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CBN initiated together with the Bankers Committee In 1999, an interventionist strategy called the Small and Medium Industries Equity Investment Scheme (SMIEIS). This scheme requires banks to set aside 10 percent of their profit before tax to fund SMEs in an equity participation framework. (Ogujiuba, 2004). SMIEIS requires all banks in Nigeria to set aside 10% of their PBT for equity investment in SMEs (revised to 5% from end 2006) ( Oyekunmi, 2006)

According to Mambula (1997), since its independence, the small business development programs have generally yielded poor results, despite the immense amount of money invested by the Nigerian government. But this can be associated to the fact that these funds hardly reached the SMEs business because funds got lost to bureaucratic bottle neck and end up in accounts of public office holders. It has however been worrisome that despite the incentives, policies, programmes and support aimed at revamping the SMEs, they have performed rather below expectation in Nigeria.

4.5 Funding opportunity for SMEs

To assist SME development, priority should be given to financial reforms and appropriate financing. Effective financing of SMEs should include regulatory reform the creation of a friendly business environment for doing business, the extension of guarantees to local banks to entice them to lend in local currency (e.g. USAID Development Credit Program), tax incentives for rewarding companies that agree to have their financial statements audited, the creation of equity funds suitable for SMEs, financial incentives for partnerships, etc. (Bercy, 2005).

SMEs being very unique and important and because of their relative small size can be negatively affected by changes in the financial institution especially banks during crisis period. The credit availability to SMEs is very important and significant not only from a theoretical point of view but also for policy purposes.

In many countries different innovation have enthused extensive restructuring in the financial sector. Commercial banks have engaged in mergers and acquisitions, which has lead to the vanishing of many small credit institutions and appearance of complex financial conglomerates. Merger has open previously isolated markets due to the lifting of geographical barriers hence reducing market segmentation. SMEs can be funded in two major ways; internal finance, concerned with getting money from personal savings and from friends and relatives and external finance when the company grows and begins to expand. External financing is sourced from most financial institutions. There are two notable variants of external finance and these include debt financing and equity financing.

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