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THE ROLE OF BANK LOAN AND INFORMAL FINANCIAL INSTITUTION FINANCING ON INVESTMENT: EVIDENCE FROM NIGERIA

Purpose: This study aimed to identify the effectiveness of bank loan and informal financing of businesses in achieving increased investment. The study also aimed to ascertain if money supply is related to investment. 
Methodology: This study adopted co-integration with vector error correction and Granger causality technique to investigate the impact of bank loan on investment computed from time series data covering the period of 1982-2019. Furthermore, this study uses logistic regression analysis to ascertain if informal external finance to businesses increases investment. The study covered a sample size of 265 small and medium scale enterprises using a structured questionnaire with random sampling technique to investigate the role of informal financial institution financing in investment in Nigeria.  
Findings: The empirical evidence from the normalised long run equilibrium indicates that bank loan and money supply positively relate to investment. The short run dynamics supports the co-integration results by being appropriately signed and statistically significant. Results from the diagnostic tests suggest that the long run and short run results are not spurious. Result from logistic regression analysis shows that informal external finance to businesses contributes to investment. Thus, good policies should be put in place to encourage informal and formal financial institutions to give loans to business enterprises. 
Unique contribution to practice and policy: Its unique contribution to practice and policy is that this study empirically reveals how Nigeria’s investment can be improved using post-Keynesian endogenous model. Consequently, policy makers will shift in line with the findings. Policy makers should ensure that policies that encourage formal and informal financial institutions to give loans to businesses are put in place to help improve the level of investment in Nigeria.