Small and medium enterprises are supposed to playa central role in the drive for economic development of the country. There is however a consensus' that these small and medium enterprises have largely failed to ·deliver on this score. Lack of access to credit from financial institutions has been identified as constituting the greatest clog in the wheel of progress for small and medium enterprises. This research work seeks to appraise the process of analysing credit requests on small and medium enterprises in. the Lagos Metropolis using Bank PHB as a case study. In carrying out this research study, questionnaire was used as the instrument and chi-square also was used for the testing of the hypothesis formulated with the use of non-parametric statistical techniques. The management and staff of Bank PHB PIc was used as the respondents which relevant question was structured to sought respondent's opinion on the credit analysis on small and medium enterprises by banks. It was recommended that a mechanism should be put in place whereby governments at various levels could guarantee SMEs loans availed by banks.


Title Page    -    -    -    -    -    -    -    -    -   

Approval Page    -    -    -    -    -    -    -    -   

Declaration    -    -    -    -    -    -    -    -   

Dedication    -    -    -    -    -    -    -    -    -   

Acknowledgement    -    -    -    -    -    -    -   

Abstract    -    -    -    -    -    -    -    -    -   

Table of Contents    -    -    -    -    -    -    -   


1.1    Background of the Study    -    -    -    -    -   

1.2    Statement of the Problem    -    -    -    -   

1.3    Objectives of the Study    -    -    -    -    -    -   

1.4    Research Questions    -    -    -    -    -    -   

1.5    Research Hypothesis    -    -    -    -    -    -   

1.6    Significance of the Study    -    -    -    -    -   

1.7    Scope of the Study    -    -    -    -    -    -   

1.8    Limitations of the Study    -    -    -    -    -

1.9    Definition of Terms    -    -    -    -    -    -   


2.1    Introduction    -    -    -    -    -    -    -   

2.2    Theoretical Framework    -    -    -    -    -   

2.3    Conceptual Framework    -    -    -    -    -   

2.4    Empirical Review    -    -    -    -    -    -


3.1    Introduction    -    -    -    -    -    -    -   

3.2    Research Design    -    -    -    -    -    -   

3.3    Population of Study    -    -    -    -    -    -   

3.4    Sample size and Sampling Techniques    -    -    -   

3.5    Method of Data Collection    -    -    -    -    -   

3.6    Research Instrument

3.7    Validity of the Instrument    -    -    -    -    -   

3.8    Reliability of the Instrument    -    -    -    -   

3.9    Sampling Method    -    -    -    -    -    -   


4.1    Introduction    -    -    -    -    -    -    -   

4.2    Data Presentation and Analysis    -    -    -    -   

4.3    Testing Hypothesis    -    -    -    -    -    -   


5.1    Summary    -    -    -    -    -    -    -    -   

5.2    Conclusion    -    -    -    -    -    -    -    -   

5.3    Recommendations    -    -    -    -    -    -   

    References -    -    -    -    -    -    -    -   

Appendix    -    -    -    -    -    -    -    -




According to Nwankwo (1990), since the first formal bank was established in 1656 in Sweden, the banking industry has always been a pervading institutional player in any given economy, being the only sector that thrives on other people's money. Although element of the practice of banking has always existed both In pre and post-colonial periods, the introduction of modern banking in Nigeria dates back to 1892 when the African Banking Corporation (ABC) came into existence, engaging in commercial activities. This bank was later changed to Bank of British West Africa (BBWA) in 1894, now the First Bank of Nigeria Plc. Other banks have since sprung up in the financial landscape offering a variety of innovative financial products to their ever-burgeoning clientele.

According to Enyinnaya (1991), granting of credits is one of the fundamental and basic functions of banks and other financial institutions. By their nature, banks intermediate between savers and users of funds, i.e., banks source funds from economic sectors with surplus funds in form of deposits, and disburse the same to economic units that need them for various purposes in form of credits or loans. Aside from providing the fiduciary responsibility on depositor's funds, granting of loans appears to be the next most important function of banks since this activity represents one of the key sources of income for banks generally. However, in considering requests for loans, income or profit motivations do not and should not prevent the lending financial institution from ensuring that the loan together with associated interest income is repaid fully and timely. One of the surest ways of ensuring that a credit facility together with its related interest income gets fully and timely repaid is through a thorough credit analysis. This analysis as basis for determining worthy customers to be availed credit facility is done for all categories of customers including individuals, corporate organizations, and in some instances, governments including its agencies and parastatal. In a profit driven market economy like ours in

Nigeria, the major borrowers are organizations in the private sector. Even amongst players in the private sector, the small and medium scale industries are rated as having a large appetite for credit. This is not surprising, as small and medium enterprises constitute an important segment partly due to the fact that the sub sector has been widely known as the backbone of many economies and their engine of growth and development.


We had acknowledged the central role to be played by small and medium enterprises industries in the drive for economic development of the country. There is however a consensus those small and medium enterprises have largely failed to deliver on this score (Bunmi, 2002). The immediate past CBN Governor in a key note address at the national summit on "Revamping small and medium scale industries" organised by the Manufacturers Association of Nigeria (MAN) at the MAN House, Ikeja on March 04, 2004, laid this failure squarely on the absence of what he termed critical success factors including:

i.    Competent entrepreneurship

ii.    Technical and managerial skills; as well as

iii.    Enabling environment for investment in small and medium scale industries.

He listed other constraints to include:

·    Poor access to money and capital markets. >High rate of enterprise mortality.

