FINANCIAL TECHNOLOGY, BANK INTERMEDIATION, AND PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
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Sopelola Tolulope Abiodun(1)
Accounting Department, Aradel Energy Limited
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Ariyibi Mayowa Ebenezer(2*)
Department of Banking and Finance, Olabisi Onabanjo University
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Yinusa Ganiyu O(3)
Department of Banking and Finance, Olabisi Onabanjo University
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Asogba Israel O(4)
Department of Accounting, Olabisi Onabanjo University
(*) Corresponding Author
Keywords:
Financial Technology, Bank Intermediation, SME’s Performance, Interest Rate
Abstract
The performance of the small and medium-scale enterprises is a function of internal and external factors, which are challenges for the enterprises to consider in their internal operations that spur the contribution to economic development. The inability to align with financial technology and the availability of bank intermediation prowess could retard their supposed contribution to economic development due to poor levels of performance. In the peculiarity of these challenges, this study examines the combined effect of financial technology and bank intermediation on small and medium-scale enterprises' performance. The study adopted time series data from the Central Bank Statistical Bulletin from 2019 to 2022 but was converted to quarterly data to accommodate the ordinary square least regression. The findings from the short-run results in accordance with the bound test revealed that point-of-sale, loan-to-deposit ratio, liquidity ratio, and interest rate have a positive significant effect on credit for small and medium-scale enterprises, while automated teller machines and deposit mobilization have a negative significant effect on credit for small and medium-scale enterprises. It is therefore recommended that financial institutions also reconsider their reliance on ATMs in SME operations, as it has a substantial negative impact. Encouraging web-based payment systems could also be beneficial, though further studies are needed to assess their full potential. Strengthening financial indicators like loan-to-deposit ratios and liquidity ratios should be prioritized to enhance credit provision. Additionally, financial institutions should explore alternative deposit mobilization strategies that do not constrain credit flow to SMEs.
Keywords: Financial Technology; Bank Intermediation; SME’s Performance; Interest Rate
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References
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Harash, E., Al-Timimi, S., & Alsaadi, J. (2014). The influence of finance on the performance of small and medium enterprises (SMEs). Technology, 4(3), 161-167.
Igboeli, U. H., & Bisallah, H. I. (2020). Information and communication technology in managing small and medium enterprises in Nigeria. Open Journal of Management Science, 1(2), 1-11.
Khan, M. A., Siddique, A., Sarwar, Z., Minh Huong, L. T., & Nadeem, Q. (2020). Determinants of entrepreneurial small and medium enterprises performance with the interaction effect of commercial loans. Asia Pacific Journal of Innovation and Entrepreneurship, 14(2), 161-173.
Loh, A. (2011). A study on influence of trust, social identity, perceived risk, and EWOM on consumer decision-making process in the context of social network sites (Dissertation, Blekinge Institute of Technology School of Management). Available from https://urn.kb.se/resolve?urn=urn:nbn:se:bth-4458
Lontchi, C. B., Yang, B., & Shuaib, K. M. (2023). Effect of financial technology on SMEs performance in Cameroon amid COVID-19 recovery: The mediating effect of financial literacy. Sustainability, 15(3), 2171.
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Marus, E., Fabian, M., Constant, O. O., Abanis, T., & Gilbert, U. (2020). Financial inclusion and the growth of small medium enterprises in Uganda: Empirical evidence from selected districts in Lango Sub Region. Research Square, 1-96.
Mule, S., Wafula, F., & Agusioma, N. (2021). Effect of financial technology loans on financial inclusion among the unbanked low-income earners in Makueni County. International Journal of Current Aspects in Finance, Banking and Accounting, 3(2), 1-12.
Musa, S. K., & Njeru, A. W. (2023). Effect of digital financial innovation on the financial performance of small and medium enterprises in Nairobi City Centre, Kenya. International Journal of Social Science and Humanities Research, 1(1).
