Banking and Finance Project Topics

Financial Inclusion and Loans Accessibility by the SMEs in Ekiti State

Financial Inclusion and Loans Accessibility by the SMEs in Ekiti State

Financial Inclusion and Loans Accessibility by the SMEs in Ekiti State

Chapter One

Objectives of the Study

The specific objectives are as follows:

  1. To assess the current state of financial inclusion for SMEs in Ekiti State.
  2. To identify the specific challenges hindering loan accessibility for SMEs in the sinclude
  3. To propose practical solutions to enhance financial inclusion and improve loan accessibility for SMEs in Ekiti State.



Conceptual Review

Financial Inclusion in SMEs

Financial inclusion in the context of Small and Medium Enterprises (SMEs) refers to the extent and ease with which these enterprises can access and utilize financial services (Abbasi, Wang, & Abbasi, 2017). Abbasi, Wang, and Abbasi (2017) define financial inclusion as the holistic process of ensuring that SMEs have access to a wide array of financial services, including credit, savings, insurance, and electronic payment systems. This encapsulates the idea of encompassing SMEs into the formal financial sector, fostering their participation in the economic growth of Ekiti State.

The components of financial inclusion for SMEs extend beyond mere access to banking services. Adelekan, Eze, and Majekodunmi (2019) emphasize that financial inclusion in SMEs involves providing them with a suite of financial instruments tailored to their specific needs. This includes credit facilities with reasonable terms, savings mechanisms suitable for the irregular income patterns often found in SMEs, and insurance products that mitigate risks inherent in their operations. The comprehensive understanding of financial inclusion considers the diverse financial needs of SMEs, recognizing them as dynamic entities requiring multifaceted support.

The importance of financial inclusion for SMEs cannot be overstated, particularly in a state like Ekiti, where entrepreneurship plays a pivotal role in economic development (Biliqees Abdulmumin et al., 2023). Access to financial services empowers SMEs to invest in expansion, modernization, and innovation, fostering their overall growth. Anokwuru and Wike (2021) highlight that financial inclusion enhances the resilience of SMEs, enabling them to navigate economic uncertainties and contribute significantly to employment generation and poverty alleviation in the region. Therefore, financial inclusion catalyzes the economic prosperity of Ekiti State by empowering SMEs as vital contributors.

Key indicators of financial inclusion in SMEs are essential for evaluating the effectiveness of financial inclusion initiatives and policies. Bakhtiari et al. (2020) stress that these indicators include the percentage of SMEs with access to formal financial services, the diversity of financial products available to them, and the extent of their integration into the formal financial system. Monitoring these indicators provides insights into the level of financial inclusivity achieved and helps policymakers and financial institutions tailor their strategies to address specific gaps and challenges faced by SMEs in Ekiti State. The successful measurement and improvement of these key indicators contribute to creating a more robust and inclusive financial ecosystem for SMEs in the region.

 Loan Accessibility for SMEs

Factors influencing loan accessibility for Small and Medium Enterprises (SMEs) in Ekiti State are multifaceted and play a crucial role in determining the financial health and growth prospects of these enterprises. One of the primary factors influencing loan accessibility is the creditworthiness of SMEs. Okuneye and Ogunmuyiwa (2022) highlight that financial institutions often assess the creditworthiness of SMEs based on their financial statements, credit history, and overall business stability. This evaluation influences the approval or denial of loan applications, shaping the extent to which SMEs can access crucial financial resources.

The types of loans relevant to SMEs contribute significantly to their growth and sustainability. Adelekan, Eze, and Majekodunmi (2019) point out that tailored loan products, such as working capital loans, equipment financing, and trade finance, are vital for addressing the specific needs of SMEs. These specialized loans facilitate smoother operations and enable SMEs to invest strategically in areas crucial for their development. The availability and accessibility of these tailored loan products become essential in fostering the diverse and dynamic nature of SMEs in Ekiti State.

Challenges faced by SMEs in loan accessibility are notable barriers that need attention for a more inclusive financial environment. Gbandi and Amissah (2022) emphasize that bureaucratic processes, collateral requirements, and high interest rates are common challenges faced by SMEs when seeking loans. These hurdles can impede the ability of SMEs to secure the necessary financing for expansion, innovation, and day-to-day operations. Understanding these challenges is pivotal for policymakers and financial institutions to streamline loan application processes and design financial products that better cater to the unique needs of SMEs.

In navigating the landscape of loan accessibility for SMEs, the regulatory environment also plays a critical role. The Central Bank of Nigeria’s guidelines for SME credit guarantee (CBN, 2018) represent a significant policy initiative aimed at facilitating loan accessibility for SMEs. These guidelines are designed to mitigate risks for financial institutions and encourage them to extend credit to SMEs. However, the practical implications and effectiveness of these guidelines in Ekiti State remain areas that require empirical exploration.





The methodology section of this study outlines the research design, population, sampling technique, sources, and methods of data collection, data analysis, and ethical considerations. A robust methodology is essential for ensuring the credibility and validity of the research findings (Saunders et al., 2019). This chapter presents a comprehensive overview of the strategies employed to address the research objectives.

