The Impact of Financial Inclusion on SMA Business Performance. The Study of Printer Business Owners in Shomolu Area.
Objective of the study
The objective of the study is to investigate the impact of financial inclusion on SMA business performance, using printer business owners in shomolu area as a case study. The specific objectives of the study are;
- To determine the impact of financial literacy of entrepreneurs on accessibility to finance in printer business owners in shomolu area.
- To examine the impact of Microfinance Banking Services on the Sustainability of printer business owners in shomolu area.
- To examine the impact of Government Intervention in terms of Provision of Credit Enhancement Programmes on the Performance of printer business owners in shomolu area
REVIEW OF RELATED LITERATURE
The Concept of Financial Inclusion
There are various definition of financial inclusion. According to the Bank of Indonesia (2014), it is all the efforts to improve the access of the people to the financial services by removing all the barriers, both price and non-price. Hannig and Jansen (2008), proposes that financial inclusion is the efforts to include unbankable society to the formal financial system so that they have the access to services, such as savings, payment, and transfer. Besides, according to Sarma (2012), it is a process of assuring the easy access, availability, and benefits of the formal system to all actors of economy. Thus, it can be concluded that the inclusion is the effort to improve the acesss for the society, especially the unbankable, by lessening the barriers. Financial inclusion is the easiness on the access to services or formal financial system by all stakeholders of economy. Indian Government defines financial inclusion as a process to access financial services in appropriate time and credit availability needed by marginalized groups, such as those who have low income (Tamilarasu, 2014). It has general goal (economic goal), which is the growth, money mobilization, and expansion of financial service markets), and specific goal (social and politics), which is to eradicate poverty, sustainable development, expansive inclusion, and governemtn program effectiveness (Shyni and Mavoothu, 2014). There are 5 pilars of financial inclusion. Those are: (1) Full access to financial services (loans, savings, insurance, and other payments); (2) appropriate and suitable services according to the principles of dignity and consumer’s protection; (3) equal services for everyone who is able of using financial services, which includes disable people, minority tribes, and marginalized or minority people); (4)road financial service suppliers supported by adequate financial insfrastructure as well as clear regulations; and (5) society with understanding and capabilities to promote the use or benefits of the financial services (Fadun, 2014).
Financial Inclusion is One of Society Empowerment
Financial inclusion is closely related to society empowerment. Access to financial services promote social inclusion and confidence as well as society empowerment (Tamilarasu, 2014). It is given to marginalized farmers, labors, individual worker, immigrants, minority trbes, women, and other marginalized people (Shyni and Mavoothu, 2014). The empirical findings show that the index of financial inclusion and human development have positive correlation. Financial inclusion is one of significant aspects in the context of human development and inclusion growth. A system of financial inclusion promotes the allocation of efficient resources in productives way (Anurag et al., 2014).
Factors Influencing Financial Inclusion
According to Zuzana et al. (2014), the determinant factor of financial inclusion are: Income, education, age, and gender. The determinant factor of the main indicator of financial inclusion are formal account, formal saving, and formal credit. From the findings, Bank account is related to an individual income; education is positively related to the ownership of formal bank account; age and Age2 , has significant positive and negative relation. There is non- linear relation between age and financial inclusion. Individual characteristic can explain the use of formal financial services. According to Noelia and Tuesta (2014) there is significant relation between the characteristic social economy and the use of financial inclusion both for family and small enterprise. There is a significant relation between the characteristic of economy social and the use of financial inclusion, both by family and by small enterprise. Traditionally, marginal groups (women, villagers, and youth) have bigger obstacles in accessing the system of formal finance. The products of banking include loans and mortgage are the best drivers for the inclusion, compared to saving products. For the company, formality and education are not significant factor in financial inclusion. For the individuals, age, gender, education, and income are the key factors in impeding the access to financial inclusion. Individual characteristics, as well as social and personal aspects can influence the performance of financial iclusion. Social and personal factors contribute to the financial exclusion and become the key factors in financial inclusion (Cnaan et al., 2012).
