SME decision making in using bank loans: applying an adapted model with attitudinal variables of the theory of planned behaviour in Nigeria

Abstract

The financial constraints that exist for SME has received increased attention in recent years. Intervention programmes by governments to improve access to finance for businesses has mainly focused on supply side measures, through seeking to stimulate supply, by creating new financing channels and easing regulatory barriers in the supply of finance. This is based on general assumption that the issue of access to finance is as a result of insufficient supply of external finance for businesses; however, there is increasing recognition that demand side issues also hinder access to finance, and these demand side deficiencies impede the effectiveness of supply side interventions.This study focuses on the demand side perspective, it builds on the Theory of Planned Behaviour (TPB) and proposes and validates an adapted model that examines the relationship between attitudinal factors and the intention of SMEs to use bank loans in Nigeria. The adapted TPB model used attitudinal variables (perceived trust, attitude, perceived social norm, and perceived behavioural control) to understand SME financial decision (intention use bank loans), and captures various antecedent variables that influence these attitudinal factors. The cross-sectional survey study was conducted in Nigeria.The study used Structural Equation Modelling (SEM) to analyse the data. PLS SEM was used to test the hypothesized relationships between the antecedents, attitudinal factors, and intention to use bank loans. The findings indicate that attitudinal factors which consist of attitude, perceived behavioural control, perceived social norm, and perceived trust predicts SME intention to use bank loans in Nigeria. The result also showed that key antecedent factors such as financial literacy, perceived risk, normative beliefs, self-efficacy, perceived quality of loan information are antecedents to these attitudinal factors.The study successfully implemented a psychology-based theory in SME financing decision context. It highlights the importance of incorporating psychology theories to gain further understanding on noneconomic factors that impact decision making of SMEs. Traditionally, capital structure research adopts capital structure theories to understand and explain the determinant of SME financial decision making. However, this study argues that psychology based theories provide a more robust understanding of the judgement and behaviours of these actors (SMEs) especially in developing countries, because these theories examine causal influences and explain relationships.The study also makes empirical contribution by providing empirical evidence on the noneconomic determinant to SME financial decision making, demand side perspective, and emerging country context. The implication of the result for practise and policy is that local and international intervention agencies tasked with the responsibility of easing access to finance for small businesses in Nigeria can use these findings to develop more robust and effective intervention programs. In addition, the findings can inform policy direction at government level, government policies can benefit from this study by incorporating the results to inform long term policies that can address the institutional and structural factors that creates barriers SMEs financing in Nigeria. The study can also be used to formulate policies that can assist in modifying the behaviour of discouraged finance seekers and stimulate demand for external finance with the aim of reducing the financing gap and enhancing growth of small businesses in particular and economic growth in general in Nigeria.

Date of Award	2019
Original language	English
Awarding Institution	University of Bedfordshire
Supervisor	Sandar Win (Supervisor) & Guangming Cao (Second supervisor)