Bankers’ Perceptions of Successful SMEs Loan Applications: A Case Study from Libya

Abstract

This paper investigates the criteria used by loan officers at Bank Al Tanmeya when assessing SMEs loan applications and the most frequent reasons that lead to turn these applications down. To achieve this, a qualitative research method was adopted. The data were gathered using semi-structured interviews with loan officers at the bank. The results show that the ability to provide collateral and good business plans alongside the profitability of the business are very important. Other criteria such as the applicants’ credit history, their business experience and the type of business activity are also important. Further, the results indicate that SMEs loan applications are generally rejected on the ground that they are not robust enough from the bankers’ viewpoint. While lack of collateral is the most frequent reason, other reasons include weaknesses in business plan, concerns about the loan repayment, and doubts about the viability of business ventures. These results have the ability to increase awareness and broaden understanding of the factors that may affect SMEs access to bank loans from a supply side perspective.