ABSTRACT
This research examined the problems
and prospects of financing small and medium scale enterprises in Nigeria. The
evaluation of the government and International agencies programmes of
assistances and scheme such as Nigeria Industrials Development Bank (NIDB),
National Economics Reconstruction Fund (NERFUND), Nigeria for Commerce and
Industrial (NBCI), National Directorate of Employment (NDE) and current
financing initiatives such as the Small and Medium Industries Equity Investment
Scheme (SMIES). Nigerian Agricultural Cooperative and Rural Development Bank
(NACRDB). The Bank of Industry (BOI) and Refinancing and Rediscounting facility
the essence was to determined the extent to which these scheme and institution
can achieved their objectives and the effect they have on Small and Medium
Enterprises (SME’s).
Questions were posed in order to find
solution to the problems of this study and to enable us obtain a clearer
understanding and characteristics of SME’s.
This study found out that finance is
the major problem faced by SME’s in Nigeria despite government’s
efforts aimed at addressing the problems by making policies, giving incentives
and setting up various loan schemes. To some extent, lack of awareness by SME’s
operators about government programmes put in place to assist them financially
is responsible.
Recommendations were made to the
effective implementation of the study adoption of new policies and scheme for
financing of SME’s above all to stimulate awareness about special schemes aimed
to promote the growth of SME’s through enlightenment by the government
agencies.
TABLE OF CONTENT
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
CHAPTER ONE
1.0 Introduction
1
1.1
Background
of the study 1
1.2
Statement
of research problem 2
1.3
Objective
of the study 3
1.4
Research
question 3
1.5
Significance
of the study 4
1.6
Limitation
of the study 4
1.7
Scope
of the study 4
1.8
Definition
of terms 4
CHAPTER TWO
2.0
Literature
review 6
2.1 Introduction
6
2.2 Features
of small and medium scale enterprises 7
2.3 Roles of small and medium scale enterprises in Nigeria 8
2.4
Growth
and development of small and medium
scale 9
enterprises in Nigeria
2.5
The
role of government in financing and
promoting 11
small medium scale
enterprises
2.6
Problems
of small and medium scale enterprises in Nigeria 14
2.7
Prospects
for the development of small and medium 17
–scale enterprises in Nigeria
CHAPTER THREE
3.0
Introduction
20
3.1 Summary
20
3.2
Recommendation
21
3.3
Conclusion
21
Bibliography 23
CHAPTER ONE
1.0
INTRODUCTION
The importance of small and medium
scale enterprise (SME’s) to economic development
of any country whether developing or developed cannot be over emphasized they are considered to be one
of the driving forces in economic
development. They stimulate private ownership and entrepreneurial skill in fact any country that neglects this
sector does so at its own peril.
BACKGROUND TO THE STUDY
All agree that the entry point into
economy’s industrialization engineering process
is through the development and growth of small and medium scale enterprise (SME’s). This is because
SME’s play important role in development
of economy provides ready source of employment opportunities
and technological growth of the national. Also it serves as a good
source of raw material for the big industrial establishment, which later grows into large enterprises
there by oiling the wheel of industrial
development.
According
to Carpenter Clive, http//www.ypforum.org/news_carpenter, he stated that, the 1992 review by the
National Council on Industrials Standards
define small and medium scale enterprises (SMEs) as enterprises with total cost (including working capital
but excluding cost of land) above 31
million but not exceeding 3150 million, with a labour size of between 11 and 100 employees. He went further saying
that there are probably other definitions
for SMEs but what is clear is that SME are usually small, owner or family–managed business with its
goods and services being basic.
The
SMEs are faced with some problems due to lack of enabling environment to develop and grow for optimal
contributions to the economy. The problems range from poor management
of SMEs to information gap and above
all, inadequate funding although, different efforts have been put in place to assist the SME’s like policies
incentives, programmes and loan scheme.
For the benefits growth of SME’s. For example Federal Government Established Industrial Development centre in all states
of the federation to provide free
managerial and technical consultancy/extension
services to the SMEs. But these centre were not used effectively by SMEs operations also in the area of finance,
services of programmes to ensure
provision of soft loan were put in place through Nigeria Industrial Bank (NIDB), Nigeria Bank for Commerce and
Industries (NBCI), National
Economic Reconstruction Fund (NERFUND), National Directorate of Employment (NDE) and Property Alleviation Programmes like Family Economic Advancement
Programmes (FEAP) and latterly, (CBN)
Central Bank of Nigeria to banks to invest 10% of their profit before tax such as operations of eligible SMEs such
as Banks of Industry, Small and
Medium Industries Equity Investment Scheme (SMIEIS).
Despite
all these efforts from the government, the policies, incentives, programmes and loan scheme have not
able to adequately solve the fundamental
problems which have constrained SMEs access to formal or institutional credit. Thus, low credit
rating of this class of enterprise is attributable
largely to their weak capital base, high mortality rate and shortage of managerial skills. Thus, for
the SMEs to serve the expected role
of catalyst for rapid
industrial development there is need for more innovative strategy for improved access to
development finance for the SMEs would address their inability to provide
collateral securities for loans from formal
credit institutions.
