Project – Digital Financial Services and the Growth of Small and Medium Enterprises in Nigeria: A Study of Selected SMEs in Lagos State

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Small and Medium Enterprises (SMEs) constitute an important component of modern economies because of their contribution to employment creation, income generation, innovation, entrepreneurship and economic diversification. In developing countries such as Nigeria, SMEs are particularly important because they provide opportunities for individuals to establish businesses with relatively modest levels of capital and often serve as a major source of employment and livelihood. The ability of SMEs to survive and grow is therefore closely connected to the broader objectives of economic development, poverty reduction and private-sector-led growth.

Nigeria has a very large SME sector. The country’s MSME ecosystem consists predominantly of micro and small businesses, with SMEs operating across trade, manufacturing, agriculture, transportation, hospitality, professional services, retail and other sectors. The importance of these enterprises makes their growth a significant economic policy concern. However, Nigerian SMEs continue to face structural constraints, particularly limited access to finance, high operating costs, weak infrastructure, limited managerial capacity and difficulties accessing formal markets. The World Bank has consistently identified access to finance as a major constraint to the growth of Nigerian MSMEs (Shah, Owuor, & Heitmann, 2022; Dong, Popovic, Wong, & Fuchs, 2023).

Among these constraints, access to appropriate financial services is particularly significant. Businesses require finance to purchase inventories, acquire equipment, pay workers, manage working capital, expand production, enter new markets and withstand periods of economic uncertainty. Where enterprises cannot obtain suitable financial services at affordable costs, their ability to invest and grow may be restricted. The World Bank (2025) notes that fewer than one in twenty Nigerian MSMEs have access to bank credit, while available loans are often short-term and expensive, with collateral requirements excluding many otherwise viable businesses.

The traditional financial system has historically presented several barriers to SMEs. Commercial banks may consider small businesses relatively costly to assess and serve because of their limited formal records, uncertain cash flows, inadequate collateral and perceived risk. Shah et al. (2022) observe that private-sector lending to MSMEs in Nigeria remains limited, while commercial banks tend to concentrate lending on larger firms. These financing constraints can restrict the ability of SMEs to increase their productive capacity and consequently limit their contribution to economic growth.

The emergence of digital financial services (DFS) has created new possibilities for addressing some of these constraints. Digital financial services refer broadly to financial products and services delivered through digital technologies, including mobile phones, internet platforms, electronic payment systems, mobile banking, digital wallets, point-of-sale (POS) services, online banking, digital lending, electronic transfers and other technology-enabled financial services. The World Bank (2023) explains that digital financial services can help address the SME financing gap by reducing transaction costs, automating financial processes, facilitating alternative forms of credit assessment and creating new channels through which small businesses can access financial products.

Digital financial services have become increasingly relevant because they reduce the dependence of businesses on physical bank branches. A small business owner can receive payments electronically, transfer money to suppliers, pay employees, monitor transactions and, in some cases, apply for credit through digital platforms without visiting a conventional bank branch. Such services can reduce the time and cost associated with financial transactions and allow businesses to manage financial activities more efficiently.

Nigeria has experienced substantial growth in digital payment and financial technology services. The Central Bank of Nigeria (CBN) reports that by June 2024, non-cash payment channels had become increasingly prominent, with internet transfers accounting for 51.91 percent of non-cash retail payment transaction volume, POS transactions accounting for 28.53 percent and mobile transactions accounting for 15.58 percent (Central Bank of Nigeria [CBN], 2024). This development indicates a substantial shift in the way individuals and businesses conduct financial transactions.

The expansion of fintech has contributed significantly to this transformation. Fintech refers to the application of technology to financial services and encompasses mobile payments, digital banking, online lending, payment platforms, digital wallets and other technology-enabled financial solutions. According to the World Bank (2024), fintech is transforming Nigeria’s traditional banking system by increasing the reach and efficiency of financial services. Mobile banking, digital payments and digital wallets have expanded the ability of underserved individuals and businesses to access financial services.

