Author: Peter Ubi and Peter Mba
Volume: 61 Issue No:2 Year:2019

Abstract: This study assesses the role of financial innovation in output growth of small and medium-scale industries (SMEs) in Nigeria using quarterly data from 2009 to 2016. It employs the regressive distributed bounds testing approach (ARDL) and the Granger causality test to ascertain the long-run impact and the causal relationship between financial innovation variables and SMEs’ output growth. Evidence from the analyses confirms the theoretical proposition that financial innovation contributes positively to the output growth of SMEs in Nigeria as the financial innovation variables of POS, MBK, ATM and INTB have positive and statistically significant impact on the output growth of SMEs. The Granger causality test indicates that a unidirectional causal relationship runs from financial innovation variables to SMEs output in Nigeria. Based on this empirical evidence, the paper recommends that the positive impact of the financial innovation variables on SMEs output demands that deposit money banks not only improve but also expand the current level of financial service delivery in Nigeria by establishing more financial channels in both rural and urban areas.

JEL classification: G21, G22, O31