FIRM CHARACTERISTICS AND ACCESS TO BANK FINANCING: EVIDENCE FROM SMES IN NORTH CENTRAL NIGERIA
The paucity of finance to SMEs, widely reported in the literature has continued to undermine the potential of the sector as a driver of economic growth. This scourge has partly been blamed on the SMEs’ observable characteristics. However, the dearth of comprehensive research in this area portends the need for further studies especially in the north central Nigeria where the problem is reportedly endemic. Against this backdrop, the study examines, from both SMEs and banks’ viewpoints, the impact of firm characteristics on access to bank financing in the north central Nigeria. The study drew data from the primary source through the adaption of World Bank and OECD financial literacy questionnaires. A sample of 280 SMEs and 207 loan officers were drawn the population of 1030 SMEs and 448 banks respectively. Descriptive statistics, binary logit regression model with marginal effect and Kruskal Wallis H were employed in analyzing the data. From SMEs’ perspective, the results revealed that firm age, incorporation status and industry which are significant at 0.05, 0.01 and 0.1 respectively, are the firm specific characteristics impacting on access to bank finance among SMEs. Whereas firm size is insignificant. From banks’ perspective, all the selected firm characteristics, which are all significant at 0.01, are the factors influencing banks’ credit approval for SMEs in the north central Nigeria. The study concluded that SMEs in the north central Nigeria encounter serious paucity of finance as they are virtually oblivious of, or not fully exploring all firm related factors influencing their access to facilities especially from banking institutions. The study therefore, recommended that SMEs should fully explore all firm factors, at individual level, for improved access to financial market. Also, they should synergise by forming strong alliance and solicit credits as a consortium rather than as individual units to facilitate better access and at relatively cheaper costs.
