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1.1Background of the study

Most countries at all levels of development, small and medium scale enterprises (Small medium enterprises) have an important role to play in achieving the sustainable development goals, by promoting inclusive and sustainable economic growth, providing employment and decent work for all, promoting sustainable industrialization, fostering innovation, creating values and reducing income inequalities (OECD, 2017). For developing nations, sustainable economic growth is real poverty reduction. Thus, the interest in Small medium enterprises should be greater in developing countries due to high level of poverty and flexibility of Small medium enterprises as compared to other ventures.

In Nigeria, a developing nation with over 160 million people and over 65% of their populace being below 35 years (SMEDAN/NBS MSME Survey, 2013), it has become imperative for policy makers to seek development of national economy through Small medium enterprises rather than rely on the oil sector. This change in Nigeria’s economic policy direction is not limited to the depleting state of oil reserve but also because of the abundant potentials; availability of land, cheap labor, etc. of Small medium enterprises. Though the change of economic policies in favor of the Small medium enterprises has seen a considerable increase in the number of available Small medium enterprises, the contribution of this sector to the Gross domestic product (GDP) of Nigeria is low. The Education, wholesale/trade and manufacturing sectors which have the highest distribution of Small medium enterprises do not account for up to 50 % of independent contribution to the national GDP of Nigeria (SMEDAN/NBS MSME Survey, 2013). This low rate of contribution to the national GDP of Nigeria could be attributed to lack of access to finance, multiple taxation, access to market and obsolete technology that affect the ease of doing business in Small medium enterprises (SMEDAN/NBS MSME Survey, 2013). Inability of Small medium enterprises to access information communication technology (ICT) is viewed as the major challenge of Small medium enterprises to developing strong operations and expand their businesses (Dutta & Mia, 2009).

Economic sectors that apply advances in ICT are characterized by high level of efficiency, ease and convenience of operation. Inventions of the internet and mobile technology are key information communication technologies that have enhanced the manner of doing business in recent years. The growing number of applicants for internet has also been very crucial in product marketing and distribution in many businesses (Yang, Li, Ma, & Chen, 2018).

Banks are one of the earliest and greatest facilitators of the use of internet technology (Kondabagil, 2007). As leaders of industries in which e-commerce has been developed , they apply internet technology in electronic banking (e-banking) services like online transfer, electronic bill payment and opening of deposit accounts to customers (Sumra, Manzoor, Sumra, & Abbas, 2011). These services are offered through various initiatives such as phone banking, mobile banking, internet payment systems and electronic banking (Kurnia, Peng, & Liu, 2010). E-banking could improve process excellence, speed of delivery and value of service to customers. Though the success of e-banking services depend on the rate at which the technology is adopted by customers, small and medium scale enterprises.

Policymakers and development practitioners acknowledge the leading role of information and communication technologies (ICTs) for development (Dutta and Mia, 2009; UNCTAD, 2009). For instance, Millennium Development Goal (MDG) 8 aims at making available the potential benefits of new technologies (ICTs in particular) to poor regions of the world. In Nigeria, limited access by small and medium enterprises (Small medium enterprises) to ICTs is regarded as a key obstacle for business growth (Dutta and Mia, 2010), and information and communication technologies are therefore seen as helping Small medium enterprises strengthen their operations and grow their businesses. Nonetheless, the impact of ICTs on development depends on how accessible these technologies are to firms, particularly Small medium enterprises ( Monge-González et al., 2007).

 Monge-González et al. (2005) evaluated the importance of ICTs in the improvement of productivity and competitiveness of Small medium enterprises. The authors concluded that internal factors that favor the adoption of ICTs in Small medium enterprises include the use of computers and the Internet by most employees, the existence of a budget to purchase and maintain computers and Internet services, a focus on scientific activities associated with business activities (such as increased levels of knowledge about modern software and advantages of using Internet services), and a willingness to venture into e-commerce. The main finding of the study was that the use of ICTs by Small medium enterprises in their business processes is still limited.

Likewise in her 24th Nigeria Customer Service (NCS) national conference in December 2011, CBN data shows that 51% of withdrawal done in Nigeria was through ATM, while 33.6% was done through over the counter (OTC) cash withdrawals and 13.6% through Cheque. Payment was also done through point of sales machine (POS) which accounted for 0.5% and web 1.3%. Therefore, if the introduction of ATM in Nigeria reduced OTC withdrawal; then it implies that introduction of electronic banking supported by application of information technology can achieve more to reduce over dependent on cash payment. James (2012) investigated the acceptance of e-banking in Nigeria. The result showed that acceptance of e-banking in Nigeria was significantly influenced by age, educational background, income, perceived benefits, perceived ease of use, perceived risk and perceived enjoyment. James (2013) used Rogers Diffusion of Innovation theory to investigate the determinants of the adoption of mobile banking in Nigeria. The study empirically showed that age, educational qualification, relative advantage, complexity, compatibility, observability and trialability were important determinants of the adoption of mobile banking. This therefore makes it imperative for relevant stakeholders to make efforts to positively influence these independent variables so as to make mobile banking more popular.

