The Impact of Financial Institutions on the Growth of SMEs in Nigeria (Case Study of Alaba International Market)
Chapter One
Objective of the study
The objectives of the study are;
- To know the extent to which the financial institutions have helped to finance small-scale businesses.
- To identifying the problems confronting small scale industrialist in vying for business finance in Nigeria.
- To evaluating measures initiated to boost industrial production and its financing and how this has affected the attainment of set goals.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
A thorough surveys on previous literatures provide a clue into possible causality between financial institutions financing and small scale industrial activities indicating that no general form of relationship exist between the duo concepts of interest. Several researchers have evaluated the role of financial institutions in the development of SMEs. Oni, Paiko and Ormin, (2012) assessed the contribution of micro finance institutions to sustainable growth of small and medium scale enterprises in Nigeria. Their findings exposed that MFIs does and could contribute to the sustainable growth of SMEs in the economy. The study also revealed among others that MFIs services outreach to SMEs at present is poor. Ojo et al (2009) examined the impact of microfinance on entrepreneurial development in Nigeria. The researcher concludes that microfinance institutions world over and especially 9 in Nigeria are identified to be one of the key players in the financial industry that have greatly impacted individuals, business organizations, other financial institutions, the government and the economy of the nation at large through the services they offer and the functions they perform in the economy. Oni, and Daniya, 2012 tried to investigate the development of Small and Medium Scale Enterprises and the role played by the Government and other Financial Institutions, they found out that financial institutions provide the necessary financial lubricant that facilitate the growth and development of Small and Medium Scale Enterprises, they stressed that, a lot still ought to be done by the government in terms of policy formulation in order to complement and aid the efforts of financial institutions. They suggested however that micro finance institutions be established to serve and meet the grass root financial needs. Quaye (2011) investigated the effects of Microfinance Institution (MFIs) on the growth of Small and Medium Scale Enterprises (SMEs) in the Kumasi Metropolis. He examined detailed profile of SMEs in the Kumasi Metropolis of the Ghanian economy, the contribution of (MFIs) to entrepreneurial development, the challenges encountered by SMEs in reaching credit and the rate of credit utilization by SMEs. An analysis of the profile of (SMEs) reveals that most (SMEs) are at their Micro stage since they absorb less than six people and the sector is greatly dominated by the commerce sub-sector. The research also explains that (MFIs) have impacted positively on the growth of SMEs. Some of the important contributions of MFIs include; greater access to credit, improved and enhanced savings and provision of business, financial and managerial training. Irrespective of the contributions of MFIs to SMEs, there are challenges that affect the activities of both SMEs and MFIs. More pronounced among these is the cumbersome process associated with meeting up credit demands of collateral security. The MFIs on the 10 other hand, are faced with challenges relating to credit misappropriation, moral hazards and non-disclosure of the relevant facts of their businesses. From the findings, the research clearly reveals that MFIs have a positive effect on the growth of SMEs. In other to attain and maintain a sustained and accelerated growth in the operations of SMEs, credits should be client-targeted and not product-oriented. Extensive monitoring activities should be provided for clients who are granted loans. Adewale and Afolabi (2013) are of the opinion that inadequate funding has been the main challenge to SMEs in Nigeria since it got her independence till date. All political regime, both military and civilian governments attempted to make an issue of accomplishable wild ado out of this critical economic matter of national concern, but they were all talking and subscribing policies on paper, more than achieving results by practically implementing the policies and turning the much ado about empty storytelling to action and results. The first to the third Nigerian Economic Summits sponsored by the Babangida military Junta focused its search light more seriously on Economic Development through industrialization with increased concern for the expected impact of the Medium and Small Scale Industries in the Nigerian economy. Irrespective of all the inactivated, unproductive policy statements, establishments of various “Development Financial Institutions”, and the ultimate technically unprofessional “liberalization of the banking institutions licensing”, which made total mockery of the institution of banking in Nigeria, including its ethics and professionalism, the outcomes, of which the industry is yet to recover from. As a result of all the political interventions in the banking industry, and consequential failure of the financial system to provide appropriate financing for MSSI’S (the back bone of industrialization), since attaining independence in 1960, Nigeria is yet to experience any remarkable achievement in the industrial sector. On the foreign scene, the World 11 Bank, initiated three different tranches of subsidized credit to SMEs in Nigeria, put to work through deposit money banks, all of which totally failed to achieve their objectives. The SMEEIS was initiated and established by the Obasanjo administration, plus an additional sum of 500 billion naira budgetary provision, to support MSSI’s; In spite of these and other myriads of multilateral financial supports administered through Nigerian governments and the financial system, the good motives of the foreign governments aids and multilateral financial institutions supports, were thwarted by the corruption and fraudulent elements within the Nigerian authorities, and the operators of the financial system. The resulting outcome of this research effort displayed a positive relationship between financing of MSSI’s and a systemic development and growth of industries which is also a required condition for national economic growth and development. Reduced industrialization and slow economic growth and development in Nigeria are direct consequences of the poor funding of SMEs since independence, yet there is no evidence of any promising solution in sight for posterity.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought the impact of financial institution in the growth of SMEs on Nigeria
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information the impact of financial institution in the growth of SMEs on Nigeria. 200 staff of selected SME in Alaba international market were selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain The impact of financial institution in the growth of SMEs on Nigeria (case study of Alaba international market). In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing challenges of awareness of financial institution in the growth of SMEs on Nigeria
Summary
This study was on the impact of financial institution in the growth of SMEs on Nigeria (case study of Alaba international market). Three objectives were raised which included: To know the extent to which the financial institutions has helped to finance small scale business, to identifying the problems confronting small scale industrialist in vying for business finance in Nigeria and to evaluating measures initiated to boost industrial production and its financing and how this has affected the attainment of set goals. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of selected SMEs in Alaba international market. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made manager, secretaries, sale reps and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
In conclusion, from the empirical and analytical findings the results reveals that Banking sector credit was important but insignificant in understanding growth variations in Nigeria’s Small and Medium Sector. The implication to the study is for banks to understand that irrespective of the size of SME’s, banking sector credit is an important factor to the overall success of SME’s in Nigeria which is a catalyst for Nigerian economic growth. The current priority attention being accorded the banking credit sector by government is well deserved. This is because the sector has great potentials to be the engine of growth in Nigeria. In the face of rising unemployment and high poverty levels, growth generated from this sector. The sector is capable of lifting the greatest number of people above the poverty level. While efforts are being made to address the credit bottlenecks are very commendable, there is the need for complementary reforms to provide the other critical elements. These include improving power, transportation, water, and all other ancillary issues which account for under-performance in the sector. As part of the suggestions for further research, there is need for more research into other variables that could equally determine output that were not captured in the study. It is important to consider further studies on the effects of banking sector growth on SMEs in Nigeria and other possible factors that impede or accelerate growth of the sector.
Recommendation
The Federal Government’s fiscal and monetary authorities should improve in its management of macro-economic variables, such as the exchange and inflation rates; this will help maintain the value of the currency such that funds could be valuable enough to improve SME investments that will yield positive returns in the country. SME’s should be encouraged to building stronger internal structural base such that funds will be adequate to enable them function more effectively and compete favourably. Deposit Money Banks should provide more training to help the SME’s in financial management practices as this will enhance the accounting processes of SME’s for improved accountability, transparency and effective management for better performance
References
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