The effect of capital rationing on business growth: A study of Interswitch Nigeria
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Background of the Study
Capital rationing occurs when a company has limited resources available to invest in its projects and, therefore, must prioritize certain investments over others (Nwoke & Okafor, 2024). Interswitch Nigeria, a leading payment technology company, operates in a rapidly evolving financial technology sector where innovation, scalability, and market expansion are crucial for maintaining competitive advantage. However, the company must balance these needs with its available financial resources, leading to capital rationing decisions that determine which projects or opportunities receive funding (Ajayi & Adejumo, 2024).
The impact of capital rationing on business growth has been a subject of interest, particularly in companies operating in sectors that require heavy investment in technology and infrastructure, such as the fintech sector in Nigeria. For companies like Interswitch, capital rationing affects both short-term and long-term growth strategies, influencing decisions on technology upgrades, market expansion, and research and development (Abiola & Akinmoladun, 2025). Effective capital rationing can lead to better decision-making, enabling firms to focus on high-return projects, while poor capital rationing practices may hinder growth and innovation.
This study seeks to explore the effects of capital rationing on Interswitch’s business growth, analyzing how the company allocates its resources to maximize growth opportunities within the constraints of limited capital.
Statement of the Problem
The challenge of capital rationing in the fintech industry, particularly in the context of Interswitch Nigeria, lies in balancing the need for expansion and innovation with the available financial resources. Although capital rationing is a common practice in businesses, limited research has focused on its direct effects on the growth of fintech companies in Nigeria. This study aims to explore the consequences of capital rationing on Interswitch’s business growth and how it influences the company’s investment strategies and competitive positioning.
Objectives of the Study
- To evaluate the effect of capital rationing on the growth strategies of Interswitch Nigeria.
- To assess how Interswitch Nigeria allocates its resources in the face of capital rationing.
- To identify the challenges faced by Interswitch Nigeria in implementing effective capital rationing.
Research Questions
- How does capital rationing affect the growth strategies of Interswitch Nigeria?
- How does Interswitch Nigeria allocate its resources under capital rationing conditions?
- What challenges does Interswitch Nigeria face in implementing effective capital rationing?
Research Hypotheses
- H₀: Capital rationing does not significantly affect the growth strategies of Interswitch Nigeria.
- H₀: Interswitch Nigeria does not allocate its resources optimally under capital rationing conditions.
- H₀: There are no significant challenges faced by Interswitch Nigeria in implementing capital rationing effectively.
Scope and Limitations of the Study
This study will focus on Interswitch Nigeria, particularly examining how capital rationing affects its growth and resource allocation decisions. Data will be gathered from interviews with management and financial personnel, as well as a review of financial statements and strategic plans. Limitations may include access to proprietary information and potential biases in responses from internal stakeholders.
Definitions of Terms
- Capital Rationing: The practice of limiting the amount of capital allocated to investment opportunities, often due to financial constraints.
- Growth Strategy: The strategic plans and initiatives undertaken by a company to expand its market share, increase revenue, and enhance competitiveness.
Resource Allocation: The process of distributing available capital to various projects and investments.
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