The study in brief

The study uses a  market-oriented approach to investigate the relationship between the financial  system and SMEs access to finance in  Nigeria  between  1995  and 2019.  Both  indicators  from  the  capital  and  money  markets  are  used  as independent variables  while  some  macroeconomic  variables  such  as  inflation rate,  interest rate  and exchange  rate  are  also  used.  The  study  made  use  of  Auto-Regressive  Distributed  Lag  to explore the long and short-run relationship and the result shows that the capital market has a  more  significant  impact  on  SMEs  access  to  finance  than  the  money  market.  Variables such  as  inflation  rate,  exchange  rate  and  interest  rate  all  have  a  significant  influence  on access to  finance by the  SMEs. it is recommended that  the  money  market as an essential aspect of the financial system in Nigeria should be made to devote more credit to the SMEs sector as it has shown from this study that the bulk of the credit going into the private sector from the money market might not go into the SMEs sector. The inflation rate should also be controlled as  well  as  reducing  the lending rate and guide against unreasonable  currency devaluation to promote access to finance by the SMEs in Nigeria.

Citation: Ademosu, A., & Morakinyo, A. (2021). Financial system and SMEs access to finance: a market-oriented approach. Studia Universitatis „Vasile Goldis” Arad–Economics Series, 31(3), 21-36.