 Research Design

In crafting the methodology for this research, a deliberate choice was made to adopt a quantitative survey design (Saunders et al., 2019). The rationale behind selecting a survey design lies in its ability to efficiently gather substantial data from a diverse respondent pool, offering a robust foundation for subsequent statistical analyses and the derivation of meaningful insights (Saunders et al., 2019). This approach aligns with the study’s overarching goal, emphasizing the exploration of numerical data about financial inclusion and loan accessibility among Small and Medium Enterprises (SMEs) in Ekiti State.

The decision to employ a quantitative approach is underpinned by its inherent suitability for the research objectives, specifically the investigation of patterns, relationships, and trends related to financial inclusion and loan accessibility by SMEs in Ekiti State (Creswell & Creswell, 2018). Quantitative research methods, including surveys, are well-equipped to handle numerical data, allowing for statistical analyses that unveil intricate connections within the dataset. This aligns seamlessly with the study’s intention to delve into the nuanced dynamics of financial inclusion, providing a structured and systematic exploration of the factors influencing SMEs in Ekiti State (Creswell & Creswell, 2018). The quantitative approach, grounded in statistical rigour, enhances the capacity to draw empirically supported conclusions and contribute substantively to the existing body of knowledge on financial inclusion within the SME sector.

Population of the Study

The population targeted for this study comprises SME owners and managers in Ekiti State, Nigeria. Justification for this population stems from the fact that SMEs are at the heart of economic development, and understanding their financial inclusion challenges is crucial for policy formulation and business sustainability. The choice of a population of 1200 respondents is reasonable, ensuring an adequate representation of the diverse SME landscape in Ekiti State (Bell, 2022).



Data Presentation




Summary of Findings

The findings of this study provide a comprehensive understanding of the financial landscape for Small and Medium Enterprises (SMEs) in Ekiti State, Nigeria, focusing on financial inclusion, loan accessibility, and related challenges. The research employed a quantitative survey design, and the data were collected from a diverse group of 120 SME owners and managers. The study aimed to investigate the current state of financial inclusion, the challenges faced by SMEs in accessing loans, and potential solutions to enhance financial mechanisms for these enterprises.

In terms of the demographic profile of the respondents (Table 4.2 to Table 4.6), the majority were male (68.3%), aged between 25-34 years (60.4%), holding at least a Master’s degree (52.5%), working in the healthcare sector (39.6%), and having more than 10 years of experience in business (61.4%). These demographic details provide insights into the characteristics of the SME owners and managers participating in the study.

The overall response rate was 84.2%, indicating a substantial engagement of the SME community in Ekiti State with the research objectives. The demographic distribution ensures a diverse representation, allowing for a more nuanced analysis of the financial landscape for SMEs.

The study explored respondents’ perceptions of the existing financial infrastructure (Table 4.7), revealing that a significant portion (70.3%) either strongly agreed or agreed that the current infrastructure adequately caters to SMEs’ financial needs. However, challenges emerge when considering loan accessibility. Respondents acknowledged that while SMEs have access to financial services (Table 4.8), significant barriers persist in integrating these enterprises into the formal financial system (Table 4.10). This discrepancy suggests that while services are available, SMEs may face hurdles in fully leveraging them.

Further insights into loan accessibility reveal that respondents believe SMEs encounter difficulties due to the limited availability of collateral-free loan options (Table 4.11), stringent eligibility criteria set by financial institutions (Table 4.12), high interest rates on loans (Table 4.13), and limited financial literacy among SME owners and managers (Table 4.14). These challenges collectively underscore the multifaceted nature of the obstacles SMEs confront when seeking financial assistance.

On a positive note, respondents expressed optimism about potential solutions. The majority agreed that targeted financial education programs (Table 4.15), government-backed credit guarantee schemes (Table 4.16), and collaboration between financial institutions and SME support organizations (Table 4.17) could contribute to a more conducive environment for loan accessibility. Additionally, respondents recognized the crucial role of microfinance institutions in improving financial inclusion (Table 4.18).

Finally, the study conducted a one-sample t-test to analyze respondents’ perceptions of the state of financial inclusion for SMEs, the challenges hindering loan accessibility, and the practical solutions proposed. The results (Table 4.19) indicated mean scores above the assumed mean of 0 for all three aspects, suggesting a statistically significant positive relationship between financial inclusion, challenges faced by SMEs, and proposed solutions.

In summary, this research contributes valuable insights into the financial dynamics of SMEs in Ekiti State. While acknowledging the existing financial infrastructure, the study emphasizes the persistent challenges in loan accessibility, providing a nuanced understanding of the barriers faced by SMEs. The findings also highlight the optimism among SME owners and managers regarding targeted interventions, signalling opportunities for policymakers and financial institutions to design tailored initiatives that can foster a more supportive financial environment for SMEs in the region.


