Human-factor governance and SME finance: strengthening banking sustainability in an emerging economy

Purpose Small and medium-sized enterprises (SMEs) in emerging economies continue to face persistent credit constraints, often attributed to borrower risk and insufficient collateral. Using the Gambia as a case, this study argues that a deeper and underexplored driver lies within internal banking governance, specifically human-factor failures in accountability, trust and ethical duty. These governance deficits shape how banking leaders interpret regulatory requirements and exercise discretion in credit allocation. To address this gap, the study develops a stakeholder-oriented Human-Factor Governance Model (HFGM) to support improved SME financing. Design/methodology/approach A sequential mixed-methods design was employed. An initial survey informed the development of qualitative instruments leading to interviews and focus groups with bank managers, regulators, employees and SME clients. Grounded-theory procedures generated an audit trail from 86 open codes to nine categories, six axial categories and a core category, lack of accountability, which anchors the resulting HFGM. Findings The HFGM consists of six interrelated components. The model specifies directional relationships, demonstrating how weak accountability undermines ethical duty and trust, enabling discretionary lending, insider practices and restrictive SME credit conditions. Effective supervision and compliance curb discretion only when supported by duty-based ethics. Practical implications The study offers evidence-based pathways linking governance practices to SME financing outcomes. Policy implications include embedding ethics-by-design into compliance processes, standardising SME documentation and enhancing supervisory transparency. Boundary conditions and propositions for applying the HFGM in similar emerging-economy contexts are outlined. Originality/value The study provides a context-specific governance mechanism integrating Kantian ethics with stakeholder theory to explain how human-factor deficits translate into restrictive SME lending behaviours.