Digital financial services are particularly relevant to SMEs because many small businesses operate with frequent, relatively small-value financial transactions. Retailers, restaurants, service providers, artisans, online vendors and other businesses often need to receive customer payments, pay suppliers and workers and transfer funds several times within a business day. Digital payment systems can make these transactions faster and more traceable than cash-based transactions.

Another potential benefit of DFS is improved financial record generation. When businesses receive payments electronically, transactions can generate digital records that may provide evidence of business activity and cash flow. This is important because many SMEs have historically struggled to provide the formal financial records required by conventional lenders. Digital transaction histories can potentially provide alternative information for assessing business creditworthiness.

The World Bank (2023) argues that digitalisation and alternative data can improve the credit-risk assessment process for SMEs. Digital records of business activities and cash flows may provide lenders with additional information, potentially enabling some enterprises that would previously have been excluded from formal finance to obtain financial products. Digital technologies can therefore contribute not only to payment efficiency but also to improved access to credit.

Recent international evidence strengthens this argument. Mare and Farazi (2026), using firm-level data from approximately 50,000 firms across 101 economies, found that firms receiving electronic payments were significantly less likely to be credit constrained. The study reported that firms receiving digital payments were approximately three percentage points less likely to be fully credit constrained, suggesting that digital payment histories may provide useful information about firms’ revenue-generating capacity.

The implications for Nigerian SMEs are considerable. If digital payments generate credible transaction histories, such information could help financial institutions better understand the activities and cash flows of small businesses. This may reduce information asymmetry between SMEs and financial institutions and potentially improve access to credit. Digital financial services may therefore influence SME growth both directly, through more efficient financial transactions, and indirectly, through improved access to finance.

Digital financial services can also reduce transaction costs. Traditional financial transactions may require transportation to bank branches, waiting time, paperwork and other administrative activities. Digital platforms can enable businesses to make transfers, receive payments and perform other transactions remotely. For SMEs operating with limited staff and resources, savings in transaction time and cost can be particularly valuable.

In addition, digital financial services can improve the speed of business transactions. A customer can make an electronic payment almost immediately, allowing the business to confirm receipt and proceed with the transaction. Suppliers can also be paid more rapidly. Improved transaction speed may contribute to better inventory management, customer service and working-capital management.

The potential relationship between DFS and SME growth is therefore multidimensional. Digital financial services may influence business growth through access to finance, payment efficiency, transaction-cost reduction, financial record keeping, cash-flow management and access to wider markets. These dimensions are particularly relevant in a competitive commercial environment such as Lagos State.

Lagos State provides an important setting for investigating the relationship between digital financial services and SME growth. Lagos is Nigeria’s principal commercial and financial centre and contains a large concentration of businesses operating across retail, manufacturing, technology, hospitality, transportation, professional services and other sectors. The state also has a relatively developed digital and financial ecosystem, making it an important environment in which to examine the adoption and consequences of digital financial services.

The concentration of SMEs in Lagos creates opportunities for digital financial services to support enterprise development. Small businesses can use electronic payment platforms to receive customer payments, digital banking applications to manage accounts, fintech platforms to access financial products and mobile technologies to conduct transactions. The widespread presence of digital payment infrastructure potentially allows SMEs to participate in a more interconnected financial ecosystem.

However, digital financial services do not automatically result in business growth. The benefits of DFS depend on adoption, frequency of use, reliability, affordability, digital literacy, trust, security and the availability of appropriate financial products. An SME may have access to digital payment services but use them only occasionally. Another enterprise may use digital payments extensively but still experience poor financial performance because of high operating costs, weak management or insufficient demand.

The issue of digital financial literacy is therefore important. Business owners need to understand how digital financial products work, how to compare financial services, how to protect passwords and account information, how to identify fraudulent transactions and how to manage digital credit responsibly. The World Bank (2023) identifies digital financial literacy and awareness as important challenges that can limit the ability of SMEs to benefit fully from digital financial services.

Cybersecurity and consumer protection also constitute important considerations. As financial transactions increasingly move online, businesses may face risks associated with fraud, unauthorised transactions, identity theft, phishing and data breaches. If SME owners perceive digital financial platforms as unsafe, they may be reluctant to adopt them extensively. Thus, trust and security may influence whether the potential benefits of DFS translate into actual business growth.

