Bank Credit Availability to SMEs in Nigeria: The Impact of Firm and Owner Characteristics

Abstract

This study empirically examines the effect of firm and owner characteristics on the availability of bank credit to small and medium size enterprises (SMEs) in Nigeria using firm-level data from the World Bank Enterprise survey. We found that SMEs with a financial statement and an audited financial statement are more likely to have credit than SMEs that don’t. Medium sized firms are more likely to have credit than small firms whilst higher performing firms are more likely to have credit than SMEs that have lower performance. Additionally, we also found that firms with a sole proprietor are less likely to have credit than partnerships or corporations. These findings provide empirical support to the theory that a reduction in information asymmetry reduces the perceived higher lending risk and hence the bank is more likely or willing to lend in these circumstances.

Keywords: Firm and owner characteristics; Bank credit; SMEs; Nigeria