Financial inclusion and poverty reduction among the operators in the small and medium scale enterprises of Lagos State

Abstract

This study examines the impact of financial inclusion on poverty reduction through microfinance institutions (MFIs) with a focus on small and medium enterprises (SMEs) operators. The study is a cross-sectional study adopting micro-level primary data through the use of a questionnaire. It is conducted in Lagos state being the hub of SMEs in Nigeria. SMEs, which form the population of the study, were divided into two strata, small and medium-sized enterprises after which enterprises were randomly selected from each stratum for sampling. The research instrument is a standard, closed, and pilot-tested questionnaire administered to 400 SME operators in the five geographical divisions namely, Badagry, Epe, Ikeja, Ikorodu and Lagos Island. The sample size was determined using the Yamane sample size determination formula. The data gathered were analysed in the year 2020 using two methods, descriptive statistics and logit regression. Findings reveal that all financial inclusion measurement indicators: access, usage, quality and effect, have a positive and statistically significant impact on poverty reduction. The cost of financial inclusion was surprisingly found to be positive, although insignificant. Overall, financial inclusion through MFIs is therefore found to have a preponderantly positive effect on poverty reduction and SME development. Consequently, boosting SMEs’ development through financial inclusion will reduce poverty among SME owners, enabling them to reach their potential, provide gainful employment for the Nigerian populace, and promote entrepreneurship.