources,improvespatialdistributionofindustrialactivities and enhance the migration of rural- urban population movements. (Onwumere,2000;Okafor,2000;Berger,2002).Untilrecently,theSmallScaleIndustrysectorwasvirtuallyneglected in the Nigeria Development Plans. In the 1975-1980 Development Plans.Government provided funds for SSEs research, created a small industry division andencouraged States SSEs credit schemes but without proper monitoring. In the 1981-1985Development Plan, the increasing recognition by government of the need to boost non-oilsectormadethegovernmenttofocusontheSSEs.TheeconomicreformscarriedoutundertheStructuralAdjustmentProgramme (SAP) in1986,howeverplacedgreateremphasisonSSEsdevelopment. The economic condition that prevailed in the country during the 1970’s and1980’s made people to understand that Large Scale Industries have not played and cannotalonebeexpectedtoplaythedynamicroles that theyweresupposedto in therapidgrowthand development of the Nigerian Economy. The roles include the gross domestic product,employment generation, and technological development. In 1985, SSEs were completelyneglected. Itwasbelieved thatSSEswouldbringaquickdevelopmentprocess intoNigerianeconomyintermsofincreaseinemploymentrate,reductioninpovertyleveletc.,(Egwaikhide,1997;Anyanwu2001).Theexperiencesof therecently industrializingcountriesof theworldthat discovered SSEs as the avenue for industrial transformation and development havearousedthenecessarychangeofattitudetowardsthedevelopmentandsupportofSSEs.Itwasfurther revealed in study that SSEswere veritable vehicles for the achievement of nationalmacro-economicobjectivesintermsofemploymentgenerationatlowinvestmentcostandthedevelopment of entrepreneurial capabilities and indigenous technology. Finally, theimportance of SSEs in industrialization was becoming increasingly recognized as manyorganizations both local and international have givenmuch attention to the developmentofSSEs.However,thestudyadvisedthatforaneconomyirrespectiveofitseconomicideologytoachievemeaningful and sustainable development, adequate attentionmust be given towidespreadofeconomicactivitiesthroughentrepreneurshipandsmallscaleenterprisegeneration.The youth as a major contributor to all round economic growth and development must begivendueattentionandtheiryearningforjobsecuritymustbeprimaryandparamountsincethey processgreater capability tomove the economy forward inorder to achieve economicdevelopment(AkandeandObadeyi,2017).Micro-CreditsFinancingMicro-creditsfinancingcouldbedefinedasfinancialprocessofmakingmini-creditsavailablein form of funds to micro and small business owners at affordable rates by financialinstitutionsmostespeciallybanks.Thisprocesscouldberegardedasfinancialintermediation

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roles performed by financial institutions of channeling funds from the lenders (banks) sub-sectortoborrowers(SSEs)sub-sector.Themicro-creditwasoneofthemajorcardinalservicesprovided bymicrofinance bankswhich varied from smallest amount of two thousand naira(#2000)tofivehundredthousand(#500,000).Micro-creditwasasmallfinancialloanmadetopoverty-stricken individuals seeking to start their own business. This type of loan typicallycouldexceedatleast#50,000dependingonthepolicyofthebank.Hence,itmustbenotedthatanimpoverishedindividualcouldnotsolelydependonthistypeofloantofundtheirbusiness.Microcreditcouldalsobecalledmicroloan.Wellen&Mulder(2008)believedthatcreditwasthe money receipt in exchange for future repayment of the principal, plus interest. Theprincipal was the larger amount borrowed, and the interest was the amount (i.e. smallercompared to principal); charged for receiving the credit. Ojo (2009) claimed that theborrower’spurposeforthecreditmustbejustifiedandsatisfactorytothelender.Sincelendersweretakingariskthatborrowersmightnotrepaythecredit,creditsavershavetooffsetriskbychargingafee-knownasinterest.Theabilityofborrowertousethecreditaspromisedandasagreedbybankscreatedconfidenceinthecreditrepaymentprocessbythecredituser.Mostcreditsweretypicallysecured.Asecuredcreditinvolvedpledginganassetascollateraliftheborrowerdefaulted,orunwillingtopaybacktheloan,thelendertookpossessionoftheasset.Orodje(2012)furtherclaimedthatcreditusagewasatermthatshowedtheunderlyingreasonanapplicantwasseekingforacredit.Thepurposeofthecreditusedbythelenderwastomakedecisionsontheriskandtheinterestrateoffered.Creditusagewasimportanttotheprocessofobtaining business loans such that the purpose of credit neverwent contrary to itsoriginalintention.

