AN EXAMINATION OF THE IMPACT OF MICRO CREDIT PROGRAMMES ON ENTREPRENEURSHIP DEVELOPMENT IN AKWA IBOM AND CROSS RIVER STATES
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AN EXAMINATION OF THE
IMPACT OF MICRO CREDIT PROGRAMMES ON ENTREPRENEURSHIP DEVELOPMENT IN AKWA IBOM AND CROSS RIVER STATES
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Prior to the 1970s, the view that large firms were the
cornerstone of a modern economy dominated the literature (Nnanna,2003). The
theory of economies of scale, which is predicated on the advantages of large
scale operations prevailed. Thus, entrepreneurial business was seen as
belonging to the past; out-moded, and a sign of technological backwardness.
More recently, however, this view has shifted due to the important role played
by relatively small entrepreneurial business firms in promoting
industrialization and facilitating sustainable economic growth and development.
The concept of entrepreneurship evokes varying meanings or
interpretations, depending on the perspective of the user. However, as Duke
(2006, p.1), puts it, “an individual who pioneers a new technology or
introduces a new method of doing business typifies entrepreneurship. He also is
a person that carries on with an existing technology or method, but in an
innovative way. The entrepreneur usually undertakes and operates a new business
venture and assumes some accountability for the inherent risks”. Thus, an
entrepreneur is an integrated person who brings about some changes through
innovation for both personal and societal benefit. As such the entrepreneur is
a critical factor in driving socio-economic change as he seeks new
opportunities, and brings about new techniques, new products and co-ordinates
the activities required to manage an enterprise.
In Nigeria, the
development of entrepreneurial activities has manifested in virtually all
aspects of the economy including micro finance, personal services, food,
clothing, ICT, telecommunications, entertainment and hospitality, and
agriculture/agro-allied business. These entrepreneurial efforts have
contributed to the attainment of some of the nation’s economic development
objectives. Such contributions include employment generation for the growing
rural and urban labour force, production output expansion, income
redistribution, utilization of local raw materials and technology, increase in
revenue base of government, as well as production of intermediate goods that
help to strengthen inter and intra industrial linkages (Osuji, 2005).
Similarly, developed countries such as United States of America, Japan,
Germany, Italy, and Britain, have been found to owe their overall economic
development to entrepreneurship (Fasua, 2006).
The development and growth of entrepreneurship in Nigeria,
has remained a major concern for the government. The importance of a private
sector-driven economy can best be described and appreciated from its potential
for facilitating food security, employment generation, service delivery,wealth
creation and economic empowerment of the citizenry. These are outcomes that are
also aligned with the goals of the National Policy on Micro, Small and Medium
Enterprises (MSMEs), National Economic Empowerment and Development Strategy
(NEEDS), State Economic Empowerment and Development Strategy (SEEDS) and the
Millennium Development Goals (MDGs)
Unfortunately, the impediments of entrepreneurship
development in Nigeria today include the dearth and paucity of credible and
reliable database, weak infrastructure, inconsistent government policies, lack
of knowledge of the various laws, policies, or statutes that protect SMEs and
which can even help them expand and grow, poor credit administration,
corruption, and, lack of capital and/or inadequate funding due mainly to poor
access to conventional banking facilities (MSME, 2010). Lack of capital and/or
inadequate funding in particular, makes it difficult for entrepreneurs to
transform their initiatives, creations and innovations into finished products
and services capable of satisfying the needs of consumers. It is universally
acknowledged that banks and other financial institutions are only able to
provide credit for just twenty five percent of all clients (Fasua, 2006). The
situation is even worse for entrepreneurs as only two percent of micro
enterprises are being served by the banks (Casson, 1995). In response to this
problem, government and the international developmentagencies have over the
years, instituted various programmes, strategies and policies aimed at
providing credit to entrepreneurs, with a view to promoting micro, small and
medium scale business ventures. Typical among these efforts,are the various
micro credit schemes instituted by some state governments, multinational
companies (MNCs), United Nations Development Programme(UNDP), United Nation
Industrial Development Organization (UNIDO), and private organizations, such as
the Tony Elumelu Foundation.
However, the impact of these credit programmes and schemes
has so far been unclear. More worrisome is the perception that micro and small
scale business sector has still not realized its actual potential in Nigeria.
This therefore puts a question mark on the efficacy of the available credit
programmes. It is against this background that this study seeks to examine and
establish the real contribution of micro credit programmes on the development of
entrepreneurship in Akwa Ibom and Cross River States of Nigeria.
1.2 STATEMENT OF
THE PROBLEM
In spite of the intervention strategies of government and
other development partners, through direct lending or credit guarantee
programmes and schemes to micro and small business firms and entrepreneurs, the
growth and development of entrepreneurship remains observably low. For
instance, Nigeria remains listed among the poorest countries of the world, with
unemployment and poverty levels rising increasingly (World Bank, 2010). This is
indicative of the inefficacy of micro and small businesses in helping address
these problems. Specifically, the micro credit programmes are perceived to be
poorly coordinated and managed. The credit administration mechanisms used for
the schemes and programmes are generally considered to be weak and
non-responsive to the challenges of monitoring and controlling of the lent
funds. Also, there are issues of corruption surrounding the management of the
funds. Finally, funding of these programmes, especially the ones instituted by
State governments, is considered to be poor and insufficient.