Infrastructure is another critical factor. Effective digital financial services require reliable telecommunications networks, internet connectivity and electricity, as well as appropriate devices. Although Lagos has relatively strong digital infrastructure compared with many parts of Nigeria, businesses may still experience network failures, service interruptions, transaction delays and other challenges. Such problems can reduce confidence in digital financial services and affect business operations.

The regulatory environment is equally important. Digital financial services operate within a complex ecosystem involving banks, fintech companies, payment service providers, telecommunications companies and regulatory institutions. Appropriate regulation is necessary to promote innovation while protecting users and maintaining the stability and security of the financial system. The World Bank (2023) emphasises the importance of regulatory frameworks, digital infrastructure, identity systems and data protection for the effective expansion of digital financial services for SMEs.

The growing importance of digital finance is also reflected in Nigeria’s broader economic policy environment. Recent World Bank analysis indicates that Nigeria continues to face a financing gap affecting MSMEs and that expanding access to innovative financial products is important for private-sector-led economic growth. In December 2025, the World Bank approved the $500 million Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, designed to expand access to and usage of inclusive and innovative financial products among MSMEs. The project is expected to strengthen the ability of banks, microfinance institutions and fintech companies to provide financing to SMEs and to use digital technologies to improve loan assessment and delivery (World Bank, 2025).

The FINCLUDE initiative is particularly significant because it demonstrates that access to finance for SMEs remains a major development concern in Nigeria despite the expansion of financial technology. The project targets 250,000 MSMEs and seeks to mobilise approximately $1.89 billion in private capital, illustrating the scale of the financing challenge facing Nigerian small businesses (World Bank, 2025).

The relationship between digital financial services and SME growth has also attracted scholarly attention. A study of 17 African countries by Osei-Assibey and colleagues found evidence that digital finance significantly improves SME financial inclusion, suggesting that increased digital financial activity can expand SMEs’ access to financial services (2024). The study further recommends user-friendly digital financial technologies and supportive regulatory frameworks to facilitate greater financial inclusion among SMEs.

Within Nigeria, research has increasingly examined digital finance and financial technology. Iwedi (2024) examined digital finance infrastructure and the growth of commercial banking firms in Nigeria, highlighting the increasing importance of payment technologies such as POS and web banking within the country’s financial ecosystem. Although the study focused on commercial banks rather than SMEs, it demonstrates the broader transformation of Nigeria’s financial sector through digital infrastructure.

Similarly, Kolawole et al. (2024) investigated digital financial services and the performance of quoted commercial banks in Nigeria. Their findings contribute to evidence concerning the financial effects of digital services within Nigeria’s banking sector, although the focus on banks rather than SMEs indicates the need for further research at the enterprise level.

Research on SMEs in Southwestern Nigeria also suggests that digital transformation can influence business outcomes. A 2024 study involving 825 SMEs in Southwestern Nigeria found that digital transformation significantly influenced customer experience and other organisational capabilities, with implications for financial performance (Scientific African, 2024). This evidence is relevant to Lagos because the state forms part of the Southwestern Nigerian economic environment and hosts a substantial number of digitally active SMEs.

Furthermore, a Nigerian study by Efemena, Augustine and Ariyibi (2024) examined financial technology and the performance of listed small and medium-scale enterprises in Nigeria using financial data covering 2019–2023. The study reflects growing interest in the contribution of fintech to SME performance in Nigeria, although its focus on listed SMEs distinguishes it from the much broader population of privately operated SMEs that characterise the Nigerian business environment.

The importance of SMEs to Nigeria’s economy makes this research particularly relevant. SMEs are not simply users of financial services; they are employers, producers, distributors, innovators and participants in local and national markets. When SMEs grow, they can increase employment, expand production, improve household incomes and contribute to government revenue. Conversely, when SMEs fail because of inadequate finance or inefficient business processes, the consequences extend beyond individual business owners to workers, suppliers, consumers and communities.

SME growth can be measured through several indicators, including increased sales revenue, profitability, number of employees, asset growth, market expansion, customer base and business survival. Digital financial services may contribute to these outcomes by improving the speed and efficiency of financial transactions and potentially increasing access to credit. However, the extent to which these benefits occur among SMEs in Lagos State requires empirical investigation.