Financial inclusion in Nigeria
Prior to the recent efforts to increase the FI rate in Nigeria, the economy was largely cash based. This made the issue of financial inclusion a major economic challenge that attracted the attention of government over the past four decades (Kama & Adigun, 2013). Among the major government efforts which aimed at promoting FI was the establishment of commercial banks in rural areas of the country, interventionist financing arrangements and building of institutions and frameworks that promotes FI. Recently, government took critical initiative by incorporating FI as one of the cardinal objectives of the Nigerian Financial System Strategy 2020 (FSS 2020). The FSS 2020 represents a holistic and strategic road map and framework for developing the Nigerian financial sector into a growth catalyst that will enable Nigeria to be one of the 20 largest economies by 2020 (Kama & Adigun, 2013). The strategy identified six stakeholders (regarded as the suppliers in the value chain of FI) namely banking institutions, non-bank financial institutions, insurance companies, capital market players, pension institutions and technology providers together with their regulatory bodies. The determination of the government to expand FI in Nigeria is clearly shown in the six initiatives adopted to strengthen the domestic financial market in which four initiatives directly addressed FI. The four initiatives are development of varied financial products, enhancement of payment processes, development of credit system and encouragement of a savings culture. The aim of the government initiatives is to achieve a state in which adults above the age of 18 have formal easy access to a broad range of financial products which are appropriate, provided at affordable cost and with dignity of the citizens. According to Arogundade (2019) the implementation of FI strategy has brought about a decline in financial exclusion in Nigeria, thereby improving FI rate over the past years. He reported that the 2018 survey of the Nigerian financial system carried out by EFInA recorded a major boost in FI rate when compared with previous years’ rate. The survey showed that the number of people who currently have access to financial services has increased to 63.6 per cent while only 36.4 per cent are financially excluded compared with 46.3 per cent of exclusion in 2010. The indicators upon which the survey was conducted include banked population, savings, remittances, payments, loans and banking agents. According to the survey, digital payments increased tremendously. An increase from 5,000 monthly volumes in 2011 to 30 million in 2018 is made visible in the quantity of card transactions on POS as reported by the director of Nigeria Inter-Bank Settlement System. There has also been an increase in the quantity of installed POS terminals from 10,000 in 2011 to 200,000 in 2018 – an indication that the measures and initiatives put in place were productive.
Survey and ex post facto research design will be adopted for this study. Triangulation method of data collection will be adopted for the study. Both primary and secondary data will be collected due to the nature of the research work. Primary data will be sourced through the administration of well- structured questionnaire using probability sampling techniques (Simple Random Sampling) to printer business owners in shomolu area of Lagos State. Secondary data will be collected from Central Bank Statistical Bulletins and SMEDAN Reports for the period of 7 years (2015- 2021). Descriptive Statistics (Simple percentage) Technique and Ordinary Least Square (OLS) regression Analysis will be adopted for data analysis at 5% level of significance. However, before the application of the OLS, the time series characteristics of the variables will be examined. This will involve conducting unit root test in order to determine their order of integration.
Population of the Study
This study focuses on effect of financial inclusion on the performance of printer business owners in shomolu area of Lagos State.
PRESENTATION OF DATA AND ANALYSIS
This section of the study present and discuss the result of the study obtained from the regression result starting from the descriptive statistics, correlation matrix and the summary of the regression result.
This section present and discuss the result of the descriptive statistics where mean, minimum, maximum, standard deviation, kurtosis and skewness were presented and discuss.
CONCLUSIONS AND RECOMMENDATIONS
Based on the findings of the study, the research has provided both empirical as well as statistical evidence on the utility of four independent variables (Financial Literacy, Microfinance Banking Services, Government intervention and credit facilities) in explaining and predicting performance of micro, small and medium size enterprises in south western states of Nigeria. However, based on the above findings and conclusions, the study concluded that: the owners as well as managers of micro, small and medium size enterprises in printer business owners in shomolu area should embrace financial literacy, save more out of their profit, use their mobile phones to transact and access and patronize different credit facilities packages as they were found playing prominent role in improving the performance of printer business owners in shomolu area.
To policy makers and practitioners; there is need to seriously consider and continue to enable an environment where inclusion is possible. This will enhance usage, access and quality of finances which in turn will enable better performance of enterprises. This will definitely have an effect on social inclusion of citizens and better the economic performance. For further studies, scholars should include more inclusion variables and intervening variables apart from just technology as there are more to inclusion and the intervening variables than what the study has looked into. The study also recommends a further study on the factors affecting financial inclusion and their effects on financial performance of small enterprises in rural parts of the country.
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