FINANCING SMALL SCALE INDUSTRIES IN NIGERIA (A CASE STUDY OF SELECTED SMALL BUSINESS IN LAGOS SUB-URBAN)
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FINANCING SMALL SCALE INDUSTRIES IN
NIGERIA (A CASE STUDY OF SELECTED SMALL BUSINESS IN LAGOS SUB-URBAN)
ABSTRACT
The
study was conducted on Financing Small and Medium industries in Nigeria (A Case
Study of Selected small business in Lagos State sub-urban).
The
roles play by SSEs as been confirmed by this study. It therefore means that the SSEs can be
effectively used to improve the country’s employment and growth if the above
stated problems that they face are tackled.
More activities of the government should therefore be directed to the
industry.
The
data were gathered through the administration of questionnaire to respondents
from different department status in the organization.
The
findings of this work do not differ significantly from what have been said by
former researcher as reviewed in chapter two of this work. However, this does not mean that further
study into this area cannot be undertaken since new facts are emerging every
day.
Small
Scale Industries do not prepare proper and regular financial report that makes
them not to have one for loan purposes.
Policy should be put in place to make compulsory preparation of business
name so that names of from which do not subsequently prepare financial report
may be struck off from the register book.
TABLE
OF CONTENTS
TITLE
PAGE
I
CERTIFICATION
II
DEDICATION
III
ACKNOWLEDGEMENT
IV
ABSTRACT
V
TABLE
OF CONTENTS
VI
CHAPTER
ONE: INTRODUCTION
1.1 BACKGROUND OF THE STUDY
1
1.2 STATEMENT OF RESEARCH PROBLEM 3
1.3 OBJECTIVE OF THE STUDY
4
1.4 STATEMENT OF RESEARCH OPERATORS
4
1.5 STATEMENT OF RESEARCH HYPOTHESIS 4
1.6 SIGNIFICANCE OF THE STUDY
5
1.7 SCOPE AND DELIMITATION OF THE STUDY 5
1.8 PLAN OF STUDY
5
1.9 DEFINITION OF TERM
6
CHAPTER
TWO: LITERATURE REVIEW
2.1 DEFINITION OF SMALL SCALE
ENTERPRISES
7
2.2 ADVANTAGE OF SSE’S
10
2.3 ROLES OF SSE’S IN NATIONAL
DEVELOPMENT
11
2.4 PROBLEM OF SMALL SCALE ENTERPRISE 15
2.5 CONCEPTUALIZING UNEMPLOYMENT
/EMPLOYMENT 17
2.6 ECONOMIC GROWTH
24
2.7 THE ROLES OF SMALL-SCALE
ENTERPRISE
27
2.8 FINANCES OF SMALL – SCALE
ENTERPRISE 30
2.9 THE NIGERIA BANK FOR COMMERCE AND INDUSTRY
(NBCI)
32
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 INTRODUCTION 37
3.2 RESEARCH DESIGN
37
3.3 RESTATEMENT OF RESEARCH QUESTIONS 37
3.4 RESTATEMENT OF RESEARCH HYPOTHESES 38
3.5 THE POPULATION OF THE STUDY
38
3.4 SAMPLE SIZE AND SAMPLING PROCEDURE 38
3.5 SOURCE OF DATA/METHOD OF DATA
COLLECTION 39
3.6 METHOD OF DATA ANALYSIS
39
CHAPTER
FOUR: PRESENTATION AND ANALYSIS OF DATA COLLECTED
4.1 INTRODUCTION
40
4.2 DATA PRESENTATION AND ANALYSIS 40
4.2.1 TESTING OF HYPOTHESIS
55
CHAPTER
FIVE: SUMMARY RECOMMENDATION AND CONCLUSION
1.1 SUMMARY
59
5.2 CONCLUSION
60
5.3 RECOMMENDATION
62
5.4 SUGGESTION TO FURTHER STUDIES 63
BIBLIOGRAPHY 65
QUESTIONNAIRE
67
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Interest
in the role of small and medium-sized enterprises (SMEs) in the development
process continues to be in the forefront of policy debates in developing
countries. The advantages claimed for SMEs are varies, this include: the
encouragement of entrepreneurship; the greater likelihood that SMEs will
utilize labour intensive technologies and thus have an immediate impact on
employment generation; they can usually be established rapidly and put into
operation to produce quick returns. SME development can encourage the process
of both inter- and intra-regional decentralisation; and, they may well become a
countervailing force against the economic power of larger enterprises. More
generally the development of SMEs is seen as accelerating the achievement of wider
economic and socio-economic objectives, including poverty alleviation.
Staley
and Morse (2011) identify a ‘developmental approach’ to SME promotion which has
as its objective the creation of ‘economically viable enterprises which can
stand on their own feet without perpetual subsidy and can make a positive
contribution to the growth of real income and therefore to better living
levels’. This approach emphasises the importance of efficiency in new SMEs.
Small producers must be encouraged to adopt new methods, move into new lines of
production and in the long-run, wherever feasible, they should be encouraged to
become medium- or even large-scale producers.
More
recent concerns associated with the growth and efficiency of smaller
enterprises has also become prominent. Using the case of Northern Italy, Piore
and Sabel (2009) have argued that small enterprises are more efficient because
they have adopted a flexible specialisation approach. Correspondingly, there
has been growing interest in whether this model has or can be replicated in
developing countries (Schmitz, 1998; Pederson, 2002; Schmitz and Musyck, 2003;
Schmitz, 2004).