A major issue requiring attention is that digital financial services may have different effects depending on the type of service used. Digital payments may primarily improve transaction convenience and cash-flow management. Digital banking may improve access to account management and financial information. Digital lending may provide working capital. Mobile money and wallets may facilitate payments and transfers. POS services may allow businesses to accept electronic payments from customers. These services may therefore influence different dimensions of business growth.

It is consequently necessary to examine digital financial services not merely as a general technological concept but in relation to specific business functions. The effectiveness of DFS may depend on whether the service addresses an actual business need. For example, a retail SME with a high volume of customer transactions may benefit substantially from digital payments, while a capital-intensive manufacturing SME may derive greater benefit from digital credit or banking services.

Another important consideration is that digital financial services may formalise business transactions. Businesses that rely heavily on cash may have limited verifiable records of sales and expenses. Digital transactions create electronic records that may help owners monitor cash flows and demonstrate business activity. Such records can potentially support better financial management and improve interactions with lenders.

At the same time, the transition from cash to digital transactions may expose SMEs to additional charges and service costs. Transaction fees, withdrawal charges, platform fees and other costs may reduce the financial benefits of digital services, particularly for businesses operating on thin profit margins. Therefore, the impact of DFS on SME growth cannot be assumed to be uniformly positive.

The COVID-19 pandemic also accelerated the importance of digital business practices. Restrictions on physical movement and changes in consumer behaviour encouraged businesses to adopt digital communication, online sales and electronic payment methods. Evidence from Lagos-based SMEs indicates that businesses increasingly relied on digital platforms during periods of disruption to maintain customer relationships and business transactions (Ihemebiri et al., 2023). Although digital financial services are distinct from social media, both developments illustrate the broader digital transformation affecting SMEs in Lagos.

The post-pandemic business environment has continued to reinforce the importance of digitalisation. Consumers increasingly expect businesses to provide convenient payment options, while businesses need efficient mechanisms for managing transactions and reaching customers. SMEs that effectively integrate digital financial services may therefore have opportunities to improve operational efficiency and compete more effectively.

Nevertheless, the existence of digital financial services does not eliminate traditional barriers to SME growth. Businesses may continue to face inflation, high energy costs, inadequate infrastructure, unstable exchange rates, taxation pressures, regulatory challenges and weak purchasing power. Digital finance should therefore be viewed as one potential contributor to SME growth rather than a single solution to all business problems.

Against this background, there is a need for empirical evidence concerning the extent to which SMEs in Lagos State adopt digital financial services and whether such adoption contributes meaningfully to their growth. Understanding this relationship can provide useful information for SME owners, financial institutions, fintech companies, government agencies and policymakers.

The present study therefore focuses on Digital Financial Services and the Growth of Small and Medium Enterprises in Nigeria: A Study of Selected SMEs in Lagos State. The study seeks to examine how the use of digital financial services influences SME growth and to provide evidence concerning the role of digital finance in strengthening the performance and sustainability of SMEs in Lagos State.

1.2 Statement of the Problem

Small and Medium Enterprises play a critical role in Nigeria’s economic development, yet many continue to experience difficulties achieving sustained growth. SMEs require adequate finance to purchase inventory, acquire equipment, pay employees, manage working capital and expand their operations. However, access to appropriate and affordable finance remains a persistent challenge. The World Bank reports that fewer than one in twenty Nigerian MSMEs have access to bank credit, while high costs, short loan maturities and collateral requirements continue to exclude many businesses from formal financing (World Bank, 2025).

The financing problem is particularly concerning because inadequate access to finance can restrict the ability of SMEs to exploit business opportunities. An enterprise may have a viable product and an established customer base but lack sufficient working capital to purchase additional stock, acquire equipment or expand production. Where formal financing is unavailable, business owners may depend on personal savings, family contributions, informal lenders or retained earnings. These sources may be insufficient to support sustained expansion.

