MODERATING EFFECT OF TRUST ON THE RELATIONSHIP BETWEEN LOAN REPAYMENT PRACTICES AND SMALL AND MEDIUM ENTERPRISE’S PERFORMANCE IN NORTH-WEST NIGERIA

Abstract

The low performance of Small and Medium Enterprises (SMEs) in Nigeria today dominates discussions not only among the prospective and active entrepreneurs but also both the private and the public sectors. This study aimed at examining the moderating effect of trust on the relationship between loan repayment practice and the performance of small and medium enterprises in Northwest Nigeria. SMEs are pivotal to economic growth in Nigeria and they contribute maximally to employment generation and gross domestic products. A Cross-sectional Survey Design was used for the study.  The unit of analysis is the organization (SMEs performance) and the owners/managers were the respondents. The study employed proportionate stratified random sampling technique using five hundred and ninety-two (592) respondents from the population of eleven thousand seven hundred and thirty-one (11,731) registered SMEs in the Northwest Nigeria comprises seven states: Jigawa, Kaduna, Kano, Katsina, Kebbi, Sokoto and Zamfara. In order to test the proposed hypotheses and to examine the relationships between the constructs, both the descriptive and inferential statistics were employed to analyse the data collected using Statistical Package for Social Science (SPSS) for Window Version 23. The study ran multiple and hierarchical regression analysis in order to establish the relationships between financial management practices (FMP), debt management practices (DMP), financial literacy practices (FL) and SMEs performance as well as the moderating effect of trust (TRT). The study reveals that financial management practice (FMP) has a significant positive relationship with SMEs performance. On the other hand, the study finds no significance relationship between debt management practices and SMEs performance. The study also unveils a significant relationship between financial literacy (FL) and SMEs performance. In addition, trust (TRT) has significant moderation effect on financial management practice, debt management practice and financial literacy practice and SMEs performance. Based on the empirical findings, the current study has made contributions to the body of knowledge particularly in literature.