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Nnabugwu, O. C. (2021). Effect of financial intermediation on the development of small and medium scale enterprises in Anambra State, Nigeria. International Journal of Innovative Finance and Economics Research, 9(3), 44-54.
Odero, J. O., & Ibrahim, T. O. (2018). Effect of financial inclusion on financial performance of banks listed at the Nairobi Securities Exchange in Kenya. International Journal of Scientific and Research Publication, 8(5), 1-96.
Ogidi, E. J., & Pam, P. (2021). Financial inclusion and growth of small and medium enterprises in Plateau State. African Journal of Business and Economic Development, 1(8), 69-81.
Ogiriki, T., & Atagboro, E. (2021). Emergence of financial technology and micro, small, and medium scale enterprises in Nigeria. Innovative Journal of Business Education, Accounting and Marketing, 7(2), 3226-4051.
Ogujiuba, K., Fadila, J., & Stiegler, N. (2013). Challenges of microfinance access in Nigeria: Implications for entrepreneurship development. Mediterranean Journal of Social Sciences, 4(6), 611-618.
Oliveira, T., & Martins, M. F. (2011). Literature review of information technology adoption models at firm level. Electronic Journal of Information Systems Evaluation, 14(1), 110-121.
Phinaonyekwelu, N., & Chinwe, N. O. (2020). Effect of cashless economy on the performance of micro, small, and medium scale enterprises in Anambra State, Nigeria. International Journal of Science and Research, 9(5), 375-385.
Poi, G. (2024). Financial technology innovation and business growth of small and medium- scale enterprises in Port Harcourt, Rivers State, Nigeria. Journal of Economics Finance and Management Studies, 3(3), 2644-050.
Rasyid, A. (2023). Improving the performance of micro, small, and medium enterprises in Indonesia: The role of financial technology. Journal of Economics and Business (JECOMBI), 4(1), 25-32.
Ratnawati, K. (2020). The influence of financial inclusion on MSMEs' performance through financial intermediation and access to capital. The Journal of Asian Finance, Economics and Business, 7(11), 205-218.
Rofiat, A. (2017). The effect of cashless banking on the financial performance of small and medium scale enterprises. International Journal of Advanced Research in Public Policy, Social Development, and Enterprise Studies, 2(2), 133-142.
Rogers, E. M. (1995). Diffusion of innovations. The Free Press.
Sanni, M., Oke, L. A., & Alayande, I. T. (2020). Bank credit accessibility and performance of SMEs in Kwara State, Nigeria: A PLS-SEM analysis. Copernican Journal of Finance & Accounting, 9(2), 45–64. http://dx.doi.org/10.12775/CJFA.2020.007
Soriano, M. A. (2017). Factors driving financial inclusion and financial performance in fintech new ventures: An empirical study (Doctoral dissertation). Dissertations and Theses Collection (Open Access), 1-258.
Sumani, S., & Prasetya, I. B. (2022). The effect of financial technology on the performance of micro, small, and medium businesses. Review of Management and Entrepreneurship, 6(1), 51-72.
Ubi, P., & Mba, P. (2019). Financial innovation and output growth of small and medium scale industries in Nigeria. Nigerian Journal of Economic and Social Studies, 61(2), 1-27.
Usman, M. U. (2020). The effect of financial technology on financial inclusion in Nigeria (Master’s thesis, Baze University, Abuja), 1-57.
Wati, L. N., Ispriyahadi, H., Nisa, K., Lutfi, M., & Suprapta, I. (2020). Financial technology and financial inclusion on MSMEs: A mixed-method research approach. Moneter: Jurnal Akuntansi dan Keuangan, 7(2), 1-23.
Younus, A. M. (2021). The performance of small and medium-sized enterprises: Financial innovation and barriers. International Journal of Economics Finance and Sustainable Development, 78-90.
Yusuf, T. O., & Dansu, F. S. (2013). SMEs business risks and sustainability in Nigeria. European Journal of Business and Social Sciences, 2(9), 76-94.
