The Roles and Problems of Financial Institutions to the Growth of Small Scale Business in Nigeria.
(a Case Study of Union Bank of Nigeria Plc Enugu)
CHAPTER ONE
PURPOSE OF THE STUDY
The reason for the study of the roles and problems of financial institutions to the growth of small scale business is that it helps individuals, small scale business owners and all the sundries to be informed of the roles of financial institutions to the economy and at the same time so that they can take an advantage of the roles and develop themselves, their families and the nation at large. These roles include giving of loans, advances, overdrafts, grants and aids and advisory services. The roles when utilize properly by small scale business owners help in the growth of their businesses.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
World wide, the small and medium scale enterprises (SMEs) have been accepted as the engine of economic growth for promoting equitable development. The relative importance of SMEs in both the advanced, emerging and developing countries has led to the reconsideration of its role in the economy of nations. As a nursery of entrepreneurship which is often driven by individual creativity and innovation, the emergence of SMEs serve as a pointer to the development of many countries measured by such indices as the level of industrialization, modernization, urbanization gainful employment and equitable distribution of income and improvement in the quality of life for all citizens. (Ayanda and Adeyemi, 2011). Historically the emergence of SMEs in Nigeria can be traced to 1946 when the essential paper No. 24 on “a ten year plan of development and welfare of Nigeria, 1946” was presented by the colonial government. Prior to 1946 and before the arrival of British colonialists, there existed numerous small-scale industries and handcraft enterprises based on the available raw materials to meet local and regional demand. While the Hausa, Yoruba, and Benin people developed significant small scale manufacture of goods for a variety of trade, social and religions purpose; the West African manufacturing sector was based on clothing, metal works, ceramics, construction and food processing. In the Kano region, textile and leather goods were produced while Iron was smelted at the Nok region in the (then) Benue-Platue (now Jaba Local Government Area of Kaduna State, Nigeria). These traditional manufactures survived well into the colonial era, which understandably failed to provide sustainable basis for industrial change or investment (Synge, 1993). After the independence in 1960, successive government in Nigeria attempt to give recognition to the role of SMEs as catalyst to national development. `The first attempt in this endeavor was the launch of the First National Development Plan (1962 – 1968) which, in addition to its core objectives, sought to correct all past deficiencies in the nation’s industrial sector programmes. With the indigenization Decree of 1971 which transferred the commanding height of the Nation’s economic activities to the hands of Nigerian entrepreneurs, SMEs development were encouraged to develop and promote growth and economic diversification as a means of reducing the dependence of the economy on agricultural sector as a principal earner of foreign exchange. Subsequent development plans initiated the establishment SMEs as a viable engine of growth and development (Egbon, 2004).
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 roles and problems of financial institutions to the growth of small scale business in Nigeria.
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 roles and problems of financial institutions to the growth of small scale business 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 problem of financial institutions to the growth of SMEs business in Nigeria.
Summary
This research work was carried out to determine the constraints of small and medium enterprises in Nigeria. The study employed both primary and secondary instrument in generating data that were analyzed using simple percentage and correlation coefficient. 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 101 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. Also an analysis of the survey report showed that lack of capital has greatly contributed to the decline and poor performance of SMEs. It was also observed that small and medium scale enterprises played a significant role in the development of nation’s economy.
Conclusion
This research has explored the role of financial institutions in financing SMEs in Nigeria. The chi-square statistic was used to test the hypothesis that the total amount generated by the lenders disbursed to SMEs is not positively related to the development of the SMEs sub-sector of the economy. This hypothesis is in line with the main objective of the study. The study revealed that bank politics, previous loan repayment records, more competition, interest rates, collateral requirement and bureaucratic procedures in obtaining loans were some of the most critical factors that enhances the entrepreneurs’ efforts to obtain loan from financial institutions.
Recommendations
Based on the results of this study, the following recommendations may be appropriate Putting in place appropriate mechanism to ensure that loans are given to well established enterprises or prospective entrepreneurs that have the capacity and capability to pay back loans borrowed for either business expansion or business establishment. This is to avoid all perceived difficulties in loan repayment. Eliminate all structural and bureaucratic bottlenecks that can impede the smooth flow of loans from the lending institutions to the borrowing firms or individuals. This is to ensure an unobstructed functioning of all economic machines geared towards growth and development. Rather than making lending decision(s) to be group-specific, lending institutions should focus more on the “ability-to-pay” criterion so that no existing or prospective enterprises are short changed in the granting and disbursement of loans. After all, it is the collective activities of SMEs that constitute economic growth and development.
Reference
- Adebusuyi, B. S. (1997): “Performance Evaluation of Small-Medium scale enterprises (SMEs) in Nigeria”. CBN Bullion Vol. 21, No. 4 April / June.
- Adekunle, W (2003): “SMEs and Economic Development” Leasing Today. Newsletters Vol. 6 No. 1.
- Ayanda, L.B and Adeyemi S. (2011): “An Emperical study of Small Scale financing in Nigeria. Journal of Unilorin Business School. 1 (1).
- Aremu, M. A. and adeyemi, S. L (2011): “Small and Medium Scale Enterprises as A Survival Strategy for Employment Generation in Nigeria”. Journal of Sustainable Development. Vol. 4 No. 1 February.
- Aremu, M. A. (2004): “Small Scale Enterprises: Panecea to Poverty Problem in Nigeria. Journal of Enterprises Development, International Research and Development Institute, Uyo, Akwa Ibom, Nigeria, I(1):1-8.
- Awosike, B. O. (1997): “Evolving a National Framework for the emergence of strong and virile Small and Medium Scale Industry Sub-sector in Nigeria. A Seminar paper presented at MAN House. November 5 th P.3
