Abstract

This study investigates the effects of microcredit participation on welfare outcomes of small and micro enterprises (SMEs) in Ekiti, Southwest Nigeria. The study used primary data which included 638 respondents who were divided into two groups of 441 microcredit users and 197 non-users. The various statistical methods used in analyzing the factors which affected participation and the resulting economic and social outcomes include descriptive statistics, independent sample mean difference tests through t-test and Mann–Whitney U tests, chi-square tests and logistic regression. Users of microcredit programs showed higher income generation, employment creation, business expansion and access to basic services when compared to non-users. The mean difference tests demonstrate moderate to large effect sizes which exceeded Cohen's d range of 0.42 to 0.73, thus confirming the statistical strength of the differences. The results of logistic regression analysis showed that microcredit participation positively impacts income generation, employment creation, business expansion and access to basic services. The Hosmer–Lemeshow test confirms a good model fit (χ² = 7.82, df = 8, p = 0.55), with the model explaining 75% of variations in welfare outcomes (Nagelkerke R² = 0.75). To enhance its effectiveness, policymakers need to develop strategies which will expand microcredit access while providing financial literacy education and customized support programs that will empower women to manage their funding and build their businesses effectively