EFFECT OF DEPOSIT MONEY BANKS LENDING ON PROJECT FINANCING FOR SMALL AND MEDIUM ENTERPRISES (SMEs) IN ONDO STATE, NIGERIA.

Abstract

This study examined the effect of Deposit Money Bank lending on project financing for Small and Medium Enterprises (SMEs) in Ondo State, Nigeria. The population of the study consists of all SMEs operating in Ondo State. The primary data were collected through the use of well-structured questionnaire administered by well trained enumerators in the study area while secondary data were obtained from the records of Deposit Money Banks surveyed , relevant Government publications, text books, publications of the Central Bank of Nigeria as well as the records of the micro-businesses being studied. The total sample size for the study was 260. This was made up of 250 owner/managers of SMEs and a staff from each of the 10 banks operating in the study area. The research design employed both descriptive statistics and inferential statistics method. The findings showed that Deposit Money Banks in Ondo State contributes positively and significantly to project financing of small and medium enterprises in Nigeria. The result also showed that interest rate significantly influenced the decision of SME owners/managers in applying for bank loan for project development. Specifically, the regression result showed that loan size is significant and positively related to SMEs project development, revealing that Deposit Money Bank lending capacity has significant effect on project development (proxy) by asset acquisition of SMEs. Similarly it showed that interest rate is statistically insignificant at 10% and negatively related with project development. This showed that high interest rate stifles project development initiatives in SMEs. The study concluded that Deposit Money Banks are imperative for the project finance, growth and survival of SMEs in Nigeria. Finally the study recommends, that deposit money bank should increase the proportion of their credit portfolio to SMEs and a dynamic approach to lending process should be adopted .