Effect of Business Credit Availability on SMEs Growth of Selected Small and Medium Enterprises in North Central, Nigeria.

Abstract

Small and medium-sized enterprises (SMEs) play a central role in national development, yet their growth in developing economies remains constrained by limited access to credit. This study investigates the effects of business credit availability measured through information asymmetry, bank density, and credit rationing on SME growth in North Central Nigeria. Drawing on Financial Intermediation Theory, a cross-sectional survey design was adopted, and data were collected from SMEs across six states using a multi-stage sampling technique. A total of 843 questionnaires were administered, of which the valid responses met the minimum threshold for structural equation analysis. Partial Least Squares Structural Equation Modelling (PLS-SEM) was employed to evaluate both the measurement and structural models. Results showed that all three dimensions of credit availability significantly influence SME growth, with bank density exhibiting the strongest positive effect (β = 0.290, p < 0.001), followed by credit rationing (β = 0.253, p < 0.001) and information asymmetry (β = 0.141, p = 0.005). The model explained 37.4% of the variance in SME growth, indicating moderate predictive power. The findings underscore the importance of financial infrastructure, inclusive banking networks, and improved credit allocation mechanisms in fostering SME performance. The study concludes that addressing structural bottlenecks in credit markets is essential for unlocking the growth potential of SMEs in the region and recommends policies that expand bank presence, reform lending practices, enhance credit information systems, and support fintech-enabled financing. These insights contribute to ongoing discourse on SME financing and offer actionable implications for policymakers, financial institutions, and development agencies seeking to strengthen the SME ecosystem in Nigeria.