Journal of Research in Peace, Gender and Development (ISSN: 2251-0036) Vol. 2(3) pp. 72-80, March 2012
Available online@ http://www.interesjournals.org/JRPGD
Copyright ©2012 International Research Journals
Full Length Research paper
The role played by payment systems and settlement
institution in the growth of small and medium
enterprises in Nigeria
Otse Amos Egwurube
Centre for Entrepreneurship Development, University of Abuja, Abuja F.C.T
E-mail: otseamos@yahoo.com
Accepted 23 March, 2012
Money is fundamental to the operation of a modern economy and the functioning of market economies
inasmuch as transactions involved are exchange and credit based. In a market economy, any two
economic agents are free to agree on the means of payment to be used to settle a transaction (Bank of
International Settlement, 2003). The role of banks in payment system and as a settlement institution is
very paramount. Payment systems play a fundamental role in the economy by providing a range of
mechanisms through which transaction can easily be settled. The ways in which payments are made
and the forms of money used basically distinguishes a developed economy from the underdeveloped.
This is highly dependent on the extent of development of the financial institutions and level of
intermediation especially between banks. This research work will attempt to examine the role of
settlement institution and the complexity of the payment system in Nigeria. The questions that come to
mind are: i) How viable are the payment systems in Nigeria? ii) How effective has the payment systems
been accommodated by the financial institutions in Nigeria grow SMEs? And whether or not the
payment system has in any way encouraged the development and growth of Small and Medium
Enterprises in Nigeria. The research will employ a descriptive method of analysis using a primary data.
A total 200 SMEs are to be selected randomly from different skills and vocations and their responses
collated and analyzed in a tabular form which will then be further analyzed using the rational analysis.
This will then present a clear pictorial representation of the acceptability or otherwise of the
institutional settlement procedure and the innovative payment systems adopted, and to determine
whether or not they support our SMEs structure. The findings will indicate the extent to which the
payment systems in Nigeria are effective given its relevance to Small and Medium scale Enterprises.
Recommendations of this research will be based on the findings as to whether the payment systems
should be encouraged if it supports SMEs growth or not.
Keywords: Banks, instruments, settlement, exchange and credits, small and medium enterprises, growth.
INTRODUCTION
Money is fundamental to the functioning of any market
economies inasmuch as transaction is based on
exchange and credit (CPSS, BIS 2003). Money serves as
a common measure of economic value, a means of store
of value and a set of instruments and plays an active role
in the procedures to transferring value. The value of
money lies in trust and there can be absolute guarantee
that confidence in the currency can be preserved over
time. This could be shaken as a result of monetary crisis
or by the malfunctioning of the payment system.
The payment system, as an arrangement that
facilitates the transfer of monetary value among
transferring parties, to a large extent, impacts on the
stability of the financial system (CBN Banking
Supervision Annual Report, 2007). Payment systems
play a fundamental role in the economy by providing a
range of mechanism through which transactions can be
easily settled. A payment system is ‘a defined set of
instruments, procedures and rules for the transfer of fund
from one bank to another’. Payment systems include
payment mechanisms used by securities settlement
systems, whether the payment mechanism is “embed-
Egwurube 73
Banknotes
Payer
Payee
Figure 1. Payment by banknotes
ded” within the securities settlement systems or external
payment systems (CPSS, 2003). The payment system
adopted and the interface of settlement banks in any
economy should target and encourage macro
investments.
To achieve macro level investment and economic
development, SMEs are more likely to play an important
role in that economy. This is easier in a country with
stable financial development, effective and secure
financial systems and targeted lending. Such countries
must have good policies that encourage stable exchange
rates, low inflation, minimize entry regulations, encourage
fair competition and promote high level of education.
The functioning of the payment systems and the role
of the settlement institution
The payments system plays a very crucial role in any
economy, being the channel through which financial
resources flow from one segment of the economy to the
other. It, therefore, represents the major foundation of the
modern market economy (CBN, 2007). Essentially, there
are three pivotal roles for the payments system namely;
i)
The Monetary Policy role,
ii) The financial stability role and
iii) The overall economic role.