1.3 OBJECTIVES OF
THE STUDY
The main objectives of the study are:
1. To determine
the impact of micro credit programmes on entrepreneurship development in Akwa
Ibom and Cross River States.
2. To establish
the effect of operating cost on the performance of micro credit programmes in
Akwa Ibom and Cross River States.
3. To establish
the effect of credit administration on the performance of micro credit
programmes in Akwa Ibom and Cross River States.
4. To make
recommendations based on the findings of the study.
1.4 RESEARCH
QUESTIONS
The following
research questions will be relevant to this study:
1. To what extent
do micro credit programmes affect entrepreneurship development in Akwa Ibom and
Cross River States?
2. To what extent
does operating cost affect the performance of micro credit programmes in Akwa
Ibom and Cross River States?
3. To what extent
does credit administration affect the performance of micro credit programmes in
Akwa Ibom and Cross River States?
1.5 RESEARCH
HYPOTHESES
Arising from the foregoing, the underlisted hypotheses will
be stated for the research:
HO1: Micro credit programmes do not have a
significant effect on entrepreneurship development in Akwa Ibom and Cross River
States.
HO2:
Operating cost does not have a significant effect on the performance of
micro credit programmes in Akwa Ibom and Cross River States.
HO3: Credit
administration does not have a significant effect on the performance of micro
credit programmes in Akwa Ibom and Cross River States.
1.6 SIGNIFICANCE OF
THE STUDY
This study will be useful to governments at the various
levels, (Federal, State and Local) and their ministries, departments and
agencies (MDAs) charged with the responsibility of implementing policies and
programmes on entrepreneurship development such as National Bureau of
Statistics (NBS), SMEDAN, NDE, NAPEP, NDDC, NASSI, CBN (Development Finance
Department), Small and Medium Industry Development Agency (SMIDA) and National
Association of Small and Medium Enterprises (NASME), among others.
Secondly, the study will be useful to International Development
and Funding agencies, Multinational Corporations (MNCs) operating in the
country, and Non-Governmental Organizations (NGOs), which have been partnering
and supplementing the efforts of government in providing micro credit for
entrepreneurship development in the country. They include United Nations
Industrial Development Organization (UNIDO), United Nations Development Program
(UNDP), World Bank (SMEs department), Lift Above Poverty (LAPO), and Oil and
Gas Companies (Exxon Mobil, Shell, Agip, Chevron, etc), who will find the work
a useful intervention document for designing and projecting the extent of their
involvement in meeting their social responsibility expectations in their
area(s) of operation. Others are private organizations like Tony Elumelu Foundation
that recently donated about N2.5billion for the development of Entrepreneurship
in Nigeria and Dangote group that has been partnering government in this
direction.
Thirdly, this study will be of benefit to management scholars
in universities, polytechnics and professional bodies as it will enrich the
body of literature on micro credit programmes and their impact on
entrepreneurship development in Nigeria. The content of this study will also
stimulate further research on related subjects.
1.7 ASSUMPTIONS OF
THE STUDY
1. It
is assumed that the variables used for the study are appropriate.
2. It
is assumed that the sample selected for the studyis truly representative of the
population.
3. The
methodology employed in the study is appropriate and replicable.
1.8 SCOPE OF THE
STUDY
The study is cross-dimensional as it involves more than one
state. Geographically, the study will be limited to Akwa Ibom and Cross River
States in South-South Nigeria. The study will limit its scope to the
examination of micro credit as a catalyst and a facilitator of micro and small
enterprises development in the two states.
1.9 DEFINITION OF
TERMS
1.
ENTREPRENEURSHIP:Entrepreneurship is the act of creating a new business
in the face of risk and uncertainty, for the purpose of achieving profit and
growth by identifying significant opportunities and assembling the necessary
resources to capitalize on them (Zimmerer, Scarborough & Wilson, 2013).
2. MICRO
CREDIT:Micro credit is the extension of small loans to active poor people
(entrepreneurs) who are unable to access traditional bank loans to engage in
self employment projects or to finance micro and small business initiatives, in
order to generate income to cater for themselves and others (Edeghe, 2005).
3. MICRO
ENTERPRISES:These are enterprises whose total assets (excluding land and
buildings) are less than five million naira, with a workforce not exceeding ten
employees (SMEDAN, 2010).
4. SMALL
ENTERPRISES:These are enterprises whose total assets (excluding land and
buildings) are above five million naira, but not exceeding fifty million naira,
with a total workforce of above ten, but not exceeding forty-nine employees
(SMEDAN, 2010).
5.
INNOVATION:This is the act of bringing about changes by introducing new
methods, new ideas, new technology and new ways of doing things. It is the
ability to apply creative solutions to problems and opportunities to enhance
people’s lives.
6. LATENT
CAPACITY:This is an existing capacity for entrepreneurship which is not yet
visible or developed.
7. GROSS
DOMESTIC PRODUCT:The GDP is the market value of final goods and services
produced within a country at a particular period, usually a year. It is earned
domestically, rather than abroad.
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