CharacteristicsofMicro-CreditsBanks in developing countries were primarily attracted by the potential profitability of theinformalmarketandservedSSEsprimarilythroughdedicatedunits.Scoringmodelswereusedbymostbanksbutwerejustoneoftheinputsinloandecision.Banksindevelopingcountriesreported that macroeconomic instability was the main obstacle to SSEs lending and alsoaffected their performance, rather than flaws in the legal and contractual framework. In thestudyofAbreham, (2002)andSomoye,2010)empirical evidence showed that collateralizedloansweresubjecttogreaterrisk. Maturityofmicro-creditcouldalsoaffectthelikelihoodofdefault. The longer the maturity, ceteris paribus, the greater the risk of the borrowersencounteringproblems(Wakaba2014).Alex(2014)arguedthatmaturitywasanalternativemechanism for solving the problems of adverse selection and moral hazard in creditrelationships. Thus, in a situation of asymmetric information, an insiderwho knew that thecompanyhashighcreditqualitypreferredtoborrowshorttermratherthanbepenalizedforlong-termborrowing.Thiswasbecauseoutsiders’uncertaintieswouldbegreaterandtheriskpremiumincreased.Lowerriskborrowerswouldthereforechooseshort-termfinance,whichsignaled good risks. Thus, the shorter the maturity of micro-credit, the lower the risk. Thecreditriskandmaturityhavebeenfoundtobenegativelyrelated(Fernando,2006).Government policy of a country could be regarded as major determining factor of SSEs tocommence business; and to grow to large scale Business Empire. Millions of new jobopportunities were established by SSEs owners in the informal market. Though, few SSEscollapsed for the first-three years in business due to porous regulatory framework andunstable and weak government policies with less recognition of SSEs. Most SSEs havechallenges such as double tax regimes, and experience difficulty in enterprise registrationprocess. Itwas thereforenecessary toknow thatgains/profits/contributionof SSEsownersandmanagersmustnotbelessthanzeroatalltimes

Obadeyi, J. A., Adesuyi, I. O., & Olubodun, I. E. (2019). Examining the Impact of Micro-Credits Financing on Small Scale Enterprises’ (SSEs) Survival in an Emerging Market, Nigeria. Archives of Business Research, 7(5), 182-193.

URL:http://dx.doi.org/10.14738/abr.75.6555. 186

FirmSurvivalGenerally,examiningtheassociatingfactorsoffirmsurvivalwouldprovidebasicinformationto prospective small scale enterprise owners, entrepreneurs, business owners, and policymakersonhow topromote self-employmentandcreate conducivebusiness climate.Despitethesupportandfocusgiventothesector, largenumberofSSEswereexpectedtoeventuallyclose or stagnated at starting phase. As studies (World Bank, 2011; Barbosa, 2016)documented that therewere internal and external factorswhich affected the success of theSSEs such as shortage ofworking capital, lack ofmarketing skills, poor location of businesssites,failuretotakerisk,andoveremphasistoshorttermprofitwereinternalfactorsaffectingthesurvivalrateofSSEs.Inaddition,lackofaccesstoefficientinfrastructure,accesstofactorofproduction, bureaucracy burden, and lack of appropriate skill and training were alsodocumentedasexternalfactorshinderingthesuccessoftheSSEs(Aremu,2010).

FactorsthatinfluencethesurvivaloffirmsLiquidity

Besley(2008)arguedthatliquidityconstraintsforcedstart-upstoentersmallandtheinitialunder investmenthavenegative impactonthe firm’ssurvivalprobabilities.Van-Praag,Thomas & Williams (2005) claimed that financial capital constraints might prevent smallbusinessownersfromcreatingbuffersagainstrandomshocks,therebyaffectingthetimingofinvestmentsandhavingnegativeimpactonfirms’survivalprobabilities.Assetsownedbyfirmswere regarded as liquid as long as it could easily be converted to cash (Brealey, Myers &Marcus, 2001). The critical performance phenomenon as related to liquidity explained howfirmshavedevelopedsufficientaccessiblecapitaltocontinuouslybeinoperation.

EconomicConditionsChoudhury & Kumar, (2002), argued that the general business climate, measured by thenumberofbankruptciesinthepreviousyears,raisedthrough‘chaineffects’thepropensitytoexit. Also fluctuation in the external value of the currency influenced the exits of firmsdisparately,thiscouldeasilybecharacterizedviadwindlingexportactivity.Also,highcostoffunds,highinterestrate,uncontrollableinflationrateandhighrateofdefaultonthepartoftheborrower affected the survival of small business outfits. However, once an increase in theexternalvalueofthecurrencydeteriorated,itaffectedthecompetitivenessandvalueoffirmson foreign markets, thereby increasing firm’s exposure and ability to survive in the futurecouldbedoubtful.