The smooth and safe functioning of a payment system
is dependent not just on the quantity of the settlement
asset but also on the quality of such asset and thus on
the identity of the settlement institution (CPSS, 2003).
The form of money used to make payment may require a
more or less complex arrangements and this could be in
form of Banknotes or Commercial Bank Deposit Money.
Where a banknote as a bearer instrument is used, the
payment process is simple – the note simply transfers
from the payer to the payee.
However, where the commercial bank deposit money
is used, transfers generally take place within organized
“payment system” where the commercial and central
bank money often compliment each other in complex
chains of payments. In making payment in an interbank
payment system, the central bank acts as the settlement
institution. The paying and receiving banks are both
direct participants in the interbank payment system and
hold accounts at the settlement institution, and settlement
is effected by a debit from the account of the paying bank
to the credit of the account of the receiving bank. The
payment may either be financed with funds already on
the account of the paying bank, or with credit provided by
the settlement institution. The “payment chain” which is
actually a combination of various payments at different
tiers, whose “settlement” takes place independently, can
be more complex and complicating depending on the
number of banks involved and the form of money used.
The payment and settlement systems have gone
through a process of significant change over the decade,
with the introduction, where they not already exist, of riskreducing features such as real-time gross settlement into
interbank payment system and delivery versus payment.
This is however, influenced by a wide range of economic
forces affecting the financial system as a whole. The
financial markets have been affected by powerful forces
of liberalization, technological innovation, globalization
and consolidation. The payment arrangements have
been affected by these interrelated forces, which many
economic sectors are dependent including SME sector,
predicated upon which the growth of the economy
depends.
Simple models of how payment systems function
The complexity of payment arrangement most times
depends on the form of money used in payment. The two
commonest forms of money used in making payments
are banknotes and commercial bank deposit money.
Banknotes are bearer instruments and thus payment
process is simple – the notes are simply transferred from
the payer to the payee (see figure 1).
Figure 2 shows a simple interbank payment system.
The payment system has one intermediary – the Central
Bank, which act as a settlement institution. The paying
and receiving banks are both direct participants in the
interbank payment system and hold account at the
settlement institution. Payment is directly effected by
debiting the account of the paying bank and crediting the
account of the receiving bank.
The payment chain can be more complex and
complicated as shown in figure 3. The payment process
involves debiting the payer’s account at Bank A with
Bank B’s account with the settlement institution. It also
74 J. Res. Peace Gend. Dev.
Settlement Institution
Receiving Bank
Paying Bank
Figure 2. Simple interbank payment system
…………………………………………………………………………………………………
……
Settlement Institution
Bank B
Interbank payment system
Bank C
…………………………………………………………………………………………………
……
Bank A
Payer
Payee
Figure 3. More complex payment arrangements
Source: CPSS, Bank for International Settlement 2003
involves crediting Bank C’s account with the settlement
institution and the payee’s account with Bank C.
Components of the payment systems in Nigeria
The financial instrument used in a country depends to a
large extent of development of the financial system in that
country. The payment systems adopted also depends on
the type of instrument used and the problems it intends to
solve or address.
In Nigeria, the two major components of the payments
system are the retail and the wholesale payments. The
retail payments involve high volume of transactions with
low monetary value typical among the non-bank users of
the payment system. The vehicles through which the
retail payments are made include:
i)
Cheques
ii) Debit and Credit Cards
iii) Prepaid Cards
iv) Automated Teller Machines (ATM)
v) Mobile Payment and
vi) Electronic Fund Transfer at Points of Sale
(ETFPOS)
The wholesale payments, on the other hand, involve
the exchange of large values usually among banks. It
includes critical payments such as interbank transfers,
securities and foreign exchange transactions (CBN Ban-
Egwurube 75
king Supervision Annual Report, 2007).