Zulqarnain, M., Mustehsan, M., Balouch, U. K., & Munir, S. (2023). Assessing the influence of financial inclusion and digital finance on SMEs performance: The moderating role of technological adaptation. Journal of Management: Small and Medium Enterprises (SMEs), 16(3), 459-476.
Agboola, O., Adelugba, I. A., & Eze, B. U. (2023). Effect of financial technology on the survival of micro-enterprises. International Journal of Entrepreneurial Knowledge, 11(1), 1-13.
Agelyne, M., & Musau, S. M. (2021). Financial technology and financial inclusion of small and medium enterprises in Kabati Market Kitui County Kenya. International Journal of Academic Research in Business and Social Sciences, 11(4), 362-377.
Akanbi, B. E., & Akintunde, T. S. (2018). E-Commerce adoption and small medium scale enterprises performance in Nigeria. European Journal of Management and Marketing Studies.
Akande, K. M., Igbekoyi, O. E., Olayisade, O. A., & Abiola, B. E. (2023). Financial inclusion, financial technology and performance of small and medium scale enterprises (SMEs) in Ekiti State. International Journal of Research and Innovation in Social Science, 7(7), 1826-1842.
Akingunola, R. O. (2011). Small and medium scale enterprises and economic growth in Nigeria: An assessment of financing options. Pakistan Journal of Business and Economic Review, 2(1), 78- 97.
Anas, T., Mangunsong, C., & Panjaitan, N. A. (2017). Indonesia SME participation in ASEAN economic integration. Journal of Southeast Asian Economies, 34(1), 77–117. https://doi.org/10.1355/ae34-ld.
Anigbogu, T. U., Okoli, I. M., & Nwakoby, N. P. (2015). Financial intermediation and small and medium enterprises performance in Nigeria (An aggregated analysis: 1980-2013). European Scientific Journal, 11(28).
Astari, P., Rika, N. P., & Candraningrat, I. R. (2022). Financial literacy moderates the effect of fintech on the financial performance of micro small and medium enterprises (MSMEs). International Journal of Business Management and Economic Review, 5(04), 36-47.
Babajide, A. A., Oluwaseye, E. O., Lawal, A. I., & Isibor, A. A. (2020). Financial technology, financial inclusion and MSMEs financing in the south-west of Nigeria. Academy of Entrepreneurship Journal, 26(3), 1-17.
Bagale, G. S., Vandadi, V. R., Singh, D., Sharma, D. K., Garlapati, D. V. K., Bommisetti, R. K., & Sengan, S. (2021). Small and medium-sized enterprises’ contribution in digital technology (Doctoral dissertation, Petra Christian University).
Bansal, S. (2015). Perspectives of technology in achieving financial inclusion in rural India. Procedia Economics and Finance, 1(1), 472-480.
Bello, D. A. (2015). The impact of e-banking on financial inclusion in Nigeria. Munich Personal RePEc Archive (MPRA), 1-13.
Bouhlal, M., & Chakor, A. (2024). Banking intermediation and SMEs in Morocco: Assessing financial performance dynamics. Journal of Economics Finance and Management (JEFM), 3(3), 748-758.
Buchak, G., Matvos, G., Piskorski, T., & Seru, A. (2017). Fintech regulatory arbitrage and the rise of shadow banks. Crisis Paradigm? University of Hong Kong Faculty of Law Research Paper Series.
Cheung, C. M. K., & Thadani, D. R. (2012). The impact of electronic word-of-mouth communication: A literature analysis and integrative model. Decision Support Systems, 54(1), 461- 470. https://doi.org/10.1016/j.dss.2012.06.008.
Effiom, L., & Edet, S. E. (2022). Financial innovation and the performance of small and medium scale enterprises in Nigeria. Journal of Small Business & Entrepreneurship, 34(2), 141-174.
