ABSTRACT
This study is aimed at appraising the role of the banking sector
in the development or its participation in the promotion of SMEs, where union
bank of Nigeria Plc was used as a guide. This defines (SMEs), and evaluates the
relevance and importance of SMEs in the economic and national development; we
then consider the overview of the financial support programmes to SMEs in Nigeria. This
reviews the current initiatives and strategies for financing SMEs and also
determined the various services of funds for SMEs and using evidence from a
sample of one hundred members across all the departments of Union Bank of
Nigeria Plc and the proprietor of SMEs, the result from the Spearman Rank
Correlations Coefficient (rho) and chi-square analysis shows that SMEs act as catalyst
for economic and technological development as well as the fact that growth of
small and medium scale enterprises (SMEs) depends largely on the
participation. It was also suggested in
this study that government should have a
stable industry policy consciously and deliberately remove administrative
bottlenecks involved in obtaining necessary documents. Moreover, government can
help by removing artificial policy and regulatory obstacles to SMEs
lending-importantly, policies that promote greater competition within the
financial sector as a whole are generally likely to be especially good news for
smaller borrowers like SMEs. External actors can help too-for example by
promoting development of credit information system and reform of collateral
regulations.
TABLE OF CONTENTS
Title Page
Certification i
Dedication ii
Acknowledgement iii
Abstract v
Table of
Contents vi
Chapter One: Introduction
1.1
Background of the Study 1
1.2
Statement of Problems 4
1.3
Objective of Study 4
1.4
Research Hypothesis 6
1.5
Scope of Study 6
1.6
Significance of Study 6
1.7
Historical Background of Union Bank of Nigeria
Plc 7
Chapter Two: Literature Review
2.1
Introduction 11
2.2
Assessment of Small and Medium Scale Enterprises
in Nigeria 14
2.3
Assessment of Bank’s Operations on Small and
Medium Scale Enterprises 19
2.4
The Relevance and Importance of Bank’s to Small
and Medium Scale Enterprises 26
2.5
Role, Relevance and Importance of Small and
Medium Scale Enterprises in the
Economic 29
2.6
Problems and Challenges faced by Small and Medium
Scale Enterprises in the Development
Process. 33
2.7
The Role of Government Policies and Other
Agencies
Support on Small and Medium Scale
Enterprises
in Nigeria 36
Chapter Three: Research Methodology
3.1
Introduction 41
3.2
Population of Study 41
3.3
Sampling Technique 42
3.4
Procedure for Data Collection 43
3.5
Method of Data Analysis 44
3.6
Standard of Instrument 45
3.7
Limitation of Study 45
Chapter Four: Data Analysis and