ProductivityProductivityreferredtotheoutputrelativetotheinputsperpersonorsystemwithreferenceto a point of time. Stated more clearly, productivity referred to the amount of goods andservicesproducedwiththeresourcesused.Productivitywastheefficiencywithwhichoutputwasproducedbyagivensetofinputs.Productivitygenerallymeasuredtheratioofoutputtoinput.AccordingtoFeed(2008),anincreaseintheoutput/inputratioindicatedanincreaseinproductivity; conversely, a decrease in the output/input ratio indicated a decline inproductivitytime,whicheventuallyaffectedthesurvivalofafirm.

BusinessDiversificationDiversificationwasexplainedasmeansbywhichafirmexpandedfromitscorebusinessintootherproductmarkets(Gluck1985).Firmsspentconsiderablesumsacquiringotherfirmsorto have spent heavily on internal Research and Development (R&D) to diversify away fromcoreproduct/markets.Theessenceofbusinessdiversificationwasthatbusinessorganizationswere operating in environments that were increasingly uncertain, competitive and

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unpredictable. The changes in environmentswere not only rapid and bewildering, but in astate of constant flux. Despite the complex and dynamic business environment, enterpriseswererethinkingthewaybusinessshouldbecarriedoutandneedtosurvive.TheoreticalReviewTheCreditAccessTheoryThecredit access theorywaspropoundedbyStiglitz&Weiss (1981).The theoryprovidedastructural framework for analyzing information asymmetry. The theory believed thatinsufficient funds often forced financial institutions to ration credits to large number ofborrowers,therationingprocesscouldbedeterminedbytheavailabilityofsecurity/collateral.Accordingtocreditaccesstheory,adverseselectionandthuscreditrationingoccurredifbanksrequiredcollateral.Thetheoryfurtherclaimedthatlow-riskborrowersexpectedalowerrateofreturnonaverage.Consequently,low-riskborrowerscouldthereforebeunabletoprovidecollateral resulting to difficulty to access any loanable funds. Increasing collateralrequirementshavethesameadverseselectioneffectasahigherinterestrate.Instead,Gonzalez& Sushma (2009) argued that banks only offered contracts in which they simultaneouslyadjustedinterestratesandcollateralrequirements.Theyprovedthattherewascombinationofinterestrateandcollateralrequirementssothatcreditrationingneveroccur.Stiglitz&Weiss(1981), furtherexplained that credit rationingoccurred if a financial institution charged thesameinterestratetoallborrowers,becausetheycouldnotdistinguishbetweenborrowersandscreening borrowers perfectly which might be too expensive to bear. Banks usually woulddistinguishbetweentheirborrowersuptoacertaindegree.EmpiricalReviewWakaba,(2014)researchedontheeffectofmicrofinancecreditonthefinancialperformanceofsmall andmedium enterprises inKiambu county, Kenya, and found that all SMEs borrowedinvestment capital andused it for thepurpose inwhich itwasborrowed;andmostof themneverhaveother sourceof financingother than frommicro-finance institutionsanddidnothaveotherformoffinancingbeforetheystartedreceivingfinancingfrommicrofinancebanks.AnotherstudybyMadole,(2013)ontheimpactofmicrofinancecreditontheperformanceofSMEs in Tanzania found out that the role of financial institutions toward SMEs successwasvital. Goldberg (2004) and Gaul (2011) carried out a study on the effect of micro financeinstitutionscreditonthegrowthofsmallandmediumscaleenterprises(SMEs);acasestudyof selected SMEs in the Kumasi metropolis. The study concluded that despite challenges,entrepreneursneededmicrofinanceloaninordertopromotebusinessperformance.Accordingto Davidsson, (1991) and Rosenberg (2009), SSEs’ inability to access credit was preventingthemfromreachingpotentialgrowthintermsoffinancialsustainability;andthiscouldleadtothe collapse of SSEs within a short period of existence. Liedholm (2002) examined thedeterminantsofsurvivalandgrowthofSSEsinLatinAmerica,andconcludedthatfirmslocatedinurbanareasweremore likely tosurvive,while locationwascentral featuresin identifyingfirm growth prospects. Studies (Mata&Portugal, 2002; Yang, 2005) claimed that firms thatweremorecapitalintensiveoftengrewfaster.

Obadeyi, J. A., Adesuyi, I. O., & Olubodun, I. E. (2019). Examining the Impact of Micro-Credits Financing on Small Scale Enterprises’ (SSEs) Survival in an Emerging Market, Nigeria. Archives of Business Research, 7(5), 182-193.