·    Shortage of skilled manpower.

·    Financial indiscipline.

·    Lack of infrastructural facilities.

·    Poor policy implementation.

·    Poor management practices and low entrepreneurial skill base.

·    Restricted market access.

·    Overbearing regulatory and operational environment.

However, he singled out lack of access to credit from financial institutions as constituting the greatest clog in the wheel of progress for small and medium enterprises (Olowe, 1998). This research work seeks to appraise the process of analysing credit requests of small and medium enterprises by banks in the Lagos Metropolis using Bank PHB as a case study.


The objective of this is to examine the credit analysis on small and medium enterprises by banks with reference to Bank PHB. The specific objectives are:

1)    To determine the level of credit demanded by banks

2)    To examine the criteria emphasized in credit analysis on small and medium scale enterprises (SMES)

3)    To identify the credit monitoring and follow-ups for small and medium enterprises.

4)    To identify the average time fir the analysis and approval of credit

5)    To determine what can be done to reverse the trend identified in small and medicine scale enterprises.


(1)    What is the level of credit demanded by banks?

(2)    What is the criteria emphasis in credit analysis on small and medium scale enterprises (SMES)?

(3)    Does credit monitoring and follow-ups for small and medium scale enterprises worthwhile?

(4)    What is the average time for the analysis and approval of credit?

(5)    Is there a solution to the reverse of trend identified in small and medium scale enterprises?


The following hypotheses were formulated for the purpose of this study. They are as follows:

Hypothesis I

Hi:    There is a positive relationship between credit analysis and small and medium scale enterprises.

Ho:    There is a negative relationship between credit analyses and small and medium scale enterprises.

Hypothesis II

Hi:    There is a relationshipbetween the average time for the credit analysis and approval of credit

Ho:    There is no relationship between the average times for the credit analysis and approval of credit


This study will be significant in the following ways:

1.    It will serve as a source of enlightenment to those who may be uninformed about credit analysis for small-scale industries.

2.    The study will serve as codified material for credit analysis for small­scale industries.

3.    It is expected that small-scale industries will learn useful lessons from the conclusions of the research.

4.    It is also hoped that the result of this study would be of great assistance to other researchers.


The methodology to be used in this research work would be survey method through the administration of questionnaire as the instrument. The data gathered are primary data and would be analyzed using the following statistical technique:

(1)    Simple percentage: It will be used to analyze the bio-data section and the subject matter itself.

(2)    Chi-square: This will be used to analyze the data and test the operational hypothesis formulated, non-parametric test statistic with the use of statistical package for social scientist to analyze and compare the calculated and the expected to arrive at a reasonable conclusion.


The study is intended to have an over view of lending generally. It shall delve into various forms of lending and how lending decisions are made. Special emphasis will be made on the procedure adopted by banks in analysing credit requests from small-scale enterprises. This is with a view to identifying the reasons for the high rejection rate presently the lot of small-scale industries.

The work of some authors and researchers would be incorporated in the literature review and finally, recommendations will be made based on the conclusions.

A major limitation was time constraint, which could have inadvertently affected the depth of the study. Restrictions to access to information, where available, were also experienced, and certain cases of outright unavailability of relevant information were also observed. However, a great deal of thoroughness was employed in the use of available data and information.

Another limitation was the inability to study all the mega banks that resulted from the recently concluded consolidation exercise, hence the need to select and do a special analysis of Platinum Habib Bank Plc.

Worthy of mention is the fact that that apart from above mentioned limitations; the researcher also experienced financial handicaps, which greatly determined the volume of research work.


Chapter one will provides the introductory part of the study coupled with the sub-headings such as statement of problems aim and objectives, research questions, research hypothesis, significance of study, scope and limitation of study, methodology, work plan and operational definition and terms.

Chapter two provides the interactive review and the related study of the past scholars and writers on the topic will also be considered.

Chapter three intends to give the research design, instrument for data collection, population and sample, sampling technique and limitation of the methodology.

Chapter four present of data and analysis. Here the data gathered from questionnaire administration will be highlighted, presented and interpreted alongside with the hypothesis formulated.

Chapter five is the concluding part of the research work, which includes the summary of finding, recommendations, suggestion for further studies and conclusion.


Bank: A financial institution licensed by Central Bank of Nigeria for collection of deposits and rendering of banking related financial services to the general public.

Credit Analysis: Aims at ensuring that the loan together with appropriate interest will be repaid as they fall due.

Term Loans: are given to customers to buy items that are of long term in nature. These assets include plant, machines, furniture and fittings, motor vehicles and land/buildings.

Overdraft: is given to bank customers to finance the purchase of stock of raw materials or finished goods, finance debtors, and pay for wages, rent, electricity, water rates and other general expenses.

Small And Medium Enterprises: asmall-and-medium-scale firm is defined as any enterprise with a maximum asset base of ~200 million, excluding land and working capital, with the number of staff employed by the enterprise not less than 10 and not exceeding thirty.


Bunmi O. (2002) Capacity Building for Development. Business Times No. 20 and 21 Vol. 26

Enyinnaya C. (1991) Practical Banking Operations, Pace Publishers, Lagos

Nwankwo, G.O (1991) Bank Management: Principles and Practice. Malthouse Press Limited, Lagos

Olowe, R.A. (1998) Financial Management: Concept, Analysis and Capital Investments. Briely Jones Nigeria Ltd., Lagos



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