Small and Medium Enterprises (SMEs) are increasingly being accepted as valuable platforms to create jobs and improve
livelihoods. The Nigerian government has enacted favorable laws and regulations on contracts, leasing, and corporate tax to
encourage the development of SMEs. Nonetheless, many entrepreneurs in Nigeria cannot access loans given the high levels
of poverty. The paper argues that microenterprise finance cannot be financially viable because small loans are too costly to
administer and the profits from such lending too meager to permit profitability. Based on content analysis of available literature,
it is found that microfinance institutions have collapsed in Nigeria due to poor loan quality, default in loan repayment, high
transaction costs, widespread delinquency, and management deficiencies. Given these challenges, the paper recommends
savings by microfinance institutions and measures from successful initiatives from countries such as Indonesia and
Bangladesh. These will enable microfinance institutions to be self-sustaining and to increase outreach.