Does trust influence the informal lending decision? An investigative analysis

Abstract

This study analysed the role of trust in informal lending decision-making process. By applying verbal protocol analysis, this paper empirically examined the role of trust and cooperation in lender’s initial reaction to potential lending opportunities, and the lender’s assessment of the intermediary responsible for providing the initial referral of the lending opportunity. The results corroborate earlier findings, and provide sufficient evidence to confirm that about 93 per cent of lending opportunities presented to informal lenders are rejected. It also shows that considerable reliance is placed on the brokers presenting the opportunities. The result also indicates that the dearth of entrepreneurial development in Nigeria is tied implicitly to the instant trust and instant cooperation paradigm.