Bank Lending Practices and Growth of Small and Medium Enterprises in Enugu State

Access to bank credit remains one of the most persistent constraints on the growth of small and medium enterprises (SMEs) in Nigeria, with restrictive lending practices, high collateral requirements, and elevated interest rates limiting the financing options available to enterprises in states like Enugu. This study examined the relationship between bank lending practices and the growth of SMEs in Enugu State, with focus on firms that had sought commercial bank credit within the past five years. The study was anchored on the financial intermediation theory, which describes the role of banks in mobilizing savings and channeling them to productive enterprises, thereby facilitating economic growth. A survey research design was adopted, with a population of 460 SME owners and managers across manufacturing, trading, and services subsectors in Enugu State. A sample of 213 was drawn using stratified random sampling. A validated questionnaire was administered, and data were analyzed using multiple regression analysis and descriptive statistics. Findings indicated that loan approval rates, loan terms flexibility, and processing time significantly predicted SME growth, measured by revenue growth and employment expansion. Collateral requirements and interest rate levels were significantly negatively associated with SME credit access and subsequent growth. The study concluded that restrictive bank lending practices constrain SME growth potential in Enugu State. It was recommended that the Central Bank of Nigeria should strengthen the enforcement of its SME-directed credit facilities and incentivize commercial banks to reduce collateral thresholds for businesses with strong cash flow records.

Keywords: Bank lending, small and medium enterprises, financial intermediation theory, credit access, SME growth