Bank Lending Behaviour and Small Enterprise Debt Financing




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Peer reviewed



Our reason for concern is the rapid decline in loans to small enterprises which is critical to their performance, compared to large businesses following the periods of banking reformations in Nigeria. Thus, the primary purpose of this paper is to investigate the influence of risk perception on bank lending behaviour to small enterprises. It also investigates the impact of government intervention, consolidation, and recapitalization on the relationship between risk perception and bank lending behaviour to small enterprise. This study empirically analysed (ordinary least square) secondary data obtained from the Central Bank of Nigeria Statistical Bulletins, Annual Statement of Accounts covering the period 1992-2020. The results show that the absence of government interventions and the presence of banking reformations have statistically negative significant effect on bank lending to small enterprises. Our findings challenge the argument that generally assumes risk aversion of banks towards small enterprise lending because of small enterprise’s inability to prove their credit worthiness and consequently constraining access to finance to the sector. Instead, the results and analysis from this study found theoretical support for the variation of bank behaviour in lending to small enterprises depending on the status of wealth of the financial system. A key lesson from this study for government concerned about promoting performance of the small enterprise sector is that regulating and enforcing lending requirements on access to debt financing of the sector is necessary if constraints in access debt finance is to be eliminated. Second, while strategies such as bank consolidation, recapitalization etc. may help strengthen and make financially robust the banking system; it places the banks in a gain position where losses looms to them than gain.


The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.


Bank lending behaviour, Prospect theory, Debt finance, Risk perception, small enterprises


Ogunmokun, O.C., Mafimisebi, O. and Obembe, D. (2022) Bank Lending Behaviour and Small Enterprise Debt Financing. Journal of Entrepreneurship in Emerging Economies,


Research Institute

Centre for Enterprise and Innovation (CEI)