Ehiedu, C. V., & Oteme, B. A. (2023). Technological innovations and financial deepening of small and medium scale enterprises in Nigeria. International Journal of Academic Multidisciplinary Research (IJAMR), 11(3), 2643-9670.
Godgift, D. A. I., Charles, O., & Obakayode, A. O. (2018). The impact of financial technology in the operations (payments/collections) of SMEs in Nigeria. International Journal of Innovative Research and Development, 7(2), 61-71.
Gunawan, A., Jufrizen, J., & Pulungan, D. R. (2023). Improving MSME performance through financial literacy, financial technology, and financial inclusion. International Journal of Applied Economics Finance and Accounting, 15(1), 39-52.
Hamidah, N., Prihatni, R., & Ulupui, I. G. K. A. (2020). The effect of financial literacy, fintech (financial technology), and intellectual capital on the performance of MSMEs in Depok City, West Java. Journal of Social Science, 1(4), 152-158.
Harash, E., Al-Timimi, S., & Alsaadi, J. (2014). The influence of finance on the performance of small and medium enterprises (SMEs). Technology, 4(3), 161-167.
Igboeli, U. H., & Bisallah, H. I. (2020). Information and communication technology in managing small and medium enterprises in Nigeria. Open Journal of Management Science, 1(2), 1-11.
Khan, M. A., Siddique, A., Sarwar, Z., Minh Huong, L. T., & Nadeem, Q. (2020). Determinants of entrepreneurial small and medium enterprises performance with the interaction effect of commercial loans. Asia Pacific Journal of Innovation and Entrepreneurship, 14(2), 161-173.
Loh, A. (2011). A study on influence of trust, social identity, perceived risk, and EWOM on consumer decision-making process in the context of social network sites (Dissertation, Blekinge Institute of Technology School of Management). Available from https://urn.kb.se/resolve?urn=urn:nbn:se:bth-4458
Lontchi, C. B., Yang, B., & Shuaib, K. M. (2023). Effect of financial technology on SMEs performance in Cameroon amid COVID-19 recovery: The mediating effect of financial literacy. Sustainability, 15(3), 2171.
Marini, M., Yusmaniarti, Y., Faradilla, I., & Setiorini, H. (2024). Measuring the financial performance of MSMEs from the perspective of financial literacy, financial inclusion, and financial technology. EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi dan Bisnis, 12(1), 285-296.
Marus, E., Fabian, M., Constant, O. O., Abanis, T., & Gilbert, U. (2020). Financial inclusion and the growth of small medium enterprises in Uganda: Empirical evidence from selected districts in Lango Sub Region. Research Square, 1-96.
Mule, S., Wafula, F., & Agusioma, N. (2021). Effect of financial technology loans on financial inclusion among the unbanked low-income earners in Makueni County. International Journal of Current Aspects in Finance, Banking and Accounting, 3(2), 1-12.
Musa, S. K., & Njeru, A. W. (2023). Effect of digital financial innovation on the financial performance of small and medium enterprises in Nairobi City Centre, Kenya. International Journal of Social Science and Humanities Research, 1(1).
Nathalie, H. (2019). How the drivers of financial inclusion and fintech innovation impact women in developing regions (Unpublished master’s thesis), 1-105.
Nnabugwu, O. C. (2021). Effect of financial intermediation on the development of small and medium scale enterprises in Anambra State, Nigeria. International Journal of Innovative Finance and Economics Research, 9(3), 44-54.
Odero, J. O., & Ibrahim, T. O. (2018). Effect of financial inclusion on financial performance of banks listed at the Nairobi Securities Exchange in Kenya. International Journal of Scientific and Research Publication, 8(5), 1-96.
Ogidi, E. J., & Pam, P. (2021). Financial inclusion and growth of small and medium enterprises in Plateau State. African Journal of Business and Economic Development, 1(8), 69-81.
