ABSTRACT
In view of the importance of
SMEs, government has been playing an appreciative role in promoting their survival
and growth, various policies towards this has enunciated plan and the ongoing
three year rolling plan, priority was accorded industrialization with emphasis
on SMEs.
Thus, it has been stated that the
panacea for solving the problem of stunted economic growth of developing
countries often reside in the adequate funding and development of the Small and
Medium Scale Enterprises (SMEs).
Analyst have therefore continued
to posit that Nigeria will continue to, remain in a state of underdevelopment
unless concerted efforts are made to achieve growth in the SMEs .because the
lack of development in this sector has 'continued to keep the Nigerian economy,
in the woods. One of the major impediments to the growth and development of
this sub-sector is lack of adequate finding.
The survey research design was
employed in this study and the questionnaire was the main research instrument.
A total of 50 respondents make up the sample size of the study. Thus various
statistical tools were used to analyze the data collected. A statistical tool
used was mean and standard deviation. Hence the finding of the study shows that
the rationale for promoting SMEs has given as their ability to make efficient use
of resource employment, mobilize domestic savings for investment and it is
recommended that: The government in conjunction with banks and professional
associations should help the business to sign post the path to improved methods
of marketing.
TABLE OF CONTENT
CHAPTER ONE
1.1 Background to the Study
1.2 Statement of Problems
1.3 Objectives
of Study
1.4 Research questions
1.5 Research Hypothesis
1.6 Significance
of Study
1.7 Scope and Limitation Of Study
1.8 Research
Methodology
1.9 Definitions of Terms
1.10 Summary of Subsequent Chapters
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction
2.1 Conceptual Clarifications
2.2 Banking Sector Reforms
2.3 Post - Banking Sector Consolidation
2.4 Nigerian Banks and the Problem of Financing Smes
2.5 Government Involvement .In
Development of Small and Medium Scale Enterprises
2.6 Definition of Small and
Medium Scale Enterprises
2.7 Government Agencies as Source of Finance
2.8 Survival Strategies for
Small Scale Business in Nigeria
2.9 Sources of Finance and
Funding Of Small and Medium Scale Enterprises in Nigeria
2.10 The Role of Banks in Providing Debt Finance to SMES
2.11 Survival Strategies for Small
Scale Business in Nigeria
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research
Design
3.3 Re-Statement of Research Questions
3.4 Re-Statement of Research Hypothesis
3.5 Characteristics of the Study Population
3.6 Sampling Design and Procedure
3.7 Data Collection Instrument.
3.8 Administration of Data Collection Instrument
3.9 Procedure for Analysing Collected Data
3.10 Limitations of Methodology
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 Introduction
4.1 Data Presentation and Analysis
4.2 Analysis of Respondents
4.3 Test of Hypothesis
CHAPTER FIVE:
CONCLUSION
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendation
Biography
Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
It has been erroneously upheld
that Nigeria can become industrialized only through the establishment of large
scale industries, but empirical evidence on the industrial development of the
economic developed countries has revealed that for a genuine industrial to take
off in an economy, concerted effort should be made to increase the number and
improve the performance of indigenously owned Small Scale Industries.
The economic and social
contributions of this sector have played a crucial role in the overall
development in Nigeria. For this sector has been the bedrock of Nigerian
Industrialization and remain strong in its contribution to the country's
economy today.
In most of the developing countries,
the corporate world is usually characterized by low investment rate occasioned
by inadequate of investable funds and poor economic condition. Many of such nations
therefore, feel the need to revitalize their economies by embarking on economic
reform, programs expected to boost the level of activity in the economy
(Olaleye, 2002).
The promotion of Small and Medium
Enterprises is cornerstone of economic policy for a large number of
industrialization countries. Public support for small and medium enterprises
appears 'to be based on the widely held perception that small business sector
is an incubator of economic growth, a place where innovation takes place and
new ideas become economically viable business enterprises (Craig, Jackson and
Thompson, 2005).
In line with this, the role of
small and medium scale enterprises in fosters economic development has been
well articulated in, different form of government policies. The specific
attention on them is based on their expected impact and potential contribution
as well as accelerative effort in achieving macro objectives pertaining to full
employment of local technology. They
also serve as catalyst for increase national productivity and a veritable
launching pad into the world export market.
