Financial Inclusion and Sustainability of Small and Medium Enterprises in North Central Nigeria (Published)
Small and Medium Enterprises (SMEs) are vital to economic development in Nigeria, yet their sustainability is constrained by limited access to formal financial services. While financial inclusion is promoted as a key enabler, its effectiveness remains inconsistent, suggesting the influence of contextual factors. This study investigates the relationship between financial inclusion and SME sustainability in North Central Nigeria. Anchored in Financial Intermediation Theory and the Theory of Financial Inclusion, the research employs a quantitative, cross-sectional design. Data were collected via structured questionnaires from a stratified sample of 575 SMEs across seven states in the North Central region. Using Structural Equation Modelling (SEM) for analysis, the study operationalised financial inclusion through six dimensions: Affordable Banking Services, Banking Diversity, Consumer Protection, Financial Literacy, Inclusive Credit Scoring, and Insurance Uptake. SME sustainability was measured as Operational Efficiency. The results reveal that Banking Diversity (β = 0.518) has the strongest positive effect on sustainability, followed by Consumer Protection (β = 0.172). Conversely, Financial Literacy, Inclusive Credit Scoring, and Insurance Uptake showed insignificant or negative relationships. The moderating effect of Business Growth was significant for Consumer Protection and Insurance Uptake, indicating that growing firms benefit more from these mechanisms. The study concludes that the impact of financial inclusion is not uniform but is critically contingent on a firm’s growth trajectory and the specific dimension of inclusion being applied. Policy recommendations include promoting diverse financial products, strengthening consumer protection frameworks, and designing growth-sensitive, tiered financial inclusion strategies tailored to different stages of SME development. This research contributes to a nuanced understanding of SME finance in emerging economies by highlighting the conditional nature of financial inclusion’s benefits.
Keywords: Financial Inclusion, North central Nigeria, Operational Efficiency, SME sustainability, structural equation modelling