An Examination of the Role of Accounting Records in SME Access to Bank Loans in Nigeria: A Case Study of SMEs in Ogun State
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Background of the Study
Accounting records are indispensable tools for business operations, serving as evidence of a business’s financial health and performance. For small and medium-sized enterprises (SMEs), maintaining accurate and systematic accounting records is particularly critical for securing bank loans. In Ogun State, a region with significant SME activity, limited access to credit facilities has been identified as a major impediment to SME growth. Studies suggest that poorly maintained accounting records are a key reason for loan rejection by banks (Adeoye & Ayodele, 2024).
While banks emphasize the importance of credible financial information in assessing loan applications, many SMEs in Ogun State lack the expertise or resources to maintain proper records. Factors such as inadequate financial literacy, reliance on informal business operations, and the absence of standardized documentation practices exacerbate this issue. Addressing the gap between record-keeping and credit access is vital for empowering SMEs to achieve sustainable growth (Olalekan & Ebunoluwa, 2025).
Statement of the Problem
The lack of proper accounting records among SMEs in Ogun State has limited their ability to secure bank loans. Financial institutions require well-documented records to assess creditworthiness, but many SMEs operate informally, with incomplete or inaccurate financial information. This disconnect has restricted access to much-needed capital, stalling the growth and expansion of SMEs. Despite its importance, there is limited research exploring the specific role of accounting records in facilitating bank loans for SMEs in Ogun State.
Objectives of the Study
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To assess the role of accounting records in SME access to bank loans in Ogun State.
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To identify challenges faced by SMEs in maintaining adequate accounting records.
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To recommend strategies for improving accounting practices among SMEs to enhance loan accessibility.
Research Questions
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How do accounting records influence SME access to bank loans in Ogun State?
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What challenges do SMEs face in maintaining proper accounting records?
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What strategies can improve accounting practices among SMEs in Ogun State?
Research Hypotheses
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H₀: Accounting records do not significantly influence SME access to bank loans in Ogun State.
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H₀: Challenges in maintaining accounting records do not significantly affect SME loan accessibility.
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H₀: Improved accounting practices do not significantly enhance SME access to bank loans.
Scope and Limitations of the Study
This study focuses on SMEs in Ogun State, examining their accounting record practices and their impact on bank loan accessibility. It excludes non-SMEs and financial institutions outside Ogun State. Limitations include potential reluctance of SMEs to disclose financial data and variability in record-keeping practices.
Definitions of Terms
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Accounting Records: Financial documents that detail a business’s income, expenses, assets, and liabilities.
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SMEs: Small and medium-sized enterprises operating with limited resources and scale.
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Bank Loans: Credit facilities provided by financial institutions to businesses based on creditworthiness.
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