Digital financial services appear to offer a possible solution to some of these challenges. Digital payments, mobile banking, fintech platforms, digital lending and electronic financial management systems can potentially reduce transaction costs and improve access to financial services. The World Bank (2023) argues that digital financial services can help bridge the SME financing gap by reducing the cost of financial service delivery and enabling lenders to use alternative data for credit assessment.

However, the increasing availability of digital financial services has not necessarily eliminated the financing and growth challenges facing Nigerian SMEs. Despite the rapid expansion of fintech and digital payments, many small businesses continue to face limited access to credit and other formal financial products. The World Bank’s FINCLUDE initiative, approved in 2025, demonstrates that access to finance remains sufficiently problematic to require a major national financing intervention (World Bank, 2025).

A major problem is therefore the uncertainty concerning the extent to which digital financial services actually contribute to SME growth. While digital finance has the potential to reduce transaction costs, improve payment efficiency, generate financial records and facilitate access to credit, the actual effect on business growth may vary among enterprises.

Another problem concerns the adoption of digital financial services. The availability of digital financial products does not necessarily mean that SMEs use them extensively. Some business owners may continue to depend heavily on cash transactions because of limited digital literacy, distrust of online platforms, fear of fraud, transaction charges or inadequate knowledge of available financial products. The World Bank (2023) identifies digital financial literacy, infrastructure, regulation, identity and data protection among the factors that can constrain the effective adoption of digital financial services by SMEs.

There is also a problem of digital infrastructure and service reliability. Digital financial transactions depend on telecommunications networks, internet connectivity, electricity and technological devices. Network failures, transaction delays, failed transfers and service interruptions may disrupt business operations. For SMEs that depend heavily on rapid customer payments and supplier transactions, such disruptions can have financial consequences.

Security concerns constitute another important problem. As SMEs increasingly conduct transactions electronically, they may become exposed to cyber fraud, phishing, unauthorised transactions and other digital risks. Business owners who lack sufficient cybersecurity knowledge may be particularly vulnerable. Concerns about security may also discourage some SMEs from adopting digital financial services extensively.

Another problem relates to the cost of digital financial services. Although digital platforms can reduce some transaction costs, businesses may incur charges for transfers, withdrawals, payment processing and other services. For small businesses operating with narrow profit margins, repeated transaction charges can accumulate and reduce profitability. Consequently, the assumption that digital finance automatically reduces business costs requires empirical examination.

There is also a concern about whether digital financial services improve access to productive credit. Digital payments may generate transaction records, but this does not necessarily mean that lenders will provide affordable credit to every SME. Issues such as business informality, weak credit histories, collateral requirements, perceived risk and macroeconomic conditions may continue to constrain lending. The World Bank (2022) observes that Nigerian MSMEs face structural financing challenges that cannot be solved solely through the existence of financial technology.

Furthermore, the growth of digital financial services has created a rapidly changing financial environment. Traditional banks now compete and collaborate with fintech companies and other digital financial service providers. This has expanded the range of products available to SMEs but has also created a more complex financial environment in which business owners must choose between multiple platforms and products.

The problem is particularly relevant in Lagos State because of the large concentration of SMEs and the state’s importance as Nigeria’s commercial centre. Lagos provides an environment in which digital financial services can potentially have substantial effects on enterprise activities. Yet the presence of a relatively developed digital ecosystem does not establish that SMEs are deriving measurable growth benefits from digital finance.

Existing research also reveals a gap in the Nigerian literature. Some studies have examined digital financial services and commercial bank performance (Kolawole et al., 2024; Iwedi, 2024), while other studies have examined fintech and SME performance at a broader national level (Efemena et al., 2024). Although these studies contribute useful evidence, there remains a need for research that focuses directly on selected SMEs in Lagos State and examines the relationship between digital financial services and business growth.

There is also a measurement gap. Digital financial services encompass several dimensions, including electronic payments, mobile banking, digital lending, online banking, POS services and digital wallets. SME growth, meanwhile, may be reflected in sales, profitability, market expansion, employment, assets and business survival. Examining DFS as a single undifferentiated concept may obscure the mechanisms through which specific digital financial services influence enterprise growth.