In
view of the foregoing, this research study is concerned about the peculiar problems which SMEs face. In an
attempt to finance their operation and to highlight
the source open to them and the areas and ways in which credit/loan scheme for SMEs could increasingly contribute to
their development and growth.
1.2
STATEMENT OF RESEARCH PROBLEM
The problems faced by small and
medium-scale enterprise are production, marketing,
personnel and even day to day management which are all linked to financial underpinnings, thus, the issue
of finance is central. However, it is
observed that the financial problems of small business arise from multi- faceted source which are under
capitalization, based behaviour of financial institutions
management incompetence and financial indiscipline, inadequacies of the capital market, political and economic
instability leading to policy
distortions and in consistencies which together have put the SMEs at disadvantages over the years.
The
most overwhelming financial problem encountered by SMEs owners is raising the startup capital for their
chosen business ventures. It appears that SMEs
owners do not have adequate information concerning the various source of finance specific to them, despite the
government’s effort on the availability
sources of specific finances to SME owners. As such, they depend on personal funding as well as
assistance from family and friends. This
tendency naturally limits their scope for generating finance. Consequently, the SMEs operation have to
compete with larger companies for
available funds equity, terms loans, supplier credit or leasing facilities having to bargain on the same terms
and condition as the bigger firms constitute
a problem for them.
This
research study is therefore necessary for through inquiry into the financial management and technical support
to them in order to ensure their development,
growth and contribution to the economy.
1.3
OBJECTIVE OF THE STUDY
The
statement of problem which has been the hindrance to the improvement of SMEs (written above). This study intends to attain the following objectives.
1. To highlight the different source of
finance available to the operations of SMEs in Nigeria.
2. To review the major problems limiting
access of SMEs to development finance.
3. To examine the existing government
policies, incentives, programmes and loan scheme for the
benefits of SMEs.
4. To examine benefits of existing credit
scheme made available via contributions
of SME project beneficiaries to the economy.
1.4
RESEARCH QUESTIONS
In
a developing economy like Nigeria,
survival of small business is of utmost
importance. Therefore, strategies must be developed to assist in their growth and survival. This research study intends answering the
following questions:
1. Have government policies and programmes
specific to SMEs helped in their promotion and
development.
2. How aware small and medium-scale business
operators of the various government agencies, policies,
programmes and incentives specific to them.
3. To what extent is the growth and
development of small and medium-scale enterprises in Nigeria?
1.5
SIGNIFICANCE OF THE STUDY
Despite
the problem faced by the SMEs, it also promote industrialization and economic growth of the nation. The
significance of the research study is
as follows:
1. Contributing to the knowledge and
understanding of the financial problems faced by SMEs in Nigeria as
basis for solution.
2. Giving more light on the importance of
SMEs as they perform their expected role by precipitating
industrial development finance for the
SMEs.
3. Establishment on the relevant existing
financing agencies charged with
the responsibility of assisting SMEs in Nigeria.
4. Providing a useful guide for prospective
entrepreneur who may wish to be owners of small or
medium-scale business and are in need
of funds.
1.6
LIMITATION OF THE STUDY
The
barriers faced by small and medium-scale enterprise sub-sector in Nigeria, during the course of this
research study are as follows.
1.
Difficulty
by SME operators to access funds.
2.
The
absence of government policy on small and medium-scale enterprises
3.
Lack
of access to information about new schemes which could benefit the operators
and lack of proper record keeping of SMEs activities, these are some of the
limitation faced by SMEs.
1.7
SCOPE OF THE STUDY
The
study is focused on the problems and prospects of financing small and medium-scale sub-sector of the Nigeria economy
and also looking at the way forward for
the survival of the enterprises as a engine growth for Nigeria
economy.
1.8
DEFINITION OF TERM
BANK: An institution where cash and other
valuable are kept for safety reasons and
also place money in been borrowed.
B.O.I: Bank of Industry.
C.B.N: Central Bank of Nigeria
ENTERPRISE: A business activity that is full of
initiatives.
GOVERNMENT: is a body of persons and
institutions that makes and enforces laws
of a particular state or society.
NACCIMA: National Association of
Chamber of Commerce, Industry, Mines and
Agriculture.
NASME: National Association of Small
and Medium-scale Enterprise.
NBCI: Nigerian Bank of commerce and
Industries.
NERFUND: National Economic
Reconstruction Fund
NIDB: Nigeria Industrial Bank
NCI: national Council of Industry
POLICY: A general plan of action
SCHEME: A plan of work or action.
SME: Small and Medium-scale
Enterprises.
SAP: Structural Adjustment Programme
SME OPERATOR: A person who runs a small
and medium-scale business
RRF: Refinancing and Rediscounting
Facility.
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