The role of financial institution and value of small and
medium enterprises to economic development
The idea, that financial institutions play an important role
in resources allocation process dates back to at least
Schumpeter (1912), who conjectures that banks help to
identify entrepreneurs with good growth prospects, and
therefore help to allocate resources to their most
productive uses. They play a major role in the
development process as they accept deposits and give
out loans in the economy. There are 24 Deposit Money
Banks in operation under the supervisory purview of the
Central Bank of Nigeria presently. The recent increase in
minimum paid up capital for the existing Deposit Money
Banks from N1.0 billion to N25.0 billion will now enable
the sector play it pivotal role in economic development of
the nation (Raw Material Research and Development
Council Publication, 2005).
Small and Medium Enterprises financing can be
provided, under two major groups of institutions: bankbased and market-based institutions.
Bank-based
institutions include the Deposit Money Banks order wise
referred to as the Universal Bank, Central Bank,
Development Finance Institutions, Microfinance Banks,
Finance Companies while market-based institutions
include specifically the Capital Market.
The most
common form of support from bank-based institution
include overdrafts, loans and advances, bill of exchange,
discounting, guarantees and hire purchase, while capital
market support comes in the form of equity (ownership
capital) and debt (bonds). (Clive Carpenter, 2005). The
Contributions of Financial Institutions” examines the
traditional; role of financial institutions as financial
intermediaries. They mobilize funds from surplus savers
and channel them to deficit spender/investors through
their credit granting services (Akeredolu-Ale, 1975).
The economic importance of Small and Medium
Enterprises differs depending on the economic sector.
Robust and healthy small and medium scale enterprises
are strong prerequisite for sustainable economic growth
and development. Government is heavily concerned
about developing small scale business operators or
indigenous entrepreneurs, who can assist her in
economic or national development – being self-employed
and reducing unemployment and given citizen a sense of
self worth and confidence (Inyang 2002). The small-scale
business represents an overwhelming majority of
industrial capacity in developing countries. A fact
confirmed by Ajayi (2000), and Ayozie et al. (1997) who
postulated that the present small scale business in
Nigeria constitutes over 80% of all registered companies,
occupying positions in agro-based and allied industries,
rubber-based, leather shoes industries, chemical,
electronics, general merchandising, restaurants, dress
making, hair dressing, cane-chairs, leather products,
pomade and toiletries, animal feeds and husbandry,
painting etc.
The Small and Medium Scale Enterprise are one of
the vehicles of social progress for employment creation,
for stimulating investment with lower cost, for performing
complementary activities to those performed by large
firms and supporting policies of regional and local
decentralization of the economic activities.
In Germany, Small and Medium Enterprises play a
very important part in employment. Almost 60% of the
about 20.7million employees in the economic sectors
worked in Small and Medium Enterprises. That is six out
of ten persons in employment worked in small and
medium – sized enterprises with 18% of employees in
micro enterprises, 22% in small and 19% in mediumsized enterprises (Kless, 2008). Small and Medium
Enterprises generated 46% of gross value-added and
made some 40% of total gross investment in tangible
goods.
In the United Kingdom, Small and Medium Enterprises
accounted for over 58% of all employment with small
enterprises accounting for 46.8%, and medium-sized
enterprises accounting for 11.7%. They accounts for
more than half (51.3%) of the United Kingdom’s
estimated business turnover of £2400 billion with small
enterprises accounting for 37%, and medium-sized
enterprises accounting for 14.3% (Office of National
Statistics, 2005).
In Nigeria, over 97% of all businesses are Small
business and employs less than 100 employees (Ariyo,
2000). Small and Medium Enterprises are known to have
contributed significantly to economic development, job
creation and sustainable livelihood (NIPC, 2003). The
study conducted by the Federal Office of Statistics shows
that Small and Medium Enterprises accounted for 50%
employment and contribute 50% to industrial output.
According to Owualah (1999), small firms make both
social and economic contributions to our development
process. The social benefit are in terms of transforming
traditional or indigenous industry; stimulating indigenous
entrepreneurship and technology; creating jobs, and
redistributing wealth and income. The economic benefits
involve the utilization of local resources, the dispersal and
diversification of economic activities and the mobilization
of savings. Onuoha (2004) further collaborated this by
saying that the small and medium scale enterprises
provide the sources of material and labour inputs for
bigger activities in the country. Entrepreneurs or small
and medium enterprises help to raise the level of
productivity in the economy by harnessing and utilizing
resources more effectively (Inegbenebor, 2006).