The
role of finance has been viewed as a critical element for the development of
small and medium-sized enterprises. Previous studies have highlighted the
limited access to financial resources available to smaller enterprises compared
to larger organisations and the consequences for their growth and development
(Levy, 1993). Typically, smaller enterprises face higher transactions costs
than larger enterprises in obtaining credit. Insufficient funding has been the
major problem confronting SMEs (Peel and Wilson, 1996). Poor management and
accounting practices have hampered the ability of smaller enterprises to raise
finance. Information asymmetries associated with lending to small-scale
borrowers have restricted the flow of finance to smaller enterprises. In spite
of these claims however, some studies show a large number of small enterprises
fail because of non-financial reasons (Liedholm, McPherson and Chuta, 2004).
The
panacea for solving problems of economic growth in developing countries often
reside in the development of small scale industries. The establishment of those
industries has been the centerpiece of industrial development of many countries
such as India, Malaysia, Pakistan, Indonesia and Nigeria to mention a few. It
is expected that the gains to be derived from the establishment of small-scale
industries will be translated into the generation of employment at a low investment
cost. These industries will also be able to harness raw materials locally and
serve as raw inputs to the large-scale industries.
1.2 STATEMENT OF RESEARCH PROBLEM
The
growth of output of any economy depends on capital accumulation, and capital
accumulation requires investment and an equivalent amount of saving to match
it. Two of the most important issues in developing countries, are how to
stimulate investment, and how to bring about an increase in the level of saving
to fund investment.
The
primary focus of this research work emanates from the fact thatsmall scale
enterprises owners do not have sufficient finance to carry on due to the low
saving culture of the people in this part of the world. Besides, the Central
Bank stipulated that 20% of banks’ credit should be granted as loan to the
Small Scale Enterprises but this was not adhered to because of the reason that
most loans granted to Small scale holders were not repaid and so the banks did
not consider them ascreditworthy. In the light of these, this research shall
evaluate the financial incentive available to the small-scale enterprises.
1.3 OBJECTIVE OF THE STUDY
The
main purpose of this study is to identify and consequently analyze the
financial incentives that are available to small and medium scale enterprises.
Other objective include:
I. Contribution of growth of the
Nigeria Company.
II. Role played by financial market in
financing small and scale enterprises in Nigeria.
III. Economic potential of small and scale enterprises in Nigeria
IV. Strategies that would improve the
development, growth and survival of small-scale enterprises
1.4 STATEMENT OF RESEARCH QUESTIONS
1. Does SMEs identify the financial incentives
2. Does financial institutes improve SMEs
activities
3. Is their any economy potential of SMEs in
Nigeria enterprise
4. Can the strategies in place improve the
growth and survival of SMEs
5. What are the roles played by financial market
to improve SMEs in Nigeria
1.5 STATEMENT OF RESEARCH HYPOTHESIS
Hi: There is no relationship between Small and
Medium enterprise and economic growth in Nigeria
Ho: There is significant relationship between
Small and Medium enterprise and economic growth in Nigeria
HI: The role played by financial market does
not improve SMEs activities in Nigeria
Ho: The role played by financial market improve
SMEs activities in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
The
significance of this study can be viewed from the perspective of the importance
of the industrial sector as a whole to the economy, which could in turn be
examined from the government policies that are meant to promote industrial
development and provide a solid foundation for the long-term growth in the
industrial sector.
Above
all it is believed that small and medium scale enterprises will propel the
rationalism of economic independence, long after political independence thus
there is a need to evaluate and promote small and medium scale enterprises.
This research work shall contribute to existing literature on SMEs by providing
a detailed analysis of the financing strategies that are available to small and
medium scale industries in Nigeria with the aim of improving their operations
and effectiveness.
1.7 SCOPE AND DELIMITATION OF THE STUDY
The
study will be limited to SSEs as defined.
Also the study shall limit the number of SSEs to be study to fifty.
1.8 PLAN OF STUDY
The
study will be divided into five main chapters.
Chapter one will cover the general introduction into the study under
which introduction, statement of problems, objectives of the study, statement
of the study are discussed. Chapter two
focus on literature review, which has to do with a general presentation of
views by of former researchers as well as scholars on the main variables of the
study. Chapter three will contain the
structural composition of the study under which the source the finance of small
scale enterprises are discussed. Chapter
four will be devoted to data presentation and analysis. The last but by no means the least in
importance chapter will be used for summary, conclusion and recommendations.
1.9 DEFINITION OF TERM
Small-Scale
Industry: An industry with a labour size of 11-100 workers or a total cost of
not more thanN50 million, including working capital but excluding cost of land.
Medium
Scale Industry: An industry with a labour size of between 101-300 workers or a
total cost of over N50 million but not more than N200 million, including
working capital but excluding cost of land.
Large
Scale: An industry with a labour size of over 300 workers or a total cost of
over N200 million, including working capital but excluding cost of land.
Finance:
The act of providing funds for business activities, making purchases or
investing, financial institutions and banks are in the business of financing as
they provide capital to business, consumer and investors to help them active
them goals.
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