A further problem concerns the distinction between financial inclusion and business growth. Digital financial services may increase an enterprise’s access to financial services without necessarily producing higher sales or profitability. Financial inclusion is therefore not automatically equivalent to business growth. It is important to establish whether increased access to and use of digital financial services translates into tangible improvements in SME performance.

The problem is also heightened by the changing nature of consumer payments. CBN data show that electronic payment channels have become increasingly prominent in Nigeria, with internet transfers, POS and mobile payments accounting for substantial shares of non-cash transactions by June 2024 (CBN, 2024). As customers increasingly use digital payment methods, SMEs that cannot effectively accommodate such payments may potentially lose customers or experience inefficient transaction processes.

Conversely, SMEs that adopt digital payment systems may be able to reach customers who prefer cashless transactions, maintain more reliable financial records and improve the speed of receiving payments. The extent to which these potential benefits contribute to actual business growth, however, remains insufficiently established for selected SMEs in Lagos State.

The recent evidence from Africa suggests that digital finance can significantly improve SME financial inclusion (Osei-Assibey et al., 2024). However, financial inclusion is only one component of enterprise development. There remains a need to determine whether the financial access created by digital services is translated into increased revenue, profitability, market expansion and other measures of SME growth.

Consequently, the central problem of this study is that despite the rapid expansion of digital financial services in Nigeria and their potential to improve financial access and business efficiency, there is insufficient context-specific empirical evidence on the extent to which these services contribute to the growth of SMEs in Lagos State.

Without adequate evidence, SME owners may be unable to determine which digital financial services provide meaningful business value. Financial institutions and fintech companies may also lack sufficient information about the specific needs of SMEs. Similarly, policymakers may find it difficult to design interventions that encourage digital financial inclusion while ensuring that such inclusion contributes to productive enterprise growth.

It is against this background that this study investigates Digital Financial Services and the Growth of Small and Medium Enterprises in Nigeria: A Study of Selected SMEs in Lagos State. The study will examine the relationship between the use of digital financial services and SME growth and provide empirical evidence that may assist in strengthening digital financial inclusion and enterprise development in Lagos State.

1.3 Aim of the Study

The main aim of this study is to examine the relationship between digital financial services and the growth of Small and Medium Enterprises in Lagos State, Nigeria.

Specifically, the study seeks to:

1. examine the extent to which selected SMEs in Lagos State adopt digital financial services;
2. identify the major digital financial services used by selected SMEs in Lagos State;
3. examine the extent to which digital financial services improve the efficiency of financial transactions among selected SMEs;
4. assess the level of growth of selected SMEs in Lagos State; and
5. determine whether there is a significant relationship between digital financial services and the growth of selected SMEs in Lagos State.

1.4 Research Questions

The following research questions will guide the study:

1. To what extent do selected SMEs in Lagos State adopt digital financial services?
2. What are the major digital financial services used by selected SMEs in Lagos State?
3. To what extent do digital financial services improve the efficiency of financial transactions among selected SMEs?
4. What is the level of growth among selected SMEs in Lagos State?
5. What relationship exists between digital financial services and the growth of selected SMEs in Lagos State?

1.5 Research Hypothesis

The following null hypothesis will be tested at 0.05 level of significance:

H₀: There is no significant relationship between digital financial services and the growth of selected Small and Medium Enterprises in Lagos State.

1.6 Significance of the Study

The study will be significant to SME owners and managers, financial institutions, fintech companies, government agencies, policymakers, researchers and prospective entrepreneurs.

SME Owners and Managers

The study will provide SME owners and managers with evidence concerning the potential contribution of digital financial services to business growth. The findings may help them make informed decisions about adopting digital payments, mobile banking, digital lending and other financial technologies.

Financial Institutions

Commercial banks, microfinance banks and other financial institutions may benefit from the findings by gaining a better understanding of the financial needs and digital behaviour of SMEs. The findings may assist financial institutions in designing products that are more accessible and suitable for small businesses.

Fintech Companies

Fintech companies may use the findings to improve digital financial products and services targeted at SMEs. The study may reveal the factors that encourage or discourage SME adoption, including affordability, convenience, security, reliability and usefulness.