Ogundele and Oni (1995) therefore conclude that the
Small and Medium Enterprises or the entrepreneurs are
the dominant feature in the economies of both developed
and developing countries.
76 J. Res. Peace Gend. Dev.
Table 1. Demographic profile of respondents (SMES business owners)
Gender of respondents
Male
Female
Total
Frequency
120
80
200
Percent
60
40
100
Age of Respondents
18 - 25
26 - 35
36 - 45
46 - 55
56 - 65
66 - Above
Frequency
26
36
62
40
16
20
Percent
13
18
31
20
8
10
Educational Level of
Respondents
Valid None
Primary School
Secondary School
High School (Diploma/NCE
equivalent)
First Degree (B.Sc/B.A/HND)
Post Graduate
Other (Vocational/Technical
Training)
Total
Frequency
Percent
10
14
44
26
5
7
22
13
36
20
50
18
10
25
200
100
Sector Where Respondents Work
Agro-Allied (including woodworks &
water bottling)
Manufacturing (including Printing &
publishing)
Information Technology & Telecom.
Educational Establishment
Tourism & Leisure
General Services e.g. Training
Finance
Others
Total
Frequency
20
Percent
10
18
9
32
30
15
45
20
20
200
16
15
7
23
10
10
100
Scope of research
A lot of issues were raised about the payment system
and the role played by settlement institutions especially
the issue of acceptance of the e-Payment, e-Banking and
the banking habits of Nigerians generally. In this study, a
direct survey conducted in Abuja in Gwagwalada Area
Council, two hundred owners of small/medium
businesses were examined: Table 1, 2, 3 and 4.
Issues facing Nigerian’s SMEs as it relates to
payment system efficiency and settlement institution
They are major issues and challenges facing the growth
of SME sector with regards to the system of payment that
is used in business transaction in developing economies
especially Nigeria are:
i)
Institutional Deficiencies – the policy, legal and
institutional deficiencies contribute to the poor ranking in
the World Bank ‘ease of doing business’ indicators in
most developing economy especially Nigeria (World Bank
Global Report, 2008-2009).
ii) Poor Infrastructure – Poor infrastructure is definitely
the most contributing factor to the sorry state of SME
sector in Nigeria. Due to infrastructural deficiencies,
Nigeria experience poor electricity and internet access,
poor connectivity and poor signal output which has affect
the smooth working of the e-Payment system and shred
of the e-Banking practiced. The world Bank report also
Egwurube 77
Table 2. Distribution of the respondents and banking transaction
Have Bank A/c
Valid None
No
Yes
Total
Frequency
5
15
180
200
Number of ATM Card
Possessed
Valid None
One
Two or More
Total
Percent
2.5
7.5
90
100
Frequency
Percent
12
45
143
200
6
22.5
71.5
100
Table 3. Level of adoption of e – Payment system
Payment Instruments
ATM
WEB (INTERNET)
POS
MOBILE
2006
93.16
1.71
4.83
0.31
Volume (%)
2007
88.7
5.1
2.4
3.8
2008
91.0
2.4
1.8
4.8
2006
73.35
3.51
23.04
0.11
Value (%)
2007
88.5
7.1
4.3
0.1
2008
90.0
5.7
3.7
0.2
Source: CBN Annual Reports 2006, 2007 and 2008
noted that infrastructural deficiencies brings about high
operational cost resulting from high cost of imported raw
materials, equipment and spare parts. Thus SMEs are
uncompetitive when it comes to pricing and are faced
with stiff competition from cheaper imported goods. The
Manufacturer Association of Nigeria study pointed out
that infrastructural inadequacies contribute well above
thirty percent (30%) to the cost of doing business.
