ABSTRACT

The main objective of this study is to examine the extent to which commercial banks contribute to the financing of small and medium-scale industries in Nigeria, using Access Bank Plc, Abakaliki, as a case study. Questionnaires and research questions were used as the instruments for collecting primary data. The data obtained were analysed using the chi-square statistical technique. Recent empirical evidence indicates that small and medium-scale enterprises (SMEs) contribute approximately 48% of Nigeria's Gross Domestic Product (GDP) and provide over 84% of employment opportunities. Despite their contribution to the economy, access to formal bank credit remains a major challenge for many SMEs (SMEDAN, 2023; World Bank, 2022). The findings of this study reveal that Access Bank Plc has contributed to the financing of small and medium-scale industries in Abakaliki. However, strict collateral requirements and high interest rates continue to prevent many SMEs from accessing the credit they need. Based on these findings, the study recommends that the Central Bank of Nigeria and the federal government should strengthen existing intervention programmes, including expanding the SME Credit Guarantee Scheme. Commercial banks, particularly Access Bank Plc, should also introduce more flexible lending conditions that consider the financial circumstances and operational needs of small and medium-scale enterprises. The study concludes that achieving the developmental objectives of small enterprises requires commercial banks to provide effective financial support that is consistent with national economic development policies.

Keywords: Commercial banks, SME financing, Access Bank, Nigeria, credit accessibility, CBN policy.

TABLE OF CONTENTS

TITLE — i

DEDICATION — ii

APPROVAL — iii

CERTIFICATION — iv

ACKNOWLEDGEMENTS — v

ABSTRACT — vii

TABLE OF CONTENTS — viii

LIST OF TABLES — x

CHAPTER ONE: INTRODUCTION — 1

1.1 Background of the Study — 1

1.2 Statement of the Problem — 5

1.3 Objectives of the Study — 5

1.4 Research Questions — 6

1.5 Research Hypotheses — 6

1.6 Significance of the Study — 7

1.7 Scope of the Study — 7

1.8 Limitations of the Study — 8

CHAPTER TWO: LITERATURE REVIEW — 9

2.1 Conceptual Framework — 9

2.2 Theoretical Framework — 11

2.2.1 Historical Background and Development of Commercial Banks — 14

2.2.2 General Operations of the Bank and Services Offered — 15

2.3 Characteristics of Small and Medium-Scale Industries — 22

2.4 Sources of Finance for Small and Medium-Scale Industries — 26

2.4.1 Internal Sources — 27

2.4.2 External Sources — 29

2.4.3 Other Sources — 33

2.5 Nigerian Banks and the Challenges of Financing SMEs — 34

2.5.1 Asset-Based Lending Rules: An Assessment — 35

2.6 The Role and Importance of SMEs in Nigeria's Economic Development — 39

CHAPTER THREE: METHODOLOGY — 43

3.1 Research Design — 43

3.2 Sources of Data — 43

3.3 Population of the Study — 43

3.4 Sample Size — 44

3.5 Method of Data Collection — 44

3.6 Validity and Reliability of Data — 45

3.7 Techniques for Data Analysis — 45

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS — 46

4.1 Data Presentation — 46

4.2 Analysis Based on Research Hypotheses — 47

4.3 Test of Hypotheses — 51

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS — 56

5.1 Summary of Findings — 56

5.2 Conclusion — 57

5.3 Recommendations — 58

REFERENCES — 61

APPENDICES

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Small and medium-scale enterprises (SMEs) play a significant role in industrial development and economic growth in both developed and developing countries. Their contributions go beyond increasing national output and per capita income. They also create employment opportunities, encourage the distribution of industries across different regions, and promote the effective use of available resources, which are essential for sustainable economic development (Okafor & Muriuki, 2024). According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN, 2023), SMEs contribute approximately 48% of Nigeria's Gross Domestic Product (GDP) and provide more than 84% of employment opportunities. This makes them an important part of the Nigerian economy.