Government and Policymakers

The findings may assist government agencies and policymakers in developing policies that encourage digital financial inclusion and SME development. This is relevant to ongoing national efforts to expand access to inclusive and innovative financial products for MSMEs (World Bank, 2025).

Central Bank and Financial Regulators

The study may provide useful evidence concerning the practical experiences of SMEs with digital financial services. This could inform policies relating to digital payments, financial consumer protection, cybersecurity, fintech regulation and financial inclusion.

Prospective Entrepreneurs

Individuals intending to establish businesses may benefit from understanding how digital financial services can support business operations, financial management and potential growth.

Researchers

The study will contribute to the growing literature on digital finance, financial inclusion and SME development in Nigeria. It may provide a basis for future studies examining specific digital financial services, sectors, geographical areas and dimensions of SME performance.

1.7 Scope of the Study

The study focuses on Digital Financial Services and the Growth of Small and Medium Enterprises in Nigeria, with particular attention to selected SMEs in Lagos State.

Content Scope

The study focuses on digital financial services such as:

• digital banking;
• electronic payments;
• mobile banking and mobile financial services;
• POS-based financial services;
• digital wallets;
• online transfers; and
• digital lending and other fintech-enabled financial services.

The dependent variable is SME growth, which will be considered in terms of indicators such as sales growth, profitability, customer expansion, market expansion, asset growth and employment growth, depending on the availability of appropriate data.

Geographical Scope

The study will be conducted among selected SMEs operating in Lagos State, Nigeria. The study will not cover all SMEs in Nigeria.

Unit of Analysis

The unit of analysis will be selected SMEs and their owners/managers or other appropriate representatives who possess sufficient knowledge of the financial activities and growth of the businesses.

1.8 Operational Definition of Terms

Digital Financial Services (DFS): Financial products and services delivered through digital technologies such as mobile phones, internet platforms, electronic payment systems, digital banking applications and fintech platforms.

Digital Banking: The delivery and management of banking services through electronic channels such as mobile applications, internet banking platforms and other digital interfaces.

Electronic Payment: The transfer of money between individuals or businesses through electronic systems rather than physical cash.

Digital Lending: The provision of loans or credit through digital platforms, often involving online applications, automated assessment and electronic disbursement.

Fintech: The application of technology to provide, improve or automate financial services.

Digital Wallet: An electronic application or platform that allows users to store payment information or digital funds and make or receive transactions electronically.

SME: A small or medium-sized business enterprise operating within the classification and regulatory environment applicable to Nigerian enterprises.

SME Growth: An improvement in the size, capacity, financial performance or market position of an SME, reflected through indicators such as revenue, profitability, employees, assets, customers and market expansion.

Financial Inclusion: The availability and effective use of appropriate and affordable financial products and services by individuals and businesses.

Digital Financial Literacy: The knowledge and skills required to understand, access, evaluate and safely use digital financial products and services.

Business Performance: The extent to which an enterprise achieves its financial and operational objectives, including profitability, sales and efficiency.

Digital Transaction: A financial transaction initiated, processed or completed electronically through digital technology.

1.9 Organisation of the Study

The study will be organised into five chapters.

Chapter One presents the introduction, including the background to the study, statement of the problem, aim and objectives, research questions, research hypothesis, significance of the study, scope of the study, operational definition of terms and organisation of the study.

Chapter Two will review related literature under conceptual review, theoretical review, empirical review and summary of the reviewed literature. The chapter will examine the concepts of digital financial services, financial inclusion, fintech, SME growth and the theoretical relationship between digital finance and enterprise development.

Chapter Three will present the research methodology. It will discuss the research design, population of the study, sample size, sampling technique, research instrument, validity and reliability of the instrument, method of data collection and method of data analysis.

Chapter Four will present, analyse and interpret the data collected from respondents. The research questions will be answered using appropriate descriptive statistics, while the stated hypothesis will be tested at the 0.05 level of significance.

Chapter Five will present the summary of findings, conclusion and recommendations. It will also provide suggestions for further studies.

Project – Digital Financial Services and the Growth of Small and Medium Enterprises in Nigeria: A Study of Selected SMEs in Lagos State