Giving an insight into the small
and medium scale enterprises phenomenon, the Nigerian economy does not seem to
have been able to reap 'the advantages obtainable from the SMEs in the
past. In the same vain, these industries
complain about neglect or lack of government interest in their quest for rapid
growth and development. The existing lukewarm relationship is not in the best
interest of the economy.
It is for these reasons that the
Nigerian government started to show interest in the affairs of SMEs in the
1970s to the present. Some of the positive actions taken by the government
include providing funds for some research into these industries, creating small
scale industries division or departments, as well as small scale credit schemes
in, various states and at the federal level and giving the subject a pride of
place in national development plans to the 1970s and 1980s particularly 1981 -
1985 plan.
Hence, in view of the growing
public interest and governments realization of the many advantages of SMEs, the
government has made some policies and distinct pronouncement with regards to
the operation and promoting the sector (both economically and monetary). The
monetary measures include the establishment of financial institution~. to
provide finance to the sector. Banks were also required to provide a specified
proportion of their available credit to indigenous borrowers with particular
emphasis to SMEs. In addition, various financial intermediaries were
established by monetary authorities to provide incentives to these growing
industries and business with the specific purpose of aiding them financing
managing business problems.
In line with the above
statements, it is obvious that the study of this nature cannot be
overemphasized because of the new look of the Nigerian banks and other financial
institutions in providing the needed funds to small and medium scale
enterprises.
1.2 Statement of the Problem
It is a common knowledge that the
small and medium scale enterprises have the potential of lifting the economy
out of the doldrums in which it is presently languishing (Ajonbadi, 2002). The
opportunities are simply enormous. However, the cry has been the lack of
investible funds. Thus is moreso, when allegations have been raised against the
Nigerian government and the Nigerian banks in particular, that business
policies have been largely made to favour the large scale to the detriments of
the SMEs sub-sector. Hence, SMEs does not have better access to funds.
SMEs are mostly likely to suffer
severe problems of asymmetric, information because of their size and background
and the lack of formal credit rating measures for firms. Many economists,
mostly notably Slightz and Weiss (1981).
Contend that private lending
institutions may indeed fail to allocate loans efficiently because of fundamental
information problems in the market for SMEs business loans. Stilitz and Weiss
(1981) argue that banks consider both the interest rate they receive on the
loan and the riskness of the loan when deciding to make a loan. Thus, the
inability to merge these two factors together hinders SMEs in accessing the
needed funds.
Also, it has been observed that
one of the reasons for the slow growth of SMEs in Nigeria is their limited
access to long and medium term credit facilities for the acquisition of fixed
assets and necessary expansion. The scarcity of funds for this purpose is
mainly due to the short term nature of, banks deposits which are the major
sources of finance to the economy. Evidently
in trying to reduce the risk inherent on the mismatch of the term of their
deposits and loans, banks have been overtly cautions in selecting projects to
be granted medium long term finance, while at the same time charging relatively high interest rates. Therefore, the study
focuses on the problem of financing as it relate to small and medium
enterprises.
1.3 Objectives of the Study
The main objective of the study
is to examine the effect of financing on the performance of small and medium
scale enterprises in Lagos State. Thus, in order to achieve the above
objective, the following specific objectives services as our guide:
To examine whether small and medium scale enterprises
have better access to funds due to bank consolidation.
To examine whether government policies and reform
programmes have impact on SMEs performance.
To examine whether adequate financing of SMEs, by
financial institution will enhance the growth of the sector.
To examine whether the interest rate charge by banks and
other financial intermediaries on loan affects SMEs performance.
To enumerates possible recommendations and solutions that
may prove useful in better financing of SMEs.
1.4 Research Questions
In order to achieve the'
objectives of this study, the study attempts to provide answers to the
following research questions:
To what extent does finance has impact on the performance
of SMEs?
Does SMEs have better access to funds due to bank
consolidation?
Does government policies and reform programmes have
impact 01'\ the performance of SMEs?
Does adequate financing of SMEs enhance the growth of the
sector?