URL:http://dx.doi.org/10.14738/abr.75.6555. 188

ConceptualFramework

Source:Authors’Compilation,2018

METHODOLOGYThestudyadoptedbothprimaryandsecondarydata.Butforthepurposeofthisstudy,primarydatawascollectedthroughaself-administratedquestionnairewhichwasdevelopedaccordingto the purpose of the study. The questionnaire consisted of two sections; the first sectioncomprisedthemaindemographicofthesample;thesecondpartofthequestionnaireincludedthe related statements thatmeasured the small scaleenterprisesand impactofmicro-creditfinancing.Thequestionnaireconsistedofthree(3)scalesdrawnfromtheresearchquestionsunder headings ranging fromDisagree (DA) toAgree (A). Each respondentwas expected torate himself or herself. The sample of this research consisted of the selected small scaleenterprises’operators,managersandowners,whowerecustomerstomicrofinancebanks(i.e.banksthatspecialiseatprovidingmicro-fundstomicroandsmallbusinessenterprises.Duringthesurveyperiod,thesamplewasselectedoveraperiodoften(10)days.Purposivesamplingwas used to select respondents in the study. 90 questionnaires were delivered to selectedrespondents.80questionnaireswerecorrectlyfilledandreturned,someofthequestionnaireswerecompletedonthespot,andotherrespondent‘squestionnaireswerecollectedviafollow–upinthelaterdaysviaphonecalls,textandWhatsAppmessages.Theoverallresponserateforthequestionnairewas88.9%.Meanscoreswerecalculatedbyawardingapointvaluetoeachresponse. Therefore, higher the mean score, the more the respondents agreed with thestatement. The figures for standard deviation (SD) indicated the degree towhich responsesvariedfromeachother;thehigherthefigureforSD,themorevariationintheresponsesamongrespondents.ThecollecteddatawasanalysedbyusingtheSocialPackagingStatisticalSystem(SPSS), where frequencies, percentages were analysed. The Ordinary Least Square (OLS)methodhelped tobuttress factson the influenceof explanatoryon thedependentvariables.However,asimplemodelspecificationispresentedbelow:

Y=α0+β1X+μ-----------------------------------------------(i)WhereYwasdependentvariable,Xwasexplanatoryvariable,μwastheerrorterm,whileα0andβ1wereinterceptandsloperespectively.

Yt=α0+β1Xt+β21X2t+Ut---------------------------------------------(ii)Yt was SSEs survival, Xt, X2t, and μt explanatory variables (micro-credits financing) andstochasticvariablerespectively.Letmicro-creditsfinancingacronymbeMCF,ProductivitybeP,BusinessDiversificationbeBDandLiquiditybeL.

MCFt=α0+β1Pt+β2BD2t+β3L3t+U2t---------------------------------------------(iii)

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ResultsThe regression results have estimated the coefficients of the linear equation involvingvariables thatbestpredicted thevalueof thedependentvariableas shown intable i–iv.Thetableshowedthatmicro-creditswereessential tosmallscaleenterprisessurvivalbymakingloanablefundsavailableatr-square,0.85(85%).Theresultfurtherexplainedthatthestandarderror in table I (0.21)was less than thehalfof coefficient (0.422)at t=7.252 in table III; itshowedthattheresultwasstatisticallysignificantat(p˂0.05).ItwouldthereforebepredictedthatsmallscaleenterprisesinemergingeconomieslikeNigeriawasofparamountimportancesince loan-size and credit usage have significant influence on SSEs survival. The SSEswerecapable of meeting their debt obligations as at when due, this automatically increasedproductivityandbusinessenterpriseswouldbeablediversify intoother feasible investmentopportunities. ForeveryloandisbursedtoSSEs,itgeneratedincreasedfundsaccessibilitytosmallbusinessownersandoperators.F-valueof239.9 impliedthat theoverallequationwassignificant.Specifically, the table III showed that themean responses andstandarddeviationrelating to impact of micro-credits financing on small scale enterprises (SSEs) survival inemergingmarket,Nigeria.Onthewhole,therespondentsagreedwiththeissuessurroundingtheresearchobjectivewithanaggregatemeanscoreof17.12andastandarddeviation(SD)of42.4.Furthermore,thisresultsignifiedthattheloanfacilitytoSSEswasafinancialresourcesthatservedasadditionalresourcesforSSEssurvival.

TableI:RegressionResult:ModelSummary

TableII:RegressionResult:Anova

TableIII:RegressionResult:Coefficients

Obadeyi, J. A., Adesuyi, I. O., & Olubodun, I. E. (2019). Examining the Impact of Micro-Credits Financing on Small Scale Enterprises’ (SSEs) Survival in an Emerging Market, Nigeria. Archives of Business Research, 7(5), 182-193.

