Volume 2, Issue 1, 2026

OPERATIONAL DYNAMICS OF MICROFINANCE BANKS AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN JIGAWA METROPOLIS, JIGAWA STATE, NIGERIA

Sa’adatu B. Adam, Mustapha Momoh, Musa Zakari & Rabi Sidi Ali

Abstract

This study analyzed the impact of microfinance bank operation on the
performance of SMEs in Jigawa metropolis in Jigawa State, Nigeria. The
paper was inspired by the fact that financing problems are still a major
challenge for the small and medium enterprises (SMEs), especially in
markets where commercial bank credit is limited due to collateral, costly
transactions, stringent documentation and perceived borrower risk. In
particular, the effect of employment generation on profitability, loan
utilization on sales volume and the effect of wealth creation on market
share were assessed in the study, in small and medium enterprises in
Jigawa Metropolis. The descriptive survey research design was used. A
total of 3,536 customers of the selected microfinance institutions
(MFI's): Dutse Microfinance Bank Limited, FUD Microfinance Bank
Limited and KHP Microfinance Bank Limited were used for the study.
A sample of 359 respondents was selected with the use of the Yamane's
sample size determination formula at 5 percent margin of error. Stratified
sampling was done for all the three banks and simple random sampling
was used to select respondents within each bank. Structured
questionnaires with five-point Likert scale were used to gather data. A
total of 359 copies were distributed and 352 were valid responses and
were analyzed. Descriptive statistics were used for the presentation of
respondents' perceptions; regression analysis was used for the testing of
the hypotheses. The results showed that employment generation had a
positive contribution and the value of R = 0.8948 and R² = 0.8427. The
use of loans had a very positive effect on sales volume and this had an R
value of 0.8814 and an R2 value of 0.7989. The effects of the variables
on market share were also significant and positive as R = 0.8014 and R²
= 0.7248. The study revealed that microfinance banks are relevant
instruments which could help to enhance the performance of SMEs in
Jigawa Metropolis, but the effect on the development of SMEs will be
dependent on the availability, affordability, repayment flexibilities as
well as the ability of the beneficiaries to use the credit productively. The
paper suggested tighter regulatory oversight, lower service charges,
larger loan amounts, and specific support for entrepreneurs and more
flexible credit terms for the SME operators.

Keywords

microfinance banks; small and medium enterprises; employment generation; loan utilization; wealth creation

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