OWNER CHARACTERISTICS AND ACCESS TO BANK FINANCING: PERCEPTUAL EVIDENCE FROM SMEs IN NORTH CENTRAL NIGERIA
Keywords:
owner characteristics, Bank Financing, Nigeria, SMEs, Binary LogitAbstract
The study examines the influence of owner characteristics on the access to bank financing in North Central Nigeria. Data were drawn from the primary source through the adaptation of World Bank and OECD Financial literacy questionnaires to elicit responses from the sampled SME owners/ managers in the study area. A sample of 280 SMEs was drawn from the population of 1030 SMEs. Descriptive statistics and binary logit regression model with Marginal effect were employed in analyzing the data. The study found that gender, personal networking and personal relationship with bank are the owner characteristics influencing access to bank finance among SMEs, significant at 0.05, 0.1 and 0.1 respectively, whereas owner’s age, education, experience, financial literacy and personal wealth do not have significant influence on access to bank finance among SMEs in the region. The study concluded that while all the identified owner’s characteristics are complementarily important in financial access, banks are more gender bias, value personal relationship and networking ability of firm owners. The study therefore, recommended among others, the need for SME owners to establish and maintain more undoubted relationships with their banks and form strong linkages with relevant stakeholders in the external environment for better resource exchange including financial access.
References
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Opoku–Mensah, S., & Agbekpornu, H. (2015). Determinants of access to credit by agribusiness operators in the Kumasi metropolis, Ghana. American Journal of Experimental Agriculture, 6(5), 333-346.
Owualah, S. L. (2002). SMEs borrowing constraints and banking relationship in Japan. Japan and the World Economy, 14(1), 87-100.
Pandula, G. (2011). An empirical investigation of small and medium enterprises’ access to bank finance: The case of an emerging economy. Retrieved from http://asbbs. org/files/2011/ASBBS2011v1/PDF/P/Pandula G.pdf
Peci1, F. (2015). What determines the allowance of bank loans for investment –An overview of Kosovo SMEs. International Journal of Innovation and Economic Development, 1(1), 30-39.
Peng, M, & Luo, Y. (2000). Managerial ties and firm performance in a transition economy: The nature of a micro-macro Link. Academy of Management Journal, 43(3), 486–501.
Peng, Y. (2004). Kinship networks and entrepreneurs in China’s transition economy. The American Journal of Sociology, 109(5), 1045–1074.
Rand, J. (2017). Are politically connected firms less constrained in credit markets? World Institute for Development Economics Research Working Paper, 200. Retrieved https://www.econstor.eu/bitstream/10419/190045/1/wp2017-200.pdf
Sayedi, S. N., & Isah, Z. (2013). Entrepreneurs’ characteristics and service quality of micro, small and medium scale enterprises in Nigeria. IOSR Journal of Business and Management (IOSR-JBM), 15(2), 45-56.
Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) (2015). National Policy on Micro, Small and Medium Enterprises. Retrieved from https://www.smedan.gov.ng/images/PDF/NATIONAL-POLICY-ON-MSMEsNew.pdf
Solari, E., Morini-Marrero, S., & Hernández-Estárico, E. (2014, Semptember). Determinants of Credit Constraints in Latin-American SMEs. A paper presented at the 3rd Electronic International Interdisciplinary Conference, Slovakia. Retrieved from file:///C:/Users/Test/Downloads/Determinants%20of%20credit%20co%20(2).pdf.
Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. American Economic Review, 71(3), 393-410.
Subramaniam, R., & Marimuthu, M. (2010). Bank credit card and the selection criteria: An exploratory study. African Journal of Business Management, 4(16), 3463-3472.
Szafrańska,M., & Matysik-Pejas, R (2012). Financial Literacy In SMEs Business Activity in Poland. Retrieved from http://real.mtak.hu/26158/1/Managing_SMEs_2012dec12-FINAL-DOI_CrossRef-Chapter_1.5.pdf.
Talavera, O., Xiong, L., & Xiong, X. (2010). Social capital and access to bank financing: The case of Chinese entrepreneurs. Retrieved from http://www.uea.ac.uk/menu/ depts/eco/research/RePEc/uea/papers_pdf/UEAAFE- 019.pdf
World Bank Enterprise Survey (2014). Enterprise Survey: What Businesses Experience. Retrieved from http://www.enterprisesurveys.org/data/exploretopics/finance#--7
Zia, B. (2009), Valuing financial literacy: Evidence from Indonesia, World Bank Research Publications. www.worldbank.org.