Despite the important contributions of SMEs, their growth and development are often affected by inadequate financing and weak management practices. In Nigeria, high interest rates, demanding collateral conditions, and limited access to formal financial institutions remain major challenges facing small and medium-scale businesses (Omeje, Chukwu, Mba, & Ugwu, 2024). The difficult economic environment, characterised by persistent inflation, exchange rate instability, and restrictive monetary policies, has also made financial institutions more cautious about lending to small businesses (Ibrahim, 2024). Bello and Ajayi (2022) further observed that the contribution of SMEs to GDP tends to decline during periods of high inflation and financial instability. This shows how vulnerable small businesses are to unfavourable economic conditions.

The manufacturing sector, which includes micro, small, and medium-sized enterprises, has considerable potential to create employment and generate wealth in any economy. However, Nigeria's manufacturing sector has remained relatively small in terms of its contribution to GDP and employment generation (Ekwunife, Nduka, & Ogini, 2022). Its activities are also limited in several areas and depend heavily on imported materials and production processes. Although the sector has recorded some improvement in capacity utilisation since the return to democratic government in 1999, it continues to face several difficulties. Among these challenges, inadequate access to credit remains one of the most important (Central Bank of Nigeria [CBN], 2023).

Credit facilities constitute a major source of risk for most commercial banks. Poor credit risk management can weaken individual financial institutions and, in serious cases, affect the stability of the entire banking system. Therefore, understanding the nature of credit risk and improving the methods used to measure and manage it are important for maintaining financial stability and supporting the long-term financing needs of small and medium-scale enterprises (Adeyemi & Ibrahim, 2025). Over the years, the Central Bank of Nigeria has introduced different intervention programmes to address the financing challenges facing SMEs. However, despite these initiatives, many Nigerian businesses still experience significant difficulties in obtaining adequate credit. This funding problem contributes to the early closure of many enterprises, with the Nigerian MSME Report (2022) estimating that approximately 95% of Nigerian SMEs fail within their first five years of operation.

The level of development and efficiency of financial systems differs from one country to another and may also change over time. Countries with mature economies generally have more developed and sophisticated financial systems, while developing economies often experience weaknesses in their financial structures. Existing studies suggest that bank consolidation policies, although introduced to strengthen the banking sector, may have unintentionally reduced the availability of relationship-based lending to small and medium-scale enterprises. This is particularly important because SMEs depend greatly on close relationships with financial institutions to access credit and support their operations (Onyenwe, Egungwu, Nduka, & Ogini, 2024). At the same time, developments in financial technology, including artificial intelligence and fintech innovations, are changing traditional banking practices. These technologies have introduced alternative credit assessment methods, digital lending platforms, and faster financial services that may improve access to finance for SMEs (Akande, 2025).

Successive governments in Nigeria have recognised the importance of SMEs in promoting economic growth and development. Consequently, different financial institutions and development agencies have been established to provide funding and support for small businesses. These institutions include the Bank of Industry (BOI), Development Bank of Nigeria (DBN), Nigerian Agricultural and Rural Development Bank (NACRDB), community banks, and the Nigerian Export-Import Bank (NEXIM). According to the World Bank (2022), Nigeria had almost 40 million micro, small, and medium-sized enterprises. This large number of businesses highlights the need for continuous financial support to encourage their survival, expansion, and contribution to national development.

This study therefore examines the ways commercial banks provide financial assistance to small and medium-scale enterprises, with particular attention to Access Bank Plc, Abakaliki. Access Bank Plc was established in 1989 and has developed into one of Nigeria's largest financial institutions by asset size (FMO, 2024). The bank has also demonstrated its interest in supporting SMEs through different financing initiatives. In 2023, the European Investment Bank (EIB) entered into a €50 million loan arrangement with Access Bank to support eligible investments by SMEs and mid-sized companies in areas such as transportation, agriculture value chains, manufacturing, tourism, and services. At least 30% of the facility was intended to support businesses owned by women (EIB, 2023).