Zulu (2006) identified the challenges of e-Payment in
Africa as inadequate telecommunication infrastructure
which include: connectivity failure in telephone lines; low
internet bandwidth; high internet cost; unavailability of
dedicated data service networks and close financial
networks as well as frequent power interruption.
iii) Access to information: the failure of the payment
system and crude method of doing business devoid of eCommerce, e-Banking, m-Banking and internet banking
is due to lack information. Availability of information on
access to credit/loan, profitable market, appropriate
technology and business support services will spur
increase in the number of new business and guarantee
the survival of existing ones.
iv) Infrastructural Realignment: there is virtually no
support institutions to coordinate the various efforts
targeted at SMEs growth. Institutions like the Central
Bank of Nigeria and other financial intermediaries such
as the Deposit Money Banks and support agencies like
SMEDAN, NDE function independently thus making
coordination, evaluation, and monitoring of SME related
activities cumbersome. This cannot grow the sector and it
brings about a more challenges to the management of
SMEs in Nigeria (Report of Vision 2020).
v) Identity theft and ATM fraud: One of the greatest
threats to e-Banking is the increasing trends of identity
theft, which is a major challenge to the internet age
(Helmbrecht, 2008). Alao (2009) reported the colossal
amount of money lost in Nigeria to ATM fraud through
ATM card cloning, PIN theft among others and this has
resulted t CBN removing ATM locations from public
places as well as installing security cameras at ATM
points to track the activities of fraudsters.
vi) Low level adaption, high demanding technology,
poor banking habits and level of ICT literacy: In Nigeria,
like most developing countries, even though the level of
usage of ICT is on the increase, the level of adaption of
e-Banking by the citizen is still low (Ayo & Ukpere, 2010).
The table 5 below shows the distribution of the amount of
currency in circulation from 2001 to 2010 in Nigeria.
The table raised a lot of issues about of the influence
of ICT on e-Banking and the banking habit of Nigerians,
particularly as it relates to the volume of cash at hand
and/or in circulation. The aim of the introduction an
electronic payment system by the CBN and the effort of
government to attain a cashless economy was defeated,
hence the increase in currency in circulation. There is,
therefore, need for technology that is safe, convenient
and not too demanding on the part of the user because of
the level of literacy in the developing nations of the world,
particularly Nigeria.
vii) Other problems militating against the payment
78 J. Res. Peace Gend. Dev.
Table 4. Distribution of the respondents experience with payment system
Distribution of the respondents experience with payment system
Reliability of ATM
Convenience of ATM
services
Simplicity of ATM
services
Safety of ATM
Privacy of ATM
Desirability of one ATM
Card
Improve Security
features on ATM
Finger print as Security
Necessary
e-Banking improve
SME activities
e-Payment System
support SME growth
Desirability of ePayment
Complexity of Payment
System
Convenience of mBanking
Reliability of mPayments
Convenience of
EFTPOS
Reliability of EFTPOS
Convenience of use of
Cheques
Reliability of Cheques
Acceptance of the use
of Payment Cards
Acceptance of Payment
via internet
Simplicity of interbank
Payment System
AGREE
72
(%)
(36)
DISAGREE
100
(%)
(50)
NEUTRAL
18
(%)
(9)
DO'T
KNOW
10
(%)
(5)
TOTAL
200
(%)
(100)
124
(62)
42
(21)
22
(11)
12
(6)
200
(100)
100
38
64
(50)
(19)
(32)
78
152
76
(39)
(76)
(38)
14
6
42
(7)
(3)
(21)
8
4
18
(4)
(2)
(9)
200
200
200
(100)
(100)
(100)
94
(47)
58
(29)
10
(5)
38
(19)
200
(100)
152
(76)
40
(20)
4
(2)
4
(2)
200
(100)
134
(67)
16
(8)
20
(10)
30
(15)
200
(100)
64
(32)
122
(61)
10
(5)
4
(2)
200
(100)
62
(31)
120
(60)
8
(4)
10
(5)
200
(100)
100
(50)
80
(40)
10
(5)
10
(5)
200
(100)
110
(55)
72
(36)
6
(3)
12
(6)
200
(100)
120
(60)
44
(22)
20
(10)
16
(8)
200
(100)
50
(25)
126
(63)
14
