The Impact Of Cashless Policy On Financial Performance Of Small And Medium Enterprises In Nigeria

Project and Seminar Topics with material for Banking and Finance

The Impact Of Cashless Policy On Financial Performance Of Small And Medium Enterprises In Nigeria


Abstract


The study investigated the impact of cashless policy on financial performance of small and medium enterprises in Nigeria. The main objective of this study is to examine the impact of mobile banking, automated teller machines, and point of sale on the performance of small and medium-sized businesses in the state of Edo. The research design adopted for this study is ex post facto research design. Data collated were analyzed using descriptive statistics such as correlation and regression estimation as well as postestimation diagnostic tests for evaluating the consistency and efficiency of the estimates. The findings reveal that point of sale had a favorable and significant impact on the performance of SMEs in Edo State. The study also demonstrates that the adoption of automated teller machines by SMEs’ operators has a favorable and notable impact on their performance. The study also demonstrated that the performance of SMEs in Edo State is positively and significantly impacted by the use of mobile banking services. Therefore, the study recommends that management of banking institutions should enhance application of mobile banking to increase satisfaction of their customers and performance of small and medium scale enterprises. Mobile service providers in conjunction with banks should develop more friendly and easy to use and efficient applications for bank customers and small and medium scale enterprises.


Table of Content


  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organisations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Sources of Data
  • 3.4 Model Specification
  • 3.5 Method of Data Analysis

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.5 Discussion of Findings

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One


Introduction

1.1 Background to the Study

One way small and medium-sized firms can contribute to an economy’s growth is through creating jobs. In order to handle the increased flow of financial resources, it is essential to create and put into action policies that will improve the economy’s performance and growth (Gboski et al. 2013). SMBs, however, are no longer the bright stars they once were as a result of the CBN’s new cashless policy. Small- and medium-sized firms’ achievements, growth and ongoing operations can all be considered as examples of this. The exchange of actual money is not necessary for transactions in a cashless economy. To track a user’s deposits and withdrawals, there must be electronic devices. Any company, but notably those in the service sector, must succeed with information technology. The competitive environment for companies and financial institutions has changed as a result of information technology improvements. Information technology includes many different things outside just computers. There is little doubt that IT developments will assist banks in lowering transaction costs, which will translate into lower service fees for customers. In order to enable customers to access their accounts from any place within the bank, banks use a number of information technologies, including computerization of client accounts and information storage and retrieval, automated teller machine (ATM) deposit and withdrawal, and networking. Consumers may ultimately no longer require passwords or other kinds of personal identity thanks to biometric measures like fingerprinting and other forms of authentication. A growing number of banks are offering bundles of services that go well beyond their standard transactional banking services via the internet and their websites (Gboski et al. 2013).

The establishment of the cashless policy was prompted by the shifting expectations of bank customers for cash services. In other words, cash has been entirely supplanted by electronic money transactions in the banking system. Nigeria’s central bank came up with the cashless policy to help the nation’s economy move away from a cash-based payment system and toward an electronic one. This was done to improve the efficiency of Nigeria’s payment system and, as a result, the level of service offered to the nation’s banking customers while also bringing the country’s monetary system into compliance with international best practices and discouraging the manual movement of cash. The high cost of cash, the high risk of using cash, the high subsidy, the informal sector, inefficiency, and corruption are some of the issues that the existing cash-based economic system aims to overcome (CBN, 2011). As a result of the policy’s implementation in Nigeria, issues with security, privacy, criminality, and computerization develop. Nigeria apparently took longer than other wealthy nations to adopt electronic banking (David, 2012). Policymakers and financial institutions may want to think about whether or not the current institutional arrangements and available instruments are enough to guarantee financial stability, efficiency, and the efficacy of monetary policy in light of recent advancements in financial transaction technology. According to the Central Bank of Nigeria (CBN), the implementation of the new cash policy was partly driven by a desire to help Nigeria get closer to its Vision 2020 goal of becoming one of the top 20 economies in the world by the year 2020. Economic growth and the presence of an advanced and user-friendly payment system are positively correlated.


1.2 Statement of the Problem

All banks compete with each other to attract their customers in different ways through providing convenient, accessible and acceptable services or/and products to their customers. One of the most important of these services is cashless economy (electronic services) that have contributed significantly to increase the distance between costumers and the bank and small and medium scale enterprises (Kannabira & Narayan, 2005). Today’s banking situation demands continuous innovation in order to meet the yearnings and aspirations of the ever-demanding customers. Hence, banks need to roll out new products and services quickly and effectively, using latest cutting edge technology (Augusto, 2012). Cashless economy enable bank to improve their service delivery, decongest queues in the banking hall, enable customers withdraw cash 24/7, aid international payment and remittance, track personal banking transaction, request for online statement, or even transfer deposit to a third party account.

Those services will undoubtedly impact significantly on the overall performance of small and medium scale enterprises. The small and medium scale enterprises on the other hand, stand to enjoy the benefit of quick service delivery, reduced frequency of going to banks physically and reduced cash handling, which will give rise to higher volume of turnover (Fagbuyi, 2013). However, these developments in the Nigerian banking industry seem not to have achieved their aims. Despite the effort of banks to ensure that customers reap the benefits of e-banking, the bank is met with complaints from customers as regards, online theft and fraud, non-availability of financial services, payment of hidden cost of electronic banking like Short Message Services (SMS), for sending alert, mandatory acquisition of ATM cards, non-acceptability of Nigerian cards for international transaction, malfunctioning Automated Teller Machines (ATMs) and network downtime.

