Financial Inclusion Measures and Performance of Small And Medium Enterprises in Nigeria

Abstract

This study investigates the empirical relationship between financial inclusion measures and the performance of Small and Medium Enterprises (SMEs) in Nigeria, with particular emphasis on Internet Banking (IB) and Unstructured Supplementary Service Data (USSD) transactions. The study adopts an ex-post facto research design and utilizes secondary quarterly time-series data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and publications of the Nigeria Deposit Insurance Corporation (NDIC), covering the period 2009–2023. SME performance is proxied by loans and advances to micro, small, and medium enterprises, while financial inclusion is measured using Internet banking and USSD transactions. Econometric analysis is conducted using regression techniques, and hypotheses are tested at a 5 percent significance level. The findings reveal that Internet banking transactions have a positive and statistically significant effect on SME performance in Nigeria, indicating that increased online banking activities enhance SMEs’ access to credit. Similarly, USSD transactions exhibit a positive and significant relationship with SME loans, underscoring the importance of mobile-based financial services in promoting financial inclusion, especially among underserved enterprises. The results confirm that digital financial platforms play a critical role in improving credit accessibility for SMEs in Nigeria. Based on these findings, the study concludes that financial inclusion initiatives, particularly Internet banking and USSD services, are effective tools for enhancing SME performance through improved access to finance. The study therefore recommends that financial institutions and policymakers strengthen digital financial infrastructures, promote the adoption of Internet banking among SMEs, and expand USSD-based financial services to deepen financial inclusion and support SME growth in Nigeria.