Olawunmi Ifeoluwa Ajayi1, Oluseye Samuel Ajuwon2 and Sylvanus Ikhide1
1 Business School, Stellenbosch University, Western Cape, South Africa
2Economics Department, University of Lagos, Lagos, Nigeria
Abstract: This study examines the subjective and objective effect of access to finance on the performance and growth of MSMEs in the services sector in Nigeria. The study used a cross-sectional dataset from the 2014 World Bank Enterprise Surveys database. The study employed the Ordinary Least Squares regression approach to investigate the effect of access to finance on the ability to create employment by MSMEs in the services sector in Nigeria. This study found that MSMEs face credit constraints as the majority (77.56%) of the sampled firms indicated access to finance as the main obstacle, although in different degrees (subjective effect). Also, the study found a negative and significant relationship between access to finance constraint and employment growths (objective effect). In light of these findings, the study recommends that the government should encourage financial institutions to create cheaper and more accessible credit for MSMEs, through favourable tax regimes or incentives in order to reduce the unemployment in the country. In addition, other policies that encourage a reduction in lending interest rate (such as a credit guarantee scheme) should be put in place so as to enable MSMEs to access more credit at a cheaper interest rate.
Keywords: Access to finance; Micro, Small and Medium-Sized Enterprises; Unemployment; Services sector; Nigeria.
JEL Classifications: J23, L25, M13.
Ajayi, O. I., Ajuwon, O.S., and Ikhide, S., 2021. Access to Finance and Performance of Services Sector MSMEs in Nigeria. Oradea Journal of Business and Economics, 6(2), pp. 8- 20. http://doi.org/10.47535/1991ojbe125