Ahiawodzi, A. K., & Adade, T. C. (2012). Access to Credit and Growth of Small and Medium Scale Enterprises in Ho municipality of Ghana. British Journal of Economics, Finance and Management Sciences, 6(2), 34-51.
Andoh, F.K., & Nunoo, J. (2011). Sustaining small and medium enterprises through financial service utilization: Does financial literacy matter? Retrieved from http://ageconsearch.umn.edu/bitstream/123418/2/Sustaining%20SME%20article. pdf%20Jacob%20Nunoo1. Pdf.
Asika, N. (2006). Research Methodology in Behavioural Sciences. Lagos: LONGMAN Nigeria Plc.
Asteriou, D., & Hall, S. G. (2016). Applied Econometrics. London: UK, Red Globe Press.
Avery, R. B., Bostic, R. W., & Samolyk, K. A. (1998) The Role of personal wealth in small business finance. Journal of Banking and Finance, 22(1), 1019-1061.
Ayyagari, M., Demirguc-Kunt, A., & Maskimovic, V. (2012). Financing of Firms in Developing Countries: Lessons from Research, World Bank Policy Research Working Paper, 6036. Retreivedfromhttp://documents.worldbank.org/curated/en/519991468137095642/Financing-of-firms-in-developing-countries-lessons-from-research.
Balogun, O. A., Agumba, J. N., & Ansary, N. (2016, June). Determinants Predicting Credit Accessibity within Small and Medium-Sized Enterprises in the South African Construction Industry. Paper Presented at the Creative Construction Conference, Budapest, Hungary. Retrieved from https://core.ac.uk/download/pdf/54196512.pdf
Belluci, A., Borisov, A. V., & Zazzaro, A. (2009). Does gender matter in bank-firm. Journal of Banking and Finance, 34 (12), 2968-2984
Biggs, T., & Shah, M. (2006). African SMEs, networks, and manufacturing performance. Journal of Banking and Finance 30(11), 3043–3066.
Claessens, S. (2006). Access to Financial Services: A review of the Issues and Public Policy Objectives. World Bank Research Observer 21(2), 207-240.
Cole, R.A., Goldberg, L. G., & White, L. J. (2004). Cookie-cutter versus character: The micro structure of small business lending by large and small banks. Journal of Financial and Quantitative Analysis 39(2), 227-251.
Coleman, S., and Cohn, R. (2000). Small Firm Use of Financial Leverage: Evidence from 1993 National Survey of Small Business Finances. Journal of Business and Entrepreneurship, 12(3), 81-99.
Deepa, V. (2014). Spreading financial literacy in rural India: An overview of HDFC bank’s initiative in Kerala. European Journal of Applied Social Sciences Research, 1(2), 101-105.
Ekpu, V. U. (2015). The Microstructure of Bank Lending to SMEs: Evidence from a Survey of Loan Officers in Nigerian banks. (Doctoral dissertation, The University of Glasgow,Glasgow,Scotland).Retrievedfromhttp://theses.gla.ac.uk/6811/1/2015ekpuphd.pdf
Fatoki, O., & Asah, F. (2011). The Impact of Firm and Entrepreneurial Characteristics on Access to Debt Finance by SMEs in King Williams’ Town, South Africa. International Journal of Business and Management, 6(8), 170-179.
Hisrich, R.D., & Drnovsek, M. (2002). Entrepreneurship and small business research. Journal of Small Business and Enterprise Development, 9(2), 172-222.
Kira, A. R., & He, Z. (2012) The Impact of Firm characteristics in Access of Financing by Small and Medium Sized Enterprises in Tanzania, International Journal of Business and Management, 7(24), 108-119.
Krejcie, R.V., & Morgan, D.W. (1970). Determining Sample Size for Research Activities. Educational and Psychological Measurement, 30, 607-610.
Lawal, W. A, & Ijaiya, M. A.(2007). Small and Medium Scale Enterprises’ Access to Commercial Banks’ Credits and their Contribution to GDP. Asian Economic Review. 49(3), 359-368.
Le, N. T. B., & Nguyen, T. B. (2009). The Impact of Networking on Bank Financing: The case of Small and Medium Enterprises in Vietnam. Entrepreneurship Theory and Practice, 33(4), 867 887.
Machirori, T., & Fatoki, O. (2013). The impact of networking on access to debt finance and performance of small and medium enterprises in South Africa. Journal of Economics, 4(2), 97-104.
MacRae, D. (1991, September, 2-5). Characteristics of high and low growth small and medium-sized businesses. Paper presented to 21st European Small Business Seminar in Barcelona.
