HUMANITIES EDUCATION, FINANCIAL ETHICS AND SUSTAINABLE SME DEVELOPMENT IN NIGERIA

Abstract

Nigeria, despite its oil wealth and prominent position in Africa, continues to face challenges of unemployment and limited economic diversification. Small and Medium Enterprises (SMEs), which constitute about 96% of businesses in Nigeria, play a crucial role in economic growth, innovation, and employment generation. However, their contribution to Gross Domestic Product (GDP) remains low due to inadequate access to finance. Access to appropriate financing greatly influences the growth and sustainability of SMEs. Conventional Banks, although regarded as major sources of business finance, often impose high interest, stringent collateral requirements, and limited access to credit, thereby constraining SME growth. In contrast, Islamic finance has gained global recognition as a stable and sustainable alternative for SME financing. Its profit and loss sharing (PLS) mechanism promotes equitable risk-sharing between lenders and borrowers, making it attractive to SME operators. This study examined the business and financial culture surrounding SME financing in Nigeria, identified challenges affecting its growth, assessed SME operators’ financing preferences between Conventional and Islamic finance and compared the role of both financial systems in SME financing. Using a qualitative approach, primary data were collected electronically from 412 respondents out of the 600 structured questionnaires distributed across the six geopolitical zones of Nigeria. The findings reveal that there was a strong preference among SME operators for Islamic financial institutions' Profit and Loss Sharing (PLS) mechanism due to its promotion of a balanced risk distribution between the lender and the borrower. The study recommends that efforts should be made to strengthen the infrastructure supporting Islamic finance in order to meet the growing demand for Islamic financing products.