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 South-Western 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.

Key Words: Credit Access, Land, Formal Title, SMEs, South-Western Nigerian