Ogiriki, T., & Atagboro, E. (2021). Emergence of financial technology and micro, small, and medium scale enterprises in Nigeria. Innovative Journal of Business Education, Accounting and Marketing, 7(2), 3226-4051.
Ogujiuba, K., Fadila, J., & Stiegler, N. (2013). Challenges of microfinance access in Nigeria: Implications for entrepreneurship development. Mediterranean Journal of Social Sciences, 4(6), 611-618.
Oliveira, T., & Martins, M. F. (2011). Literature review of information technology adoption models at firm level. Electronic Journal of Information Systems Evaluation, 14(1), 110-121.
Phinaonyekwelu, N., & Chinwe, N. O. (2020). Effect of cashless economy on the performance of micro, small, and medium scale enterprises in Anambra State, Nigeria. International Journal of Science and Research, 9(5), 375-385.
Poi, G. (2024). Financial technology innovation and business growth of small and medium- scale enterprises in Port Harcourt, Rivers State, Nigeria. Journal of Economics Finance and Management Studies, 3(3), 2644-050.
Rasyid, A. (2023). Improving the performance of micro, small, and medium enterprises in Indonesia: The role of financial technology. Journal of Economics and Business (JECOMBI), 4(1), 25-32.
Ratnawati, K. (2020). The influence of financial inclusion on MSMEs' performance through financial intermediation and access to capital. The Journal of Asian Finance, Economics and Business, 7(11), 205-218.
Rofiat, A. (2017). The effect of cashless banking on the financial performance of small and medium scale enterprises. International Journal of Advanced Research in Public Policy, Social Development, and Enterprise Studies, 2(2), 133-142.
Rogers, E. M. (1995). Diffusion of innovations. The Free Press.
Sanni, M., Oke, L. A., & Alayande, I. T. (2020). Bank credit accessibility and performance of SMEs in Kwara State, Nigeria: A PLS-SEM analysis. Copernican Journal of Finance & Accounting, 9(2), 45–64. http://dx.doi.org/10.12775/CJFA.2020.007
Soriano, M. A. (2017). Factors driving financial inclusion and financial performance in fintech new ventures: An empirical study (Doctoral dissertation). Dissertations and Theses Collection (Open Access), 1-258.
Sumani, S., & Prasetya, I. B. (2022). The effect of financial technology on the performance of micro, small, and medium businesses. Review of Management and Entrepreneurship, 6(1), 51-72.
Ubi, P., & Mba, P. (2019). Financial innovation and output growth of small and medium scale industries in Nigeria. Nigerian Journal of Economic and Social Studies, 61(2), 1-27.
Usman, M. U. (2020). The effect of financial technology on financial inclusion in Nigeria (Master’s thesis, Baze University, Abuja), 1-57.
Wati, L. N., Ispriyahadi, H., Nisa, K., Lutfi, M., & Suprapta, I. (2020). Financial technology and financial inclusion on MSMEs: A mixed-method research approach. Moneter: Jurnal Akuntansi dan Keuangan, 7(2), 1-23.
Younus, A. M. (2021). The performance of small and medium-sized enterprises: Financial innovation and barriers. International Journal of Economics Finance and Sustainable Development, 78-90.
Yusuf, T. O., & Dansu, F. S. (2013). SMEs business risks and sustainability in Nigeria. European Journal of Business and Social Sciences, 2(9), 76-94.
Zulqarnain, M., Mustehsan, M., Balouch, U. K., & Munir, S. (2023). Assessing the influence of financial inclusion and digital finance on SMEs performance: The moderating role of technological adaptation. Journal of Management: Small and Medium Enterprises (SMEs), 16(3), 459-476.
Published
2024-11-01
How to Cite
Abiodun, S., Ebenezer, A., O, Y., & O, A. (2024). FINANCIAL TECHNOLOGY, BANK INTERMEDIATION, AND PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA. Journal of Management : Small and Medium Enterprises (SMEs), 17(3), 869-886. https://doi.org/10.35508/jom.v17i3.18486
Section
Articles