Mijid, N. (2009). Gender, race and credit rationing of small businesses evidence from the 2003 survey of small business finance. Retrieved from http://www.kauffman.org/~/media/kauffman_org/entrepreneurship_scholars/kdf_dissertations/2008/mijid_naranchimeg.pdf.
Mordi, C. N. O., Anyanwu, C. M., Adebusuyi, B. S., Odey, L. I., Amoo, B. A. G., Mbutor, M. O., Adebayo, O. M., Akpan N. I., Igue, N. N., Ibeagha, D., Belonwu, M., Zimboh, S. T (2014). Credit Delivery to Small and Medium Enterprises: Post Bank Consolidation in Nigeria. Central Bank of Nigeria, Occasional Paper, No 53.
Nassar, M. L., & Alarape, A. A. (2018). Relational Embeddedness and Performance of Small and Medium Enterprises in South Western Nigeria. Retrieved from https://www.scribd.com/document/112596707/Alarape-and-Nassar
Opoku–Mensah, S., & Agbekpornu, H. (2015). Determinants of access to credit by agribusiness operators in the Kumasi metropolis, Ghana. American Journal of Experimental Agriculture, 6(5), 333-346.
Owualah, S. L. (2002). SMEs borrowing constraints and banking relationship in Japan. Japan and the World Economy, 14(1), 87-100.
Pandula, G. (2011). An empirical investigation of small and medium enterprises’ access to bank finance: The case of an emerging economy. Retrieved from http://asbbs. org/files/2011/ASBBS2011v1/PDF/P/Pandula G.pdf
Peci1, F. (2015). What determines the allowance of bank loans for investment –An overview of Kosovo SMEs. International Journal of Innovation and Economic Development, 1(1), 30-39.
Peng, M, & Luo, Y. (2000). Managerial ties and firm performance in a transition economy: The nature of a micro-macro Link. Academy of Management Journal, 43(3), 486–501.
Peng, Y. (2004). Kinship networks and entrepreneurs in China’s transition economy. The American Journal of Sociology, 109(5), 1045–1074.
Rand, J. (2017). Are politically connected firms less constrained in credit markets? World Institute for Development Economics Research Working Paper, 200. Retrieved https://www.econstor.eu/bitstream/10419/190045/1/wp2017-200.pdf
Sayedi, S. N., & Isah, Z. (2013). Entrepreneurs’ characteristics and service quality of micro, small and medium scale enterprises in Nigeria. IOSR Journal of Business and Management (IOSR-JBM), 15(2), 45-56.
Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) (2015). National Policy on Micro, Small and Medium Enterprises. Retrieved from https://www.smedan.gov.ng/images/PDF/NATIONAL-POLICY-ON-MSMEsNew.pdf
Solari, E., Morini-Marrero, S., & Hernández-Estárico, E. (2014, Semptember). Determinants of Credit Constraints in Latin-American SMEs. A paper presented at the 3rd Electronic International Interdisciplinary Conference, Slovakia. Retrieved from file:///C:/Users/Test/Downloads/Determinants%20of%20credit%20co%20(2).pdf.
Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. American Economic Review, 71(3), 393-410.
Subramaniam, R., & Marimuthu, M. (2010). Bank credit card and the selection criteria: An exploratory study. African Journal of Business Management, 4(16), 3463-3472.
Szafrańska,M., & Matysik-Pejas, R (2012). Financial Literacy In SMEs Business Activity in Poland. Retrieved from http://real.mtak.hu/26158/1/Managing_SMEs_2012dec12-FINAL-DOI_CrossRef-Chapter_1.5.pdf.
Talavera, O., Xiong, L., & Xiong, X. (2010). Social capital and access to bank financing: The case of Chinese entrepreneurs. Retrieved from http://www.uea.ac.uk/menu/ depts/eco/research/RePEc/uea/papers_pdf/UEAAFE- 019.pdf
World Bank Enterprise Survey (2014). Enterprise Survey: What Businesses Experience. Retrieved from http://www.enterprisesurveys.org/data/exploretopics/finance#--7
Zia, B. (2009), Valuing financial literacy: Evidence from Indonesia, World Bank Research Publications. www.worldbank.org.
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2020-06-30
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OWNER CHARACTERISTICS AND ACCESS TO BANK FINANCING: PERCEPTUAL EVIDENCE FROM SMEs IN NORTH CENTRAL NIGERIA. (2020). Timisoara Journal of Economics and Business, 13(1), 45-62. https://www.tjeb.ro/index.php/tjeb/article/view/331
