Microfinance Financing, Procurement Capability, and Enterprise Sustainability: Evidence from Small and Medium Enterprises in Nigeria

Abstract

The Small and Medium Enterprises (SMEs) in Nigeria are important contributors to employment, poverty alleviation, income generation and economic development. Despite this, however, there remain sustainability issues for many of the SMEs, stemming from a lack of funds and inadequate operational skills, including procurement. In this study, the researcher studied the financing of SMEs by microfinance banks, procurement competence and sustainability of SMEs in Kwara State, Nigeria. The study used a cross sectional survey research design. The data was collected using a structured questionnaire which was given to the owners and managers of the SMEs in the sixteen Local Government Areas of Kwara State. A total of 250 questionnaires were sent out and 218 valid questionnaires were analysed, with a valid response rate of 87.2%. Data analysis was done using descriptive statistics and regression analysis. The results indicated that business loan was the most accessed microfinance service with a mean score of 4.21 followed by savings service with a mean score of 3.96. The supplier selection capability was the highest among all procurement capabilities, with a mean score of 4.08, whereas price negotiation, with a mean score of 3.91, was the second highest. The regression results showed that microfinance financing significantly affected enterprise sustainability, R² = 0.375, p < 0.05, and procurement capability also significantly affected the enterprise sustainability, R² = 0.428, p < 0.05. Microfinance financing capability and procurement capability accounted for 52.0% of the variance in enterprise sustainability (R² = 0.520 at p < 0.05). The study found that access to finance is not the only factor that drives SME sustainability, but the capability of the SMEs in procurement is also a factor. It suggested more access to microfinance, procurement training and integrated microfinance support programmes in all the local governments of Kwara State.