(7)
10
(5)
200
(100)
64
118
(32)
(59)
76
44
(38)
(22)
40
24
(20)
(12)
20
14
(10)
(7)
200
200
(100)
(100)
80
66
(40)
(33)
92
76
(46)
(38)
26
44
(13)
(22)
2
14
(1)
(7)
200
200
(100)
(100)
56
(28)
112
(56)
28
(14)
4
(2)
200
(100)
30
(15)
160
(80)
4
(2)
6
(3)
200
(100)
60
(30)
120
(60)
14
(7)
6
(3)
200
(100)
Source: Researcher compilation
Table 5. The distribution of the amount of currency in circulation from 2001 to 2010 in Nigeria
Year
Amount (N’Billion)
2001
403.5
2002
463.2
2003
502.3
2004
545.7
2005
642.4
2006
770.1
2007
960.5
2008
1,155.1
2009
1,181.8
2010
1,378.8
Source: CBN Annual Reports
system adapted in Nigeria are as listed by Sumanjeet
(2009) generally revolve around:
a) Integrity: to ascertain that transmitted financial
information is unchanged in transit.
b) Non-repudiation: to ascertain that all parties have
non-deniable proof of receipt.
c) Confidentiality: to ascertain that transactions are
protected from possible eavesdroppers.
d) Reliability: to ascertain that there is reduced
possibility of failure.
e) Authentication: to ascertain that there are reliable
proofs of identification of all parties involved.
f)
Authorization: to ascertain that individuals are
recognized and granted the desired rights and privileges.
Research Design
The research conducted is a direct survey with the aid of
a set questionnaire randomly administered to 215 small
Egwurube 79
and
medium
enterprises
operators/owners
as
respondents. Out of this number, 200 were returned
representing 93.02%. the questions were designed in
such a way as to capture the mind of the SMEs operator
as to ascertain the validity, viability, efficiency and even
acceptance of the various system of payment introduced
over this recent years.
RESULT AND DISCUSSION
The demographic profile of the respondents shows that
200 completed questionnaire were returned, out of which
120 (60%) were male and 80 (40%) female. The age
distribution indicates that the bench mark of 18 years was
used with over 70% of the respondents within the active
working population.
The educational level of respondents indicates that
about 190 (95%) of Small and Medium Enterprises
operators are mostly literate with a minimum of a least
first school leaving certificate (primary school), while only
10 (5%) of the respondents did not indicate to have had
any formal education at any level. Of the 190 (95%), 56
(28%) of the respondents are graduate/post graduates.
The sector distribution of the respondents show that 45
(23%) respondents are in the General Services such as
motor mechanics, tailoring etc; 32 (16%) of the
respondents are in the Information technology and
Telecommunication Industry; Educational Establishment
30 (15%); the Agro-Allied, Finance and other sectors with
20
(10%)
respectively,
Manufacturing
and
Tourism/Leisure sector with least respondent of 18 (9%)
and 15 (7%) respectively.
It is unique and interesting to note that 180 (90%) of
the respondents operates a valid bank account engaged
in various bank transactions with 143 (71.5%) of them
having more than one viable ATM cards. This is an
indication of the acceptance of the unified e-Payment
system but does not confirm its efficiency.
The level of adoption of the e-Payment system with
respect to ATM, Internet Banking and m-Banking has
been steady in volume with the exception of POS. The
value has, however, been on a steady increase for ATM
and m-Banking services but recorded a significant
decrease with respect to POS and a considerable
fluctuation with respect to Internet Banking. This
indication shows that the ATM, with high volume and
value percentages, is the most popular and acceptable
component of the payment system in Nigeria.
Most of the respondents attested to the fact that the
ATM services are convenient and simple to use with 124
(62%) and 100 (50%) respectively. However, the
reliability of ATM (36%), safety (19%), privacy (32%) is
highly in doubt which point to the fact that the ATM
security features needs to be improved (76%). The
respondents suggested that finger print as security
features are necessary (67%) since the ATM is most
desirable (47%).
