Effect of Sources of Financing on Financial Performance of Small and Medium Scale Enterprises in Maiduguri Metropolis

Small and medium-sized enterprises (SMEs) play a crucial role in the economic development of many countries, including Nigeria. However, one of the significant challenges faced by SMEs is access to adequate financing. The purpose of this study was to examine the effect of different sources of financing on the financial performance of SMEs in Maiduguri Metropolis, Borno State, Nigeria. A descriptive survey research design was employed for this study, and data were collected from 400 SME owners/managers using structured questionnaires. The research instrument was validated and found to be reliable. Data analysis was conducted using descriptive statistics and inferential statistics (Analysis of Variance - ANOVA). The findings of the study revealed that bank loan financing had a statistically significant effect on the financial performance of SMEs in Maiduguri Metropolis. Informal financing sources also had a statistically significant effect on SME financial performance, while retained earnings financing had a significant effect on financial performance. However, government fund financing did not show a significant effect on the financial performance of SMEs. Based on the findings, it was recommended that financial institutions should reconsider their interest rate policies and streamline loan application processes. Also, SME owners are advised to reinvest a portion of their profits for future growth rather than using all earnings for personal expenses.