Does interest rate charge by banks and other financial
intermediaries on loans affect SMEs performance?
1.5 Research Hypothesis
Hypothesis is a tentative assumption made in order to draw
out and test its logical or empirical consequences. A hypothesis is a tentative
statement about relationships that exist between two or more variables
(Osuagwu, 2002). Hypothesis is state in two forms, "Null" which is
denoted by "Ho" and "Alternative" which is denoted by
"Hi". As general rule null hypothesis is always negative, while the
alternative is positive in relation to the variables of the research topic.
In order to provide answers to
the research questions, the following are the hypothesis of this study:
1. Ho: Finance does not hinder the growth of small and medium scale
enterprises. .
Hi:
Finance hinders the growth of small
and medium scale enterprises.
2. Ho: Government
policies and reform programmes does not have impact
on the performance of SMEs.
Hi: Government policies and reform
programmes has impact on the performance of SMEs.
1.6 Significance of the Study
The essence or significance of
this research study can be seen in the expected goal the study is to achieve.
This range from exposing the immense economic benefits derivable from SMEs when
giving enough backing (financial) from the financial institution in terms of
its contribution to the national economy and employment generation to the
people.
This study will also delve into
some other areas of sources of finance to SMEs. This is because some small
scale entrepreneurs may not even be aware of some of these credit schemes to
help and assist them.
This study also contributes to
knowledge in terms of provisions of additional information in the form of
ideas, opinions and views from the field (industry operators) to develop and move
the sector forward by way of checking the relationship that exists between the
financial institution and SMEs in Nigeria.
1.7 Scope and Limitation of the Study
The study covers Financial
Institutions and SMEs in Nigeria, particularly in Lagos State and does not
extend to other sectors. This study is restricted to selected small scale
enterprises in Ikeja local government of Lagos State. The study covers a
representative numbers of the generality of SMEs. No special consideration is
given to sex, age and nationality in collecting data from the respondents.
The level of accuracy in this
study is proportional to the availability of information that the respondents
are willing to give. Also, there is this uncertainty that information given is
without bias. Also, undertaking a research study is a serious business. It
requires a commitment of time, money and energy, both intellectual and
physical. Hence, balancing the study with academics and going to work is an
Herculean task.
1.8 Research Methodology
The design of this research study
is to investigate the effectiveness of financial institution on SMEs
performance in Lagos State. The data that will be collected for this study will
be obtained from both primary and secondary source of information. The primary
data will be collected through questionnaire, while secondary data will be
collected from organisation news, journals and other related publications.
Responses to the research
questions will be analysed using frequency, mean, standard deviation and simple
percentage analysis. Findings from the study will be comprehensively discussed
in the light of the research problems, hypothesis, purposes, research
questions, literature of the research, and other relevant issues to the
research. Conclusions will be drawn and recommendations made.
1.9 Definitions of Terms
Banks: This is a
financial institution that aid in collection of deposit and granting loans and
other auxiliary service to the public.
Banking: Is a service delivery business in which information is
pivotal, whether in the honoring of cheques or other withdrawals.
Consolidations: This
is another term used in place of merger and acquisition. Thus, it is the combination of two or more
corporation.
Enterprises: This is any
commercial undertaking that is either publicity of privately owned or
controlled. The word is used interchangeably with organisation in this study.
Performance: The degree of
efficiency and effectiveness with which the organisation objectives are
achieved.
Small Scale Enterprises: These are enterprises in which power consumptions, number of employees,
quantum of raw materials, output like are small in size.
1.10 Summary of Subsequent Chapters
The research will be divided into
five (5) chapters for easy study and analysis.
Chapter One: Is the introductory
part which include general
introduction, purpose of the study, background of the study,
significant of the study, limitation of the study etc.
Chapter Two: Shall discuss the literature review i.e. the recent
literature books and journals that deals with the subject matter.
Chapter Three: Will highlight the research
methods i.e. the methodology, study plan, restatement of research
questions and restatement of hypothesis etc.
Chapter Four. Will base on presentation, analysis and interpretation of result.
Chapter Five: Will attempt to recommend and
make its findings known
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