The respondents generally agreed that the e-Payment
is desirable (50%) with m-Banking as the most
convenient (60%) than the use of cheques (40%) but
noted the complexity of the payment system as a
hindrance to growth of SMEs. This could be as a result of
lack of infrastructure and technical knowhow. The
respondents further noted that this has made reliability on
m-Payment (25%), the use of EFTPOS (32%), Internet
Banking (15%) and interbank payment system (30%)
doubtful. They agreed that the e-Payment system (31%)
and the e-Banking method adopted (32%) has not
improved the SME activities in Nigeria and has not
supported the growth of SMEs in any way significant.
CONCLUSION
The payment system and the activities of the settlement
institutions in Nigeria have over the years improved
significantly with the introduction of various payment
components. The sophistication of the financial
instrument, the high level intermediation of banks and the
efficiency of bank interplay is an indication of the
progressive process of development in Africa particularly
in Nigeria. However, even though the level of adaptation
of e-Payment system is on the increase and the role of
the banking sector as settlement institutions cannot be
over emphasized, the people have lost confidence in the
banking sector. This is evident in the amount of cash in
the circulation or outside the banks, a situation which is
attributed to lack of safety, security, privacy and reliability
in the e-Payment instruments.
An infrastructural deficiency in Nigeria resulting from
poor electricity and internet access, poor connectivity and
poor signal output has affect the smooth working of the ePayment system and the e-Banking practice. The World
Bank report also noted that infrastructural deficiencies
brings about high operational cost resulting from high
cost of imported raw materials, equipment and spare
parts. This has affected the efficiency of the banking
sector and the reliability on the payment system. It has
also resulted to lack of information due to poor access of
information to loan or credit, market, appropriate
technology and or business services that can grow either
a new business venture or and existing ones. The failure
of payment system and the crude method of doing
business devoid of e-Commerce, e-Banking, m-Banking
and Internet Banking have kept production on a level of
subsistence.
The unresolved identity theft and ATM fraud;
complexity of e-Payment instruments; non-repudiation as
a result of lack of concert proof of receipts; infrastructural
deficiencies and realignment; and even policy failure
have contributed in no small measure to the failure of
80 J. Res. Peace Gend. Dev.
payment system and the settlement institutions. To this
end, the Small and medium enterprises has not been
given the required attention and as a result have not
contributed significantly to the growth of SMEs in Nigeria.
The payment system and the settlement institutions in
Nigeria should give attention to areas the will positively
impact on SMEs in Nigeria. SMEs are crucial for
economic growth, poverty alleviation, wealth creation and
the promotion of a more pluralistic and vibrant society. A
cursory examination of other countries, both emerging
and developed, shows that they have been able to
transform and grow their economies through deliberate
and sustainable development of their SME sectors. From
this research, the following recommendations may be
relevant:
i) The banking sector should improve on their
technology to reduce ATM fraud, and identity theft. A
smart card-based ATM with biometric and finger print
authentication will be required to improve safety, security,
and privacy.
ii) Government and the private sector participation in
the area of provision of infrastructure will be highly
appreciated. The issues of power failure, low internet
bandwidth, poor network service of telephone affect the
efficiency of the banking sector. Good infrastructure and
facilities will encourage SMEs to pool their information
and resources for increase productivity and profitability.
iii) Government should set up institutions to function
mutually and co-ordinate the activities of SMEs and its
related activities to support growth. The will go a long
way to boast the confidence of SME operators and
improve their activities. Such institutions will ensure the
promotion of and access to innovation and technology
and adequate openness to foreign technology.
The banking habits of Nigerians will improve following
improvement in public confidence as it relates to safety,
security and privacy. Improvement in payment system
adopted and the reduction in the complexity of settlement
institutions’ payment procedures will also improve in no
small measure the interplay between the Small and
Medium Enterprises operators and the Banking sector.
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