1.2 Statement of the Problem

Electronic banking is expected to affect the operations and performance of small and medium scale enterprises in a form of transactional convenience, saving of time, quick transaction alert and cost saving (Aliyu, 2012). Despite the acclaimed benefits of electronic banking, the issues of online theft and fraud, non-availability of financial service, payment of hidden cost of electronic banking like Short Message Services (SMS) for sending alert, non-acceptability of Nigerian cards for international transaction, malfunctioning Automated Teller Machines (ATMs) and network downtime has been raised by many users, especially small and medium scale enterprises in Nigeria. In the light of these complaints and to enlarge the body of knowledge on e-banking in Nigeria context, this study aims to prove the relationship between e-banking and SME performance in Nigeria. This research work is significant to policy makers in making policies that would encourage the growth of the number of Small medium enterprises especially from the large number of informal business in Nigeria. Policies generated from the results of this research would also encourage expansion of existing Small medium enterprises to provide raw materials and certain input services to lager enterprises/ventures. These would create more jobs, reduce the poverty rate and increase the GDP of Nigeria.

The problem of electronic banking on small and medium scale enterprises in Nigeria. Specifically, emphasis will be placed on: determining if electronic banking has in any way enhanced the growth of small and medium scale businesses in the study area. Data from small and medium scale enterprises access to Financial Services in Nigeria 2012 survey (A2F, 2012) highlight Nigeria’s limited adoption of electronic payments and services to date, with 0.7% of banked adults using POS terminals, 0.8% of banked adults using the internet, and less than 2.5% using mobile phones for banking transactions. The policy has since been affected by many factors namely ineffective sensitization campaign exercise; inadequate protection of the interest of merchants and people in the informal sector; non availability of Point-of-Sale (POS) terminals as well as other technological challenges. Echekoba and Ezu (2012) in a research carried out in Nigeria, observed that 68.2% of the respondents complained about long queues in the bank, 28.9% complained of bad attitude of teller officers (cashiers), while 2.89% complained of long distance of bank locations to their homes or work places. Olajide (2012) investigated electronic banking in Nigeria and its impacts on the small medium enterprises in Nigeria. Egwali (2008) used consumer acceptance theory to investigate customers’ perception of security indicators (SI) in online banking sites in Benin, Nigeria. He found out that SI were not very effective at alerting and shielding users from revealing sensitive information to fool e-banking sites in Nigeria. Olatokun and Igbinedion (2009) investigated the adoption of ATM in Nigeria. They found out that constraints such as relative advantage, complexity, observability, compatibility and trial ability were positively related to attitude to the use of ATM cards in Nigeria.

1.1            Objectives of the study

The study aims at examining the assessment of the impact of electronic banking on small and medium enterprises. More specifically, the study seeks to achieve the following objectives:

1.                    To determine the relationship between automated teller machine services and performance of Small medium enterprises.

2.                    To evaluate the impact of mobile banking services on the performance of Small medium enterprises.

3. To ascertain the influence of point of sale service on the performance of Small medium enterprises.

1.4 Research Hypotheses

The study consists of the following hypotheses:

Ho1: Automated teller machine services have no significant relationship with performance of Small medium enterprises in Nigeria.

Ho2: Mobile banking services has no significant relationship with performance of Small medium enterprises in Nigeria.

Ho3: Point of sale service has no significant relationship with performance of Small medium enterprises in Nigeria.

1.5 Significance of the study


The findings of this work will be beneficial to local, state and federal government in and that they will see the extent to which the electronic banking impacts small medium enterprises performance and for them devise a means in promoting and standardizing it in every banking sectors in Nigeria.

Managers of small medium enterprises:

The finding of the study will be of great importance to managers of small medium enterprises in Nigeria as they will understand the effect of electronic banking on performance of commercial banks in Nigeria, this will assist them in making decision on whether to adopt electronic banking or not and the expected results of electronic banking adoption to their banks profitability.

Policy makers in banking industry:

The study finding will enlighten the policy makers in the banking industry on the expected
effect of electronic banking on banks profitability; this will assist them in designing
appropriate policy for electronic banking adoption by commercial banking in Nigeria.
The study will be of great importance to future scholars and academicians as it will form
basis for future research as well as providing literature for future studies on electronic banking.


This work will serve as a reference material to other researchers who will further research on this work, as well as research on related topic and work.

1.6 Scope and limitation of the study

This study tends to be limited to the assessment of the impact of electronic banking on small and medium enterprises in Nigeria. However, in the course of carrying out this research work, the researcher can foresee some limitations which include; insufficient financing, insufficient data for the research work and the time required for the project to be concluded

1.7 Definition of terms


Defined as the provision of retail and small value banking products and services through
electronic channels. Such products and services can include deposit taking, lending, account
management, the provision of financial advice, electronic bill payment, and the provision of
other electronic payment products and services such as electronic money.

Small medium enterprises:

Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ fewer than a given number of employees. This number varies across countries. Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most 10, or in some cases 5 workers.


This is an initialism of automated teller machine, it’s a machine that receives and dispense cash to a registered customer of a registered commercial bank.


This is an initialism of point of sale teller machine, it’s was established to improve the cashless system of banking, whereby the a registered customer of a bank can pay for the goods or services rendered to him through his credit card.


This means how well and good the small medium enterprises are performing in its day to day operations or activities, which will lead in generation of income after tax.

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