The findings of this study, bolstered by rigorous statistical analysis and robust survey responses, provide compelling insights into the financial landscape for Small and Medium Enterprises (SMEs) in Ekiti State, Nigeria. The results of the one-sample t-test underscore a significant positive relationship between the level of financial inclusion, challenges faced by SMEs in accessing loans, and proposed solutions. These outcomes contradict the null hypotheses, indicating that there is, indeed, a substantial and influential association.

Firstly, the rejection of the null hypothesis related to the level of financial inclusion implies that the success of SMEs in Ekiti State is significantly linked to the state of financial inclusion. This underscores the pivotal role that inclusive financial systems play in supporting SME growth and sustainability. Secondly, the rejection of the null hypothesis concerning external economic factors influencing challenges in accessing loans affirms that the challenges faced by SMEs in Ekiti State are not isolated from broader economic contexts. Lastly, the rejection of the null hypothesis regarding the negative impact of financial literacy programs on financial inclusion aligns with the positive perspective of respondents toward targeted financial education initiatives.

In conclusion, the study’s outcomes emphasize the need for comprehensive and targeted interventions to enhance financial inclusion, mitigate challenges, and fortify the financial ecosystem for SMEs in Ekiti State, thereby contributing to the region’s economic development and sustainability.


The following recommendations were proposed for this study:

  1. Enhance Financial Literacy Programs: Develop and implement targeted financial literacy programs tailored to the specific needs of SME owners and managers in Ekiti State. These programs should focus on building a deep understanding of financial services, promoting effective financial management practices, and empowering SMEs to navigate the financial landscape with confidence.
  2. Strengthen Government-Backed Credit Guarantee Schemes: Collaborate with financial institutions and relevant stakeholders to bolster existing credit guarantee schemes. Government-backed initiatives can assure financial institutions, encouraging them to extend more loans to SMEs. This collaborative effort can create a conducive environment for SMEs to access financing with reduced risks.
  3. Facilitate Collaboration Between Financial Institutions and SME Support Organizations: Promote collaboration between financial institutions and organizations that support SMEs. This synergy can foster an environment where financial institutions understand the unique challenges faced by SMEs, leading to more tailored financial products and services that cater to the specific needs of these enterprises.
  4. Expand the Reach of Microfinance Institutions: Actively support and promote the expansion of microfinance institutions in Ekiti State. These institutions, with their focus on providing financial services to smaller businesses, can play a crucial role in improving financial inclusion for SMEs. This expansion should be accompanied by efforts to enhance the capabilities and reach of these institutions.
  5. Review Collateral Requirements: Engage with financial institutions to revisit and potentially revise stringent collateral requirements for SME loans. Exploring innovative and flexible collateral options can significantly reduce barriers for SMEs seeking financing, making loans more accessible to a broader range of enterprises.
  6. Mitigate interest rates: Collaborate with financial regulators and institutions to explore strategies for mitigating high-interest rates on SME loans. This may involve introducing policies or incentives that encourage financial institutions to offer competitive interest rates, fostering a more favourable environment for SMEs seeking financial assistance.
  7. Promote Government Initiatives Supporting SMEs: Advocate for and implement policies that directly support SMEs, such as tax incentives, subsidies, and industry-specific support programs. These initiatives can provide a much-needed boost to SMEs, fostering an environment conducive to growth and sustainability.
  8. Encourage Technological Adoption in Financial Services: Promote the adoption of technology and fintech solutions in financial services. This can streamline processes, reduce operational costs, and enhance the efficiency of financial institutions, ultimately contributing to improved access to financial services for SMEs in Ekiti State.

Contribution to Knowledge

The findings of this study significantly contribute to the existing body of knowledge in several key areas related to financial inclusion, loan accessibility, and SME development in Ekiti State. Firstly, the research sheds light on the current state of financial inclusion for SMEs in the region, providing a comprehensive understanding of the challenges and opportunities faced by these enterprises. The detailed analysis of the existing financial infrastructure and its effectiveness in catering to the financial needs of SMEs offers valuable insights for policymakers, financial institutions, and researchers.

Secondly, the study investigates the specific challenges hindering loan accessibility for SMEs in Ekiti State. By exploring factors such as the availability of collateral-free loan options, stringent eligibility criteria, and high interest rates, the research contributes nuanced insights into the multifaceted issues impacting SMEs’ access to financing. These findings are instrumental in guiding both the public and private sectors in designing targeted interventions to address these challenges effectively.

Furthermore, the research delves into the impact of financial literacy on SMEs and how it influences their ability to secure loans. The identification of limited financial literacy as a contributing factor to difficulties in accessing financing underscores the importance of educational initiatives. Policymakers, financial institutions, and relevant stakeholders can utilize this information to design and implement tailored financial literacy programs that empower SMEs to make informed financial decisions.

Moreover, the study assesses the effectiveness of existing financial inclusion initiatives in supporting the growth of SMEs. The findings provide a basis for evaluating the success of current policies and programs, offering recommendations for improvements, and guiding future interventions. This knowledge contributes to the ongoing discourse on the role of government initiatives and their impact on SME development in Ekiti State.


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