URL:http://dx.doi.org/10.14738/abr.75.6555. 190

TableIV:RegressionResult:ResidualStatistics

DISCUSSIONFindingsshowedthatsizeofa loan increasedworkingcapitalofSSEs’operators; tobemoreliquidandeasilyinfluencedturnoverofthesmallbusiness.Thepositivevalueofcreditperiodshowed that the small business operators agreed with the period of loan repayment asreasonable and affordable to achieve the targeted productivity level of the enterprise. Theprematuredeathofmanysmallbusinessenterprisescouldbeduetopooreconomicconditions(e.g. economic recession, high cost of funds, unbearable cost of borrowing etc.). Small scaleenterprisesplayedasignificantroleinthetransformationoftheeconomythroughthegreaterutilization of raw materials, employment generation, empowerment, development ofentrepreneurialabilitiesandincreaseinfoodproduction.SSEswereincreasinglybecomingthepivotfordevelopmentofanyeconomybecausetheyformedthebulkofbusinessactivitiesinagrowingeconomysuchasNigeria. In recognitionof the strategicpositionand importanceofSSEs in the developmental process of the nation, the federal and statesgovernments had atvarious times established institutions and agencies including policies to take care of thefinancingneedsofSSEsbyensuringminiandsmallcreditswereavailableforthedevelopmentofinformalmarket.

IMPLICATIONTORESEARCHANDPRACTICEInNigeria,itisparticularlydifficult,ifnotimpossibletogetreliableinformationaboutinformalbusinesses fromofficialgovernmentalsources.Hence, tounderstandtheviabilityof informalretail in Nigeria in more depth, additional original field research is needed. This study isencouraginginthatitprovedpossibletoobtaindetailedinformationaboutNigerianinformalentrepreneursworkingandlivingatthe―baseofthepyramid.A central concern of developmental entrepreneurial policy is creating economically viableenterprises,whichgeneratesatisfactorylivingstandardsanddonotrequiredirectgovernmentsubsides. Economic development initiatives often focus on stimulating production, notdistributionactivities.Yetbecauseofrelativelylowbarrierstoentry,theNigerianretailsectorattracts millions of entrepreneurs. Without stepped up formal employment, Nigeria‘sburgeoning informalretail economywill continue toofferoneof the few feasible sourcesofincome.

CONCLUSIONThe study focused on examining the impact of micro-credits financing on small scaleenterprises(SSEs)inanEmergingMarket,Nigeria.Microcreditsprovidedbycreditproviders(banks)havesignificantinfluenceonSSEstosurvivethroughincreaseinproductioncapacity,businessexpansionanddiversification;whiletherepaymentperiod(creditmaturity)wouldbetimely.ItmustalsobenotedthatSSEs’survivalcouldalsobejeopardizedviamicro-economicinstability,lackofsecurities(collaterals)tosecurecredits,longrepaymentperiod,creditrisks,fluctuatinggovernmentpolicies,highcostofborrowingassociatedwiththeprovidersofmicro

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–credits and insufficient working capital. Therefore, influence of micro-credits financing onSSEs could not be over emphasized. For SSEs to survive, the informal sector depended onmicro-creditsfinancingforbusinesscapitalgrowth(businessexpansion).Inaddition,Nigeriaasaneconomy, is endowedwithvastnaturalresourcesanda largepoolofbusinessownerswhoarereadyandwillingtoestablishnewenterprisesandexpandexistingones.SSEsownersrequired a more conducive environment to actualize their aspirations of operating in asuccessfulbusinessenvironment.Inthemidstofallthesenecessities;accesstomicro-creditsremainedtheprioritytoSSEsoperatorsandowners.

FURTHERRESEARCHBeyonddelvingdeeperintothecapitalconstraint,moreresearchneedstobedoneongenderdiscriminationandwomen‘sinabilitytoreachasustainablelivelihoodthroughinformaltrade.Tobe sure,womencarryoutvital entrepreneurial andmanagerial functions in the informaleconomy.More research needs to be done regarding time constraints (child rearing) andother factors that led females to earn less as entrepreneurs. We also need to understandcrowdingandcopycatbehaviorintheinformaleconomyanditseffectonthesuccessofsmallretailers. Interestingly, shopping centers do not yet appear to be a statistically significantdeterrent to income. Yet they still represent a competitive threat to thousands of smallbusinesses. The potential of formal retail centers to displace large numbers of informalentrepreneursinAfricameritsfurtherstudyparticularlyinNigeria.

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