In July 2024, the Dutch development bank FMO arranged a $295 million syndicated loan for Access Bank. The facility, described as the largest syndicated loan arranged by FMO at the time, was intended to strengthen the bank's capital base and improve access to working capital for underserved businesses. This support came at a period when many Nigerian businesses were experiencing economic difficulties and rising inflation (FMO & BII, 2024). Access Bank has also shown interest in expanding cash-flow-based lending to SMEs, thereby reducing its dependence on traditional collateral-based lending arrangements. Information reported by the World Bank Open Knowledge (2024) indicates that loan disbursements increased consistently between 2021 and 2023.

Access Bank Plc is a retail and commercial banking institution with its headquarters in the central business district of Lagos, Nigeria. It operates through an extensive network of branches within Nigeria and in other countries. The bank is also recognised as one of Africa's systemically important financial institutions. In 2024, it received the Nigeria's Best Bank recognition at the Euromoney Awards and continued to promote financial inclusion, particularly among SMEs and underserved groups (Access Bank Plc, 2024). The Abakaliki branch, which is the focus of this research, provides banking services to entrepreneurs and small business operators in Ebonyi State. The development of SMEs in this area is important for reducing poverty, creating employment, and encouraging economic diversification.

1.2 STATEMENT OF THE PROBLEM

One of the major responsibilities of commercial banks in Nigeria and other countries is to contribute to national economic development. Commercial banks are also expected to generate reasonable profits for their shareholders while maintaining sufficient liquidity to meet the financial obligations owed to depositors. However, despite the importance of SMEs to Nigeria's economy, contributing approximately 48% of GDP and over 84% of employment (SMEDAN, 2023), commercial banks have traditionally adopted cautious lending practices towards these businesses. Banks often justify this approach by pointing to the high risk of loan defaults, insufficient collateral, and poor financial record-keeping among many SME operators.

Recent empirical studies further demonstrate the extent of this challenge. Adeosun, Shittu, and Ugbede (2023) discovered that strict collateral conditions significantly reduce the ability of SMEs to obtain credit from formal financial institutions. Similarly, research has established that high interest rates can negatively affect the performance of small businesses in Nigeria. Increased borrowing costs reduce business profits, limit investment opportunities, and affect the ability of enterprises to create employment (Ibrahim, 2024). The absence of flexible lending arrangements that consider the different levels of risk among SMEs has also contributed to the gap between the amount of credit available and the actual financing needs of these businesses.

Against this background, this study examines the contribution of commercial banks to economic development through the provision of financial support to SMEs, using Access Bank Plc, Abakaliki, as the case study. The research seeks to determine whether commercial banks provide sufficient financial assistance to small and medium-scale enterprises, identify the major challenges affecting access to such funding, and assess the extent to which Access Bank Plc follows the Central Bank of Nigeria's lending guidelines in providing credit to SMEs.

1.3 OBJECTIVES OF THE STUDY

The main objectives of this study are to:

1. Determine the extent to which the lending procedures of Access Bank Plc correspond with the attitudes and financial needs of small-scale business owners in Abakaliki.

2. Examine the contribution of Access Bank Plc to meeting the financing needs of SMEs in Nigeria, with particular reference to its Abakaliki branch.

3. Assess the extent to which small and medium-scale enterprises in Abakaliki obtain loans from Access Bank Plc and determine the effects of such loans on their business profitability.

1.4 RESEARCH QUESTIONS

The following research questions were developed to guide the study:

1. What is the relationship between the attitudes of SME operators in Abakaliki and the lending procedures adopted by Access Bank Plc?

2. To what extent does the credit provided by Access Bank Plc improve the profitability of small and medium-scale businesses?

3. Does Access Bank Plc, Abakaliki, comply with the Central Bank of Nigeria's lending policies and guidelines when providing loans to SMEs?

1.5 RESEARCH HYPOTHESES

The following hypotheses are formulated in line with the research questions:

Hypothesis One

H₀₁: There is no significant relationship between the lending activities of Access Bank Plc to SMEs in Abakaliki and the attitudes of the business owners.

H₁: There is a significant relationship between the lending activities of Access Bank Plc to SMEs in Abakaliki and the attitudes of the business owners.

Hypothesis Two

H₀₂: Lending to SMEs by Access Bank Plc does not have a significant positive effect on the profitability of business owners in Abakaliki.

H₂: Lending to SMEs by Access Bank Plc has a significant positive effect on the profitability of business owners in Abakaliki.

