Leasing as an Alternative Source of Finance for Small and Medium Enterprises in Nigeria

73 Pages Posted: 22 May 2020

Date Written: April 26, 2020

Abstract

The research work aims at exploring lease as an alternative source of finance to small and medium enterprises and by studying the challenges of SMEs in accessing leasing finance in Nigeria and whether leasing is preferred to other sources of finance in Nigeria. Relevant journals, articles, and textbooks were reviewed, most especially those relating to small and medium enterprises and leasing. The study population is the registered small and medium enterprises registered and operating in Lagos State, Nigeria while a non-probabilistic, purposive sampling method was used to select a sample size of 60 enterprises from all the major sectors in the economy with the highest from the manufacturing sector.

The instrument validity was established by the research supervisor while the reliability was proven from the pilot study responses. Questionnaires were administered to collect quantitative data from the respondents, most of which are Chief Executive Owners or top-level managers in these organizations who have used or previously considered using lease finance at one point or the other. The research findings revealed that leasing is a good and alternative source of finance for SMEs operating in Nigeria. However, the results also show the challenges small and medium enterprises encounter in accessing lease finance in the country.

Based on the findings, low lease awareness, poor and incomplete financial records, high cost of lease awareness, and discrimination and corruption tendencies of the financial institutions are significant factors that affect small and medium enterprises in accessing lease finance in Nigeria. It was therefore recommended that to mitigate the challenges faced by SMEs, the government must put in place programs and policies that will encourage and spur financial institutions including the lease providers to give concession to small and medium enterprises that desire to access lease finance. Additionally, Equipment Association Leasing of Nigeria (ELAN) who is the umbrella and self-regulating body of all lease providers in Nigeria should offer more educational awareness and training to lessors and lessees and to further use her position to sponsor programs, bills that will promote leasing business in Nigeria.

This study is limited and focuses on only small and medium enterprises that operate in the city and state of Lagos in Nigeria. Future research should be conducted in other states of the country to further and widely test the validity of leasing as an alternative of finance and the challenges faced by small and medium enterprises in accessing the lease finance in Nigeria.

Keywords: Small and Medium Enterprises, Leasing, Capital, Source of Finance

JEL Classification: E,G,M,O

Suggested Citation

Oke, Olusola, Leasing as an Alternative Source of Finance for Small and Medium Enterprises in Nigeria (April 26, 2020). Available at SSRN: https://ssrn.com/abstract=3585546 or http://dx.doi.org/10.2139/ssrn.3585546

Olusola Oke (Contact Author)

University of Northampton ( email )

Park Campus
Boughton Green Road
Northampton, NN2 7AL
United Kingdom

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