Formal Land Titling vs. Small and Medium Enterprises’ (SMEs’) Access to Credit: The South-Western Nigerian Experience

Abstract

SMEs play vital roles in national economic development. However, lack of formal land title often times deprived them the right to use assets as collateral. The wealth entrenched in assets is thus not properly being deployed. Hence, this study expounded the impact of formal titling on access to credit from the viewpoints of entrepreneurs in the SouthWestern Nigeria. To achieve this, questionnaires were distributed to 200 randomly selected SMEs across the study area. Data gathered were analyzed using descriptive and inferential statistical analysis. Findings showed that the ratio of commercial banks' loans to SMEs compared to private sector is at lower ebb. There were significant differences in some of the factors influencing SMEs in case study areas. In addition, the study revealed collateral, firm staff strength, firm's age and annual financial statement as having significant effect and positive relationship on SMEs access to credit. The outcome of the study will assist stakeholders in SMEs, relevant government institutions and government to understand the significance of land titling in the provision of loan to SMEs. It would also contribute to relevant policy aimed at encouraging land titling among SMEs in order to further bridge SME financing gap due to collateral.