Other problems observed that are associated with Nigerian’s cash-based economy, which include: Delays in financial transactions which can be caused by queue in the bank or ATM to collect cash, lack of network which affect mobile banking and Web, banking Spread of bacteria through handling physical cash, High rate of crime, illegal drug trade, terrorism, illegal immigration, human trafficking, corruption, due to its cash-based economy. “People are always faced with the challenges of violent crimes (insecurity) such as, bank and ATM robberies” (Okafor, 2012). Based on the foregoing, the study examined the effect of cashless policy on the financial performance of small and medium scale enterprises in Anambra State Nigeria.


1.3 Objectives of the Study

The main study objective is to examine the impact of cashless policy on financial performance of small and medium enterprises in Nigeria. while the specific objectives of the study include;

  1. Investigate the effect of automated teller machine on financial performance of small and medium scale enterprises in Edo state.
  2. Investigate the effect of point of sale(POS) on financial performance of small and medium scale enterprises in Edo state.
  3. Investigate the effect of mobile banking(POS) on financial performance of small and medium scale enterprises in Edo state.

1.4 Research Questions

The study will be guided by the following questions;

  1. Does automated teller machine have a significant positive effect on the financial performance of small and medium scale enterprises in Edo state?
  2. Does point of sale have a significant positive effect on the financial performance of small and medium scale enterprises in Edo state?
  3. Does mobile banking have a significant positive effect on the financial performance of small and medium scale enterprises in Edo state?

1.5. Research Hypotheses

  • Ho1: There is no significant and positive effect of automated teller machine on performance of small and medium scale enterprises in Edo state.
  • Ho2: There is no significant and positive effect of point of sale on performance of small and medium scale enterprises in Edo state.
  • Ho3: There is no significant and positive effect of mobile banking on performance of small and medium scale enterprises in Edo state.

1.6 Significance of the Study

The study will give various insights into the various implications the introduction of the cashless policy doe have on businesses in Nigeria.

The result from this study will educate the managers of small and medium business and the general public on the effect of cashless policy on SMEs recommending coping strategies to ensure profitability with the use of the modern technology.

Empirically, the study will add to the body of existing literature and serve as reference material to scholars who wishes to conduct further studies in related field.


1.7 Scope of the Study

The general focus of this study boarders on the impact of cashless policy on financial performance of small and medium enterprises in Nigeria. Hence, the study will delimited to selected SMEs in Edo state.


1.8. Limitations of the Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents.

In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed.

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.


1.9 Definition of Terms

Cashless:

Designating of financial transactions handled by means of credit cards, bank transfers, and cheques, with no money handed from person to person.

E-banking:

A system allowing individuals to perform banking activities at home, via the internet.

Mobile Money:

This is a product that enables users to conduct funds transfers, make payments or receive balance enquiries on their mobile phones.

Cashless Policy:

Cashless policy as a policy that minimizes the use of cash by providing alternative channels for executing financial transactions.

Small and Medium Scale Enterprises:

Small and medium-sized enterprises (SMEs) are businesses whose personnel numbers fall below certain limits.


1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, definition of terms etc.
  • Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary, Conclusion and Policy Implications

5.1 Introduction

This chapter presents the summary, conclusions and recommendations of the study. These are presented in line with the objectives and findings of the study.


5.2 Summary of the Study

The study was undertaken to examine the impact of cashless policy on financial performance of small and medium enterprises in Nigeria. This study used secondary data in examining the association between cashless policy variables and performance of SMEs. . The research design adopted for this study is ex post facto research design.


5.3 Conclusion

This study looked at how Edo State’s small and medium-sized businesses fared under the cashless policy. The study primarily looked at how the financial performance of small and medium-sized businesses in Edo state was affected by point of sale, automated teller machines, and mobile banking. According to the study’s findings, point of sale has a favorable and noticeable impact on the financial performance of SMEs in the state of Edo. The findings, as could be observed, highlighted the necessity for MSMEs sector operators to increase the use of point of sale as a basis of cashless policy in the administration of their operations in the state because it has proven to be beneficial. The results also indicate that the usage of automated teller machines by SMEs has a favorable and significant impact on their performance. Because they make it simple for company operators and the general banking public to forego numerous banking protocols that would otherwise be required, automated teller machine services are speedy services that improve transactions at the bank. This is because such transactions would otherwise need to be carried out in the banking hall. When efficiency is taken into account, both employee and organizational productivity are increased. The study also revealed that the performance of SMEs in Edo State is significantly improved by using mobile banking services. Based on the aforementioned findings, the study came to the conclusion that the cashless policy channels used in this study—such as point of sale, automated teller machines, and mobile banking—had a favorable and significant impact on the performance of the SMEs in Edo-state. As a result, the study advised small and medium-sized businesses to adopt points of sale and automated teller machines (ATM), as these have a favorable and significant impact on their performance. The study’s restriction to SMEs in Edo State is one of its flaws.


5.4 Recommendations

Based on the findings, the following recommendations were raised:

  1. Management of banking institutions should enhance application of mobile banking to increase satisfaction of their customers and performance of small and medium scale enterprises. Mobile service providers in conjunction with banks should develop more friendly and easy to use and efficient applications for bank customers and small and medium scale enterprises.
  2. SMEs should embrace the innovation in the banking sector to take full advantage of advancement in technology to increase their financial performance.

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