Factors Affecting the Growth of SME Lending Portfolio of Banking Industry with Reference to Consumer Perspective of XY Bank PLC

Abstract

The Government of Sri Lanka has identified SME as an important strategic sector for balanced regional development in Sri Lanka. As such, with the purview of the Central Bank, Sri Lanka, several banks have launched numerous facilities to gear up the SME sector in Sri Lanka. However, during the last three years, it is evident that those banks have not achieved the targets of their SME lending portfolio. Accordingly, this study focuses on the analysis of factors affecting the growth of SME lending portfolio in banking industry with special reference to consumer perspective of XY bank PLC. A sample of lending portfolio was selected from the lowest pull through rate indicated districts of SME lending of XY bank, such as Anuradhapura, Ampara, Kegalle and Kurunegala. Along with the findings of the exploratory study and past research studies, the researchers tested four types of factors affecting the SME lending portfolio growth in the banking industry, namely bank staff related factors, bank credit policy related factors, bank SME customer related factors and country economic related factors. The survey was conducted using questionnaires and the data were analysed using quantitative data analysis techniques. As per the findings of the parametric tests, three predictor variables of staff, policy and customer related factors were positively correlated and economic related factors were negatively correlated. However, in the multiple regression analysis, only three predictor variables of staff, policy and customer related factors indicated significant influence on XY bank’s SME lending portfolio growth while staff related factors were identified as the most significant ones. Therefore, the study recommends XY bank to improve staff related factors, policy related factors and customer related factors to achieve SME lending targets in future.