Banks
are the most important example of a class of institutions called financial
intermediaries, firms that extend credit to borrowers using funds raised from
savers. However, credit is not an end in itself; it is
a means to an end. The ultimate goal is to affect productivity. For both developing and developed countries,
micro, small and medium scale enterprises (MSMEs) play important roles in the
process of industrialization and economic growth. Thus, this paper set out to
empirically evaluate the effect of deposit money banks’ credit on the
performance of MSMEs in Nigeria with the aid of a vector autoregression and
error correction mechanism (ECM) technique. Results of the empirical
investigation confirmed credit has a positive effect on GDP of MSMEs in Nigeria
as the coefficient of CAM (credit to MSMEs) was positive (1.0569) and
significant at one percent level. It is
therefore recommended that every effort
should be made to improve access to credit by MSMEs so that they can play their
potential roles of employment generation and wealth creation and move the majority
of the entrepreneurs out of poverty.
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