INFLUENCE OF FIRM CHARACTERISTICS ON LOAN APPROVAL FOR SMEs IN NORTH CENTRAL NIGERIA: BANKERS’ PERCEPTION
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Date
2020
Journal Title
Journal ISSN
Volume Title
Publisher
MALETE JOURNAL OF ACCOUNTING AND FINANCE
Abstract
The scourge of paucity of finance to SMEs which has been undermining their potential as drivers
of economic growth has been blamed partly on firm related characteristics. However, the fact that
little has been done in this regard from the supply side (banks) spurs this research. This study
investigates the influence of firm specific characteristics on loan approval for SMEs in North
Central Nigeria. Data was drawn from the primary source through the use of questionnaires to
elicit responses from the sampled bank loan officers in the study area. A sample of 207 was drawn
from the volunteer loan officers in 448 branches using multistage sampling technique. Descriptive
statistics and Kruskal Wallis H were employed in analyzing the data. The study found that all the
identified firm characteristics (size, age, incorporation, industry, financial information, location
and collateral), which are all significant at 0.01 but with varying degrees, are the factors
influencing banks’ credit approval for SMEs in the North Central Nigeria. The study concluded
that while banks attach greater importance to firm size, firm age and location in their loan decision
for SMEs, they also give consideration though lesser, to other factors. The study thus
recommended among others, the need for SMEs to synergize and borrow as consortium rather
than as individual units. This will facilitate improved financial access and economies of scale in
terms of relatively reduced loan costs. Similarly, SMEs should also consider setting up urban
offices to achieve close proximity to their banks for better financial access.