A CRITICAL EVALUATION OF THE LEGAL FRAMEWORK FOR SME’s LOAN REDEMPTION IN NIGERIA

Small and medium scale enterprises (SMEs) scheme has been recognised as a vehicle for rapid sustainable economic development, industrialisation, employment generation, poverty alleviation, to mention but a few. No doubt, the country is in dire need of these indices of peoples’ welfare. Yet, conventional banks are reluctant to grant credit facilities to SMEs in order to boost their capital base and sustain their enterprises. The reason is that the existing legal framework is inadequate in ensuring efficient, effective and prompt loan recovery by the banks from the SMEs. This is more so that the beneficiaries of the SMEs loans are not required to pay interests when repaying the loan. Consequently, the positive effects of viable, effective and efficient SME schemes are not felt in the country. Based on this premise, this paper critically evaluates the adequacy or otherwise of legal/policy frameworks on SME loan redemption in Nigeria. To achieve this, it assesses the enforcement mechanism against beneficiaries of the SMEs scheme. The paper finds that the legal framework for redeeming loans against SMEs in Nigeria is inadequate owing to weak and ineffective enforcement mechanisms. It concludes that there is a need for a dependable, viable, effective and justly-balanced legal framework that would ensure smooth and reliable loan redemptions from SMEs.