Guarantor’s Cheque and Loan Performance of SMEs in Selected Microfinance Banks in Nigeria

This study examines the effect of guarantors’ cheques on the loan performance of Small and Medium Enterprises (SMEs) in selected Microfinance Banks (MFBs) in Lagos, Nigeria. Using a survey research design, data were obtained from 18 Managing Directors of MFBs through a structured questionnaire and analysed using multiple regression analysis. The findings reveal that guarantor cheques, together with control variables such as interest rate, loan size, and demographic characteristics, do not have a statistically significant effect on loan performance. Although guarantor cheques alone exhibit some influence, the result suggests weak enforceability in the Nigerian context due to legal and institutional challenges. The study recommends the adoption of technology-driven guarantees such as the Global Standing Instruction (GSI) to improve loan recovery, strengthen credit risk management, and enhance financial discipline among borrowers and guarantors.

Guarantor’s cheque, loan performance, microfinance banks, SMEs, credit risk 1

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