The Role of Commercial Banks in the Development of Small Scale Enterprise
CHAPTER ONE
OBJECTIVES OF THE STUDY
The general objective of this study is to analyze the impact of commercial banks on small and medium scaled enterprises in Nigeria while the following are the specific objectives:
- To examine the impact of commercial banks on small and medium scaled enterprises development in Nigeria.
- To examine the extent to which small scale enterprises in Nigeria have been able to obtain loans and advances from Commercial Banks for business development.
- To examine the relationship between commercial bank loans and development of SMEs in Nigeria
- To examine the relationship between commercial bank deposit and development of SMEs in Nigeria
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
There is hardly any unique, universally accepted definition of SMEs because the classification of business into small and large scale is a subjective judgment (Ekpeyong & Nyong, 1992). The 1992 Review by the National Council on Industrial Standards have defined Small and Medium Scale Enterprises (SMEs) as enterprises with total cost of (including working capital but excluding cost of land) above 31 million but not exceeding 50 million with a labour size of between 11 and 100 employees. It is clear that SMEs are usually small own or family managed business with its goods and services being basic. SMEs also tend to lack the organization and management structure, which characterize large-scale entrepreneur. Urban SMEs tend to be more structured than their rural counterpart. Small and Medium Scale Enterprises (SMEs) as defined by the National Council of Industries (2009) refer to business enterprises whose total costs excluding land is not more than two hundred million naira (N200,000,000.00) only. Although, there exists no consensus among policy makers and scholars concerning the point at which a business firm is deemed to be small or medium. The United Nations Industrial Development Organization (UNIDO) identified fifty definitions of small scale business in seventy-five different countries based on parameters such as installed capacity utilization, output, employment, capital, type of country or other criteria, which have more relevance to the industrial policies of the specific country. However, it has been suggested that the SMEs sub-sector may comprise about 87 per cent of all firms operating in Nigeria, excluding informal – enterprises. USAID (2004) defined enterprises as informal businesses employing five or fewer workers including unpaid family labour; small enterprises as those operating in the formal sector with five to twenty employees; and medium enterprises as those employing 21 to 50 employees. Egbuogu (2003) noted that definitions of SMEs vary both between countries and between continents. The major criteria use in the definitions according to Carpenter (2003) could include various combinations of the following: Number of employees, financial strength, Sales value, Relative size, Initial capital outlay and Types of industry. Iyang & Ukpong (1992) however, stressed the indicators prominent in most definitions namely, size of capital investment (fixed assets), value of annual turnover (gross output) and number of paid employees. The Nigerian Government has used various definitions and criteria in identifying what is referred to as micro and small sized enterprises.
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 to examine the impact of commercial banks on small and medium scale enterprises development in Nigeria.
Sources of data collection
Data were collected from two main sources namely:
Primary source and 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.
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 examine the impact of commercial banks on small and medium scale enterprises development in Nigeria.
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 the challenges facing commercial banks in financing SMEs in Nigeria.
Summary
This research work was carried out to ascertain the impact of commercial banks on small and medium enterprises in Nigeria. The study employed both primary and secondary instrument in generating data that were analyzed using simple percentage and chi square analytical tools. Based on the result of the analysis the following findings are made: Our empirical result reveals that small and medium scale enterprises source their fund by obtaining loans from banks. It also shows that past saving are made use of and profit ploughed back into the business. On statistical ground, the empirical result reveals that „there is a positive relationship between small and medium scale enterprises are veritable tool for economic growth and development and has an impact on the economy. Most of small and medium scale enterprise encounters problems in getting loans from bank especially when it comes to collateral security requirement.
Conclusion
This research work makes useful contribution to knowledge by appraising the impact of commercial means of financing SMEs in Nigeria in comparison with financing in other lands or countries. It explicates the importance of SMEs to economic development of Ekiti State. It gives a proper insight of what the banking sector entails of the economy. Banking sector globally are identified to be major key players in the financial industry that have positively affected individuals, business organization, other financial institution, the government and the economy at large through services they offer and the function they perform in the economy. Finally, despite the effectiveness of the sector, it still suffers some setbacks. This means that the banking sector and their activities still have a long way to go in providing new services for good customer relationship, better financing schemes and development in the Nigerian economy. This research work exanimate the contribution of commercial banks in financing small scale industries in Nigeria. A case study First bank of Nigeria plc small scale enterprises re regarded as an organic part of a viable structure for the attainment of meaningful economic development in developing economics like Nigeria. They bring about development than larger enterprises because of the perceived linkage and multipliers effects which the small scale industries have on the performance of the economy and economic growth in general. The optimism after years of persistent effort sing to achieve economic emancipation of the country by imported technology is that the only alternative is to adopt a more local and positive strategy. That best alternative industrialization strategy is the establishment and continues financial assistance to the small scale industries. In essence, if the described objective of using SME as catalysts of development is to be achieved, then the contribution of commercial banks should be mutually supportive
Recommendations
Haven completed the study; the researcher therefore makes the following recommendations; Commercial banks should be strongly encouraged to assist small and medium scale enterprises by providing cheap sources of finance and making their requirements for soft loan to be easier and more reasonable. Banks should liberalize their lending policy. Premium should be attached to good feasibility report and skills rather than physical securities. Also the commercial banks should try to meet the Central bank directives for lending to small scale businesses. Small scale industrialist should try to develop good relationship with their suppliers, bankers, lawyers, management consultants, and indeed all experts and utilize their services. Market research should be carried out regularly by business owners. market research in simple terms is the objective fact finding and analysis of problems encountered in the transfer or sale of goods and services if a business owner lack the time and „know – how to personally undertake extensive research, an outside research agency or consultant might be employed
Reference
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