EFFECTS OF GOVERNMENT FUNDING SCHEMES ON DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES (SMEs) IN NIGERIA (A CASE STUDY OF SMIEIS)
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EFFECTS OF GOVERNMENT
FUNDING SCHEMES ON DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES (SMEs) IN
NIGERIA (A CASE STUDY OF SMIEIS)
ABSTRACT
The study was conducted to investigate the effects of
government funding schemes on development of Small and Medium Enterprises
(SMEs) in Nigeria. To meet the objectives of the study, survey research method
was applied and a sample of 50 respondents was administered to SMEs Owners and
Staff in Ojo Local Government Area. Data collection was done through
questionnaire administration and the data collected were statistically analyzed
with the aid of SPSS software. It was found that government funding schemes
significantly affects SMEs growth and development in Nigeria. However, only few
entrepreneurs have access to the loans. Therefore, the study recommends that
entrepreneurs need to be educated about the procedures and processes required
to secure loans from the financial schemes available to SMEs.
TABLE OF CONTENTS
CHAPTER ONE
Introduction
1.1 Background of the
study
1.2 Statement of the
problem
1.3 Objectives of the
study
1.4 Research
questions
1.5 Research
hypothesis
1.6 Significance of
the study
1.7 Scope and
limitations of the study
1.8 Plan of the
study
1.9 Definition of
terms
CHAPTER TWO
Literature Review
2.1 Introduction
2.2 Conceptual
Framework
2.2.1 Definition
of SMEs
2.2.2 Role of
SMEs in an Economy
2.2.3 Challenges
of SMEs
2.2.4 Emergence
of the Small and Medium Industries
Equity
Investment Scheme (SMIEIS)
2.3 Theoretical
Framework
2.4 Empirical
Framework
CHAPTER THREE (RESEARCH METHODS)
3.1 Introduction
3.2 Restatement of
research questions
3.3 Restatement of
research hypothesis
3.4 Research design
3.5 Population of the
study
3.6 Sample size and
sampling techniques
3.7 Source of Data
3.8 Data collection
instrument
3.9 Administration of
research instrument
3.10 Method of data analysis
CHAPTER FOUR
Data Presentation, Analysis and Presentation
4.0 Introduction
4.1 Data analysis and
presentation of result
4.2 Data analysis of
the demographic characteristics
4.3 Test of
hypothesis
4.3.1 Hypothesis
one
4.3.2 Hypothesis
two
4.3.3 Discussion
of result (tested hypothesis)
CHAPTER FIVE
Summary, Conclusion and Recommendation
5.0 Introduction
5.1 Summary of
findings
5.2 Conclusions
5.3 Recommendations
REFERENCES
CHAPTER ONE
INTRODUCTION
1.1 Background To The Study
Small and Medium Enterprises (SMEs) occupy a place of pride
in virtually every country or state. Because of their (SMEs) significant roles
in the development and growth of various economies, they (SMEs) have aptly been
referred to as "the engine of growth" and "catalysts for
socio-economic transformation of any country" (Onugu, 2005). Several
studies (i.eSanusi, 2003; Onugu, 2005; Osuagwu, 2006; Ehinomen and Adeleke,
2012) have revealed that funding has been one of the major challenges facing
the growth and development of SMEs in developing countries. Hence, the
significance of government funding schemes towards the development of SMEs
sector cannot be over emphasis.
Governments at various levels (Local, State and Federal
levels) had in one way or the other focused on the Small and Medium
Enterprises. While some governments had formulated policies aimed at
facilitating and empowering the growth and developmentand performance of the
SMEs, others had focused on assisting the SMEs to grow through soft loans and
other fiscal incentives.
According to Onugu (2005), various special measures and
programmes have been designed and policies enunciated and executed by
government to encourage SMEs development and make them more vibrant in Nigeria.
The highlights of these measures include; Fiscal incentives and protective
fiscal policies, Specialized financial institutions and funding schemes for the
SMEs, Favourable tariff structure, Small and Medium Industries Equity
Investments Scheme (SMIEIS), Small and Medium Enterprises Development Agency of
Nigeria (SMEDAN) and Bank of Industry (BOI).
The various SMEs financing schemes have been in operation for
dose to three decades and it is expected that the scheme should have
contributed immensely to SMEs growth and development in Nigeria. It is against
this background that this study shall be conducted to examine the effect of
government funding on development of in Lagos state.
1.2 Statement Of The
Problem
For the past 30 years, the Federal Government's policy
interventions for the Small and Medium Enterprises (SMEs) sector of the economy
have not produced the desired results as the sector currently contributes one
per cent to the GDP (Alli, 2012). It is a common knowledge that SMES in Nigeria
find it relatively difficult to obtain institutional credits from financial
houses. The need to address these problems comprehensively for a sustainable
source of long term financing necessitated the introduction of the Small and Medium
Industries Equity Investment Scheme (SMIEIS) by Bankers' Committee at the
initiative of the Central Bank of Nigeria.
The scheme as at the end of 2009 had attracted a total of
N42.03 billion with N28.87 equity investment in 336 projects (Alli, 2012). However,
it is unclear how beneficiaries in Lagos state access loan from the SMIEIS in
order to develop their SMEs. Therefore, the problem of this study is to
investigate the mode of operation of SMIEIS, impact of its financial advisory
services, challenges facing SMEs operators to access loan from
the scheme and find out the extent to which the, SMIEIS have
contributed to SMEs development.
