ABSTRACT:

This study examines the performance of Micro finance Institutions (MFIS) in Lagos State, based on the development of small and medium Scale Industry. Simple random sampling technique was employed in selecting the 110 (SMES)s that constituted the sample size of the research. Structured questionnaire was designed to facilitate the collection of relevant data which was used for the analysis. Descriptive statistics which involves simple percentage ,and Chi-square (contingency test). The findings indicate that the operations of MFIs have grown phenomenally in the last three years, driven largely by expanding informal sector activities, the conversion of the community banks to micro finance banks and the reluctance of banks to fund the emerging micro enterprises. The study also reveals the sub-sector faces a number of challenges, which have been addressed in this research. They include the urgent need to approved and implement a policy framework that would regulate and standardize the MFI operations; -accessing medium to long term sustainable commercial sources of funds, such as SMIEIES. Commercial banks traditionally lend to medium and large enterprises, which are judged to be creditworthy. They avoid doing business with the small and medium scale industry because the associated cost and risks are considered to be relatively high. Microfinance institutions (MFIs) have therefore become the main sources of funding small and medium scale industry in Africa and in other developing regions.