Hypothesis Three

H₀₃: Access Bank Plc, Abakaliki, does not comply with the Central Bank of Nigeria's credit guidelines relating to lending to SMEs.

H₃: Access Bank Plc, Abakaliki, complies with the Central Bank of Nigeria's credit guidelines relating to lending to SMEs.

1.6 SIGNIFICANCE OF THE STUDY

The importance of this study can be considered from different perspectives. From a government and policy perspective, the research provides additional information for understanding how Nigeria can address the financing difficulties faced by SMEs. Although the Central Bank of Nigeria has introduced programmes such as the Anchor Borrowers' Programme and the SME Credit Guarantee Scheme, alongside other financial intervention measures, the financing gap affecting small businesses has not been completely resolved (Central Bank of Nigeria, 2022; Uche & Adesanya, 2023). By examining the lending activities of Access Bank Plc at its Abakaliki branch, the study provides information that may help explain some of the challenges that are not easily reflected in national financial statistics.

Academically, the study contributes to existing research on the relationship between commercial banks and small and medium-scale enterprises in developing economies. Previous studies have shown that access to bank credit does not affect every SME in the same way. Factors such as the size of the business, industry of operation, availability of collateral, and the quality of the relationship between banks and business owners can influence access to financing and business growth (Adedipe, 2023; Adebisi & Ajayi, 2023). By focusing on SMEs in Abakaliki, this study provides additional evidence from an area that has received comparatively less attention in research on SME financing.

The study is also relevant to banking professionals, including bank managers and loan officers, as well as owners and operators of small and medium-scale enterprises. Its findings may help identify ways to improve lending procedures and make credit facilities more accessible to small businesses. The recommendations are expected to encourage lending practices that take account of the actual financial conditions of SMEs while maintaining the need for proper credit risk management by commercial banks. In this way, the study may support the development of a more effective relationship between commercial banks and small businesses in Nigeria.

1.7 SCOPE OF THE STUDY

This study focuses on the financing of small and medium-scale enterprises by commercial banks in Nigeria, with particular emphasis on Access Bank Plc, Abakaliki branch. It covers different categories of SMEs operating within and around Abakaliki, Ebonyi State, including businesses involved in production, processing, and service delivery.

The study mainly covers the period from 2022 to 2024. This period was selected to reflect recent developments in SME financing policies and commercial banking practices in Nigeria, including post-pandemic credit interventions introduced by the Central Bank of Nigeria and the expansion of SME financing initiatives by Access Bank.

Although the research focuses on Access Bank Plc, its findings may provide useful insights into the wider Nigerian commercial banking sector. Access Bank is a major financial institution operating within the country's regulatory framework, and its lending practices provide a relevant basis for examining how commercial banks support SMEs. The geographical focus on Abakaliki is also important because the development of small businesses in Ebonyi State has the potential to improve employment, reduce poverty, and promote inclusive economic growth.

1.8 LIMITATIONS OF THE STUDY

One of the major challenges encountered in carrying out this research is the limited time available to complete the study. This is due to other academic responsibilities, including lectures, assignments, and examinations, which may compete with the time required for data collection and other research activities.

Another limitation is the use of only Access Bank Plc, Abakaliki, as the case study. The lending procedures and banking activities of this branch may not fully reflect the practices of other commercial banks or even those of other Access Bank branches across Nigeria. This is because financial institutions may operate under different internal lending policies, financial conditions, and risk management strategies, all of which can influence their willingness and ability to provide credit to SMEs.

Furthermore, the study relies on primary data collected through questionnaires. This method may be affected by response bias, as some respondents may provide answers they consider acceptable rather than giving completely accurate accounts of their experiences with bank financing. Nevertheless, Access Bank Plc, Abakaliki, was selected because of the bank's wider commitment to supporting SMEs through various financing initiatives. These include the $295 million syndicated loan facility arranged in 2024 to strengthen support for businesses (FMO & BII, 2024). This makes the bank a relevant case for examining the role of commercial banks in financing small and medium-scale enterprises in Nigeria.

REFERENCES

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