Beyond Collateral: Algorithmic Trust, Digital Transformation, And Credit Risk Dynamics In SMEs Financing In Nigeria

Abstract

Small and medium-sized enterprises (SMEs) remain the backbone of Nigeria's economy, yet limited access to finance continues to constrain their growth despite the rapid expansion of fintech and digital lending platforms. While digital finance promises to reduce dependence on collateral-based lending, concerns regarding algorithmic trust, transparency, and fairness may influence SME adoption of these technologies. This study examines the relationships among algorithmic trust, mobile banking adoption, digital transformation, access to finance, loan repayment behaviour, and future perceptions of digital finance among Nigerian SMEs. A quantitative cross-sectional survey design was employed using structured questionnaires administered to 51 SME owners and managers across major commercial locations in Nigeria. Data were analysed using descriptive statistics, Cronbach's alpha reliability analysis, Pearson correlation, and multiple regression. The findings indicate satisfactory internal consistency across all constructs. Correlation analysis revealed significant positive relationships among the study variables, while regression results showed that access to finance significantly predicted loan repayment behaviour (, with digital transformation demonstrating a marginally significant positive effect. Overall, the findings suggest that strengthening digital transformation and improving access to finance can enhance SME financial performance, although increasing trust in algorithm-driven lending remains essential for sustainable digital financial inclusion in Nigeria.