Barriers to Accessing Financial Institutions Funding for Nigerian SMEs

Small businesses are recognized worldwide as a catalyst of socioeconomic development. Like all developed and developing countries, due to the economic importance of SMEs, the federal government of Nigeria is developing policies and strategies to diversify its economy from total dependence on oil. Part of the economic development diversification effort by the federal government of Nigeria is to develop entrepreneurship and small businesses. The most crucial aspect of SMEs in Nigeria is their contribution to employing most citizens. Despite the importance of socioeconomic development, most SMEs fail within the first five years. Many challenges are facing SMEs in Nigeria, which resulted in their failure. Although financial resources have been a critical success factor to SMEs, they find it difficult to access financial institutions funding to finance innovation and business opportunities to ignite success and growth. Many studies had identified numerous barriers to access to financial institutions funding, but they apply to locations of the findings. The objective of this paper was to identify the barriers that are preventing small businesses from accessing financial institutions funding in Nigeria. In this study, 296 small business owners/managers participated in a quantitative self-administered survey, and 15 owners/managers with adequate knowledge of small business managers participated in a semi-structured interview. The mixed research method revealed four barriers to accessing financial institutions funding to Nigerian SMEs: inadequate access to financial institutions; inadequate education, skills, and experience of owners/managers; exorbitant interest rates; and gender discrimination. The study made seven recommendations for removing the barriers which might spur financial institutions' funding of SMEs in Nigeria. Improving access to financial institutions funding will increase success and growth, reducing unemployment and igniting socioeconomic development as envisaged by the federal government of Nigeria. The study concluded that most of the recommendations would be implemented by government and regulators through appropriate policies and strategies that will increase the access of small business financial institutions funding.