Published Online:March 2025
Product Name:The IUP Journal of Business Strategy
Product Type:Article
Product Code:IJBS010325
DOI:10.71329/IUPJBS/2025.22.1.5-20
Author Name:Sheriff Akanji Ibrahim, Lukman Adebayo-Oke Abdurauf, Yusuf Olamilekan Quadri and Aina Taiye John
Availability:YES
Subject/Domain:Management
Download Format:PDF
Pages:5-20
Small and medium enterprises (SMEs) are critical to Nigeria’s economic development, contributing to employment generation, innovation and poverty alleviation. However, access to finance remains a major constraint for SMEs, limiting their ability to grow and sustain operations. The study examines the role of informal financing in promoting SME growth in Ilorin Metropolis, Kwara State, Nigeria, focusing on the extent to which SMEs rely on informal financial sources and the impact of such financing on business performance. The study employs a quantitative research approach, using survey questionnaires to collect data from SME owners and managers. A multiple linear regression model was employed. The results established that informal financing positively impacts SME growth, with personal savings having the strongest influence, followed by family and friends and cooperative societies. Based on these findings, the study recommends policy interventions to improve SME access to financing, including reforming microfinance loan structures, strengthening cooperative societies, implementing financial literacy programs, and introducing government-backed credit facilities tailored to SME needs. Additionally, integrating informal financing models into the formal financial system could bridge the gap between SMEs and structured financial products, enhancing business sustainability.
In Nigeria, like in many developing economies, there exist two different financial systems—one includes formal or official financial institutions, such as commercial banks, insurance providers, and mortgage banks, which are governed directly by the government;