1.3 Objective Of The Study
The main objective of the study is to examine effects of
government funding schemes on development of Small and Medium Enterprises
(SMEs) in Nigeria. However, the specific objectives are:
i. To examine the effect of Small and
Medium Industries Equity Investments Scheme (SMIEIS) on provision of loans to
small business entrepreneurs.
ii. To examine the conditions for accessing
SMIEIS loan and its effect on growth of SMEs in Lagos state.
iii. To examine
the effect of financial advisory services by SMIEIS administrators on
application of loan.
iv. To assess the compliance of banks to
the disbursement arrangement for administering SMIEIS loans to SMEs operators.
1.4 Research
Questions
The following research questions guide the study;
i. What are the
effects of Small and Medium Industries Equity Investments Scheme (SMIEIS) on
provision of loans to SMEs?
ii. Does SMIEIS
loan have effect on the growth of SMEs in Lagos state?
iii. How does
the financial advisory service by SMIEIS administrators affect application of
loans by SMEs in Lagos state?
iv. Does banks
complied with the disbursement arrangement for administering SMIEIS loans to
SMEs operators?
1.5 Research Hypotheses
The research tests the following hypotheses;
1. Ho: Small and Medium Industries Equity Investments Scheme
(SMIEIS) does not have significant effect on SMEs operations in Lagos state.
Hi: Small and Medium Industries Equity Investments Scheme
(SMIEIS) has significant effect on SMEs operations in Lagos state.
2. Ho: SMIEIS does not enhance the growth of SMEs in Lagos
state.
Hi: SMIEIS enhances the growth of SMEs in Lagos state.
3. Ho: Financial advisory service by SMIEIS administrators
does not have significant effect on application of loans.
Hi: Financial advisory service by SMIEIS administrators has
significant effect on application of loans.
1.6 Significance Of
The Study
The study contribute to knowledge in the area of SMEs
development in Nigeria. The study will examine the Small and Medium Industries
Equity Investment Scheme (SMIEIS) and how SMEs have benefited from the scheme.
The study shall unravel the factors that hinder SMEs access
to loan from government financial schemes in the country and proffer solutions
to any problem identified in the course of the study.
The findings of the study will assist SMEs operators and
policy makers in finding a better way of improving SMEs performance in Nigeria.
Also, the study will be relevant to students who may conduct
similar study in the future.
1.7 Scope And
Limitations Of The Study
The study covers government funding schemes in support of
SMEs growth and development in Lagos State. Focus will be on the mode of
operation, challenges of the scheme and its contribution towards providing
financial assistance to SMEs in Lagos State. The study shall be limited to
Small and Medium Industries Equity Investment Scheme (SMIEIS) implementation in
Lagos state.
The study will further be limited by availability and access
to data from the Central Bank of Nigeria (CBN) on SMIEIS fund disbursement in
Lagos state. However, time and financial constraints are expected to be a major
limitation of the study. Also, getting beneficiaries (respondents) to comment
on how they secure and implement funds from SMIEIS is another limitation to the
study.
1.8 Plan Of The Study
The researcher presented the study in five chapters as
follows Chapter Onepresented general background to the study followed by
statement of the research problem; objectives of the study, research questions,
research hypotheses, significance of the study, scope and limitation of study,
organization of the study and definition of terms.
In Chapter Twoliteratures were review with respect to SMEs
funding scheme in Nigeria under conceptual framework, theoretical framework and
empirical study.
Chapter Threecover the research methodology with respect
toresearch design, population of the study, sample and samplingtechnique,
instrument of data collection and data analysis.
Chapter Fourcover data analyses, presentation and discussion
of
findings from the data analysis.
Chapter Fivehowever present summary, conclusion drawn and
recommendation.
1.9 Definition Of Terms
The courses of the study, some basic concepts were used.
These
concepts are defined below;
Funding: is the act of providing resources, usually in form
of money (financing), or other values such as effort or time (sweat equity),
for a project, a person, a business, or any other private or public
institutions.
Government Funding: Refers to financial support from
government to SMEs in Nigeria.
Small Enterprise: An enterprise whose total cost including
working capital but excluding cost of land is between ten million naira
(N10,000,000) and one hundred million naira (N100,000,000) and/or a workforce
between eleven (11) and seventy (70) full-time
staff and/or with a turnover of not more than ten million
naira (N10,000,000) in a year.
Medium Enterprise: A company with total cost including
working capital but excluding cost of land of more than one hundred million
naira (N100,000,000) but less than three hundred million naira (N300,000,000)
and/or a staff strength of between seventy-one (71) and two hundred (200)
full-time workers and/or with an annual turnover of not more than twenty
million naira (N20,000,000) only.
Large Enterprise: Any enterprise whose total cost including
working capital but excluding cost of land is above three hundred million naira
(N300,000,000) and/or a labour force of over two hundred (200) workers and/or
an annual turnover of more than twenty million naira (N20,000,000) only.
Small and Medium Industries Equity Investments Scheme
(SMIEIS): Refers to the funding scheme by which the government directive from
the CBN that commercial banks should set aside 10% of the profit after tax to
provide loan for SMEs in Nigeria.
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