EFFECT OF INTEREST RATE ON INVESTMENT AND PRODUCTION IN SMALL AND MEDIUM SCALE ENTERPRISES: CASE STUDY OF SELECTED COMPANIES IN EDO STATE

F.F. Asekhame and O.N. Aibangbee

 Department of Mechanical Engineering

Igbinedion University, Okada.

Email: oaibangbee@gmail.com

ABSTRACT

An empirical study to appraise the effect of interest rate on investment and production in small and medium scale industries is presented here. Data collected using the questionnaire administered to the various companies was analysed, using statistical tools namely Cochran Q-test and percentage analysis. The Cochran Q-test was used to analyse the part of the questionnaire that required a Yes/No response, while the percentage analysis was done to ascertain the percentage of respondents that answered a particular question. With the Cochran model applied on the responses, a computed value of Q_cal =40.722 was obtained while a value of 23.68 at 95 percent of significance was obtained from the Cochran table. With the calculated value higher than the value from the table, it can be said that the data collected during the study does not provide sufficient evidence for us to accept the null hypothesis (H_o) which argued that there are no laid down criteria for Yes/No response. Hence the alternative hypothesis which clearly depicts the reality of the questions asked was accepted.  From the percentage analysis, it was deduced that 60% of firms got their initial finance from personal resources, while 33.33% got their finance from relatives and none of the firms got its initial finance from the bank. 73.33% of the firms gave their reason for not going to the bank for their initial finance as due to high interest rate, while 26.67% gave their reason as due to lack of collateral.

Keywords: Interest Rate, Investment, Production, Entrepreneurs