Microfinance Bank Operations and Performance of Small and Medium Enterprises (SMEs) in Ibadan, Oyo State

This study explores the role of microfinance bank (MFB) operations in supporting small and medium-sized enterprises (SMEs) in Ibadan, Oyo State, Nigeria. While MFBs are vital for bridging the financing gap and fostering local entrepreneurship, challenges such as high interest rates, information asymmetry, and inadequate business support services hinder SME performance in the region. Guided by the Resource-Based View (RBV) theory, the study adopts a quantitative approach, surveying 380 SMEs out of 31,739 registered businesses in the state using structured questionnaires. Stratified and simple random sampling ensured the sample's representativeness. The survey instrument was validated through pre-testing and principal component analysis, confirming convergent validity and strong internal consistency, with Cronbach’s alpha coefficients above 0.7 for most variables. Data analysis was conducted with SPSS version 25, using descriptive statistics and multiple regression analysis to examine the impact of loan repayment terms, loan accessibility, and interest rates on SME performance. Results revealed a moderate positive relationship between microfinance bank operations and SME performance (R = 0.483), accounting for 23.3% of the variance (R² = 0.233). The regression model was statistically significant (F(3,364) = 128.654, p = 0.000). Of the variables studied, only loan accessibility significantly influenced SME performance (t = 7.205, p = 0.000), whereas loan repayment terms and interest rates did not. The study concludes that improving loan accessibility is crucial for SME growth and recommends reducing collateral requirements, simplifying loan processes, and revising repayment terms to support financial health in Ibadan’s SME sector. Recommendations include simplifying loan application processes, reducing collateral requirements, and revising repayment terms to support the financial health of SMEs