The effect of Informal Financing Option for Rural SMEs Growth In Kwara State

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The effect of  Informal Financing Option for Rural SMEs Growth In Kwara State

Abstract

Based on statistical evidences in the last couple of years, Nigeria’s economy is one of the rapidly growing in the world and the fastest growing in Africa. However, in real terms, its people are the most impoverished with high poverty concentration in the rural areas. This study investigates Small and Medium Enterprises (SMEs) and how the informal financing option could boost their performance in the rural areas. A sample of 185 SMEs was selected in a cross- sectional survey research design across two (2) Local Government Areas of Kwara State who are typically rural areas. The returned questionnaires of 125 i.e. (78.1%) were according analyzed using regression and t-test analyses. The findings show that 91.2% of the sample relied only on informal sources of finance for their businesses while 4.0% and 4.8% have accessed the formal and government funding respectively. The study concludes that informal financing option is germane to improving rural SMEs as this will create business expansion, provide more jobs and ultimately reduce high rate of poverty in the rural communities. The paper recommends that government should through Central Bank of Nigeria (CBN), Bank of Industry (BOI), Bank of Agriculture (BOA) etc. provide special intervention fund for informal financing channels. Furthermore, international NGOs such as FATE, MTN, Bill and Merlyn Foundations, and other international financial institutions such as African Development Bank (AfDB) International Finance Corporation (IFC) should develop a partnership programme with informal finance providers in Nigeria

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