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AN ANALYSIS OF THE CONTRIBUTION OF COMMERCIAL BANKS TO SMALL SCALE ENTERPRISES ON THE GROWTH OF THE NIGERIA ECONOMY

Abstract

The main objective of this study is to analyze the contribution of commercial bank’s loan to small scale enterprises on the growth of the Nigeria economy. The study employed Gross domestic product as a proxy for economy which is the dependent variable and the commercial bank’s loan to small scale enterprises as the independent variable for the period of study (1993- 2012). Co-integration and error correction model approach was used to estimate the relationship between the variables. All the variables used were stationary at first difference and the result showed a long term relationship existing among the variables. The main finding of this study is that the commercial bank’s loan to small scale enterprises did not reveal any significant effect on economic growth in Nigeria within the period of study. This is attributed to the facts that the small scale operators does not have access to credit which is a major problem to small scale enterprises in Nigeria since the traditional financial institutions have not been able to meet their credit needs. Government should encourage small scale enterprise through their micro credit scheme, to give soft loans and re-introduce small business credit scheme so that the beneficiaries can use them to run the small scale enterprises. 

Keywords: small scale enterprise, growth, economy, banks, loans

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