1.1 BACKGROUND OF THE STUDY
The major problem facing African nations (including Nigeria) today is the eradication of poverty which every government has built in as part of its development programme. This research examines the effects of micro financing on and Medium Enterprises (SMEs) development in Nigeria. Tracing backward historical policies of Federal government of Nigeria on the Small and Medium Enterprises enhancement especially in relation to financial challenges which brought about schemes and policies include: Small and Medium Enterprises Equity Investment schemes (SMEEIS), the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), NDE, NEEDS, the Bank of Industry and Community Banks transformed to Micro Finance Banks (MFBs) under the supervision of the Central Bank of Nigeria (CBN). The concept of microfinance started in the late '70s and early '80s. The first organization to receive attention for its success was the Grameen Bank, which was started by Muhammad Yunus in Bangladesh. The global importance of Microfinance Institutions in poverty reduction, grass root business financing has created a compelling need to design strategies for providing financial service to the vulnerable, poor and low income group on a sustainable basis. Owing to the peculiar condition of the poor, these services were originally provided at subsidised rates through non-governmental organisations and self-help groups by donors and government. This research intends to contribute to the array of literature written by different scholars on Microfinance and SMEs development. SMEs in Nigeria have the tendency to serve as sources of livelihood to the poor, create employment opportunities, generate income and contribute to economic growth. Despite its increasing roles, its accessibility to credit remains one major constraint. However, Small and Medium scale Enterprises play important economic and social roles in employment creation and generation, economic growth and development, important linkages with larger enterprises, social security, creativity and innovations, financial markets profitability and growth (Olumide, 2011).
Microfinance is a form of financial development that has its primary aim to alleviate the poverty of the poor who are generally remained un-served or were offered improper financial service. Bank and other financial institutions are currently estimated to provide services to only 25% of potential clients worldwide. This was cited by (Mohammad, 2007) opined that only 2% of micro entrepreneurs are being provided service by banks. However, government at all levels recognised the need to encourage the small enterprises through the provision of credit schemes and policy reforms which brought about the emergence of Micro Finance Banks the Federal Government of Nigeria introduced during the Obasanjo regime to replace the formal community Bank in Nigeria which became operational in 2005. Nigerians in line with their governments acknowledge the need to alleviate poverty and encourage SMEs, through the provision of credit and inform policy reforms with respect to bringing the Microfinance Banks under the supervision of Central Bank of Nigeria to create enabling environment for SMEs access to small loans.
More so, to ensure that the mission of the policies were achieved, which include ensuring that the majority of the active population are reached with financial services, and that total credit as a percentage of Gross Domestic Product (GDP) ratio increase steadily, as well as micro credit as a percentage of total credit to the economy. Equally important was the need to improve access of poor active most especially women to microfinance on a consistent basis (Attah, 2008). Finally, the other chapters arrangements were as follows: The second section reviews literatures by different authors on alternative financial sources available to SMEs and challenges facing SMEs in reaching them. The third and fourth sections describe the methods applied in collecting and analyzing data, while the last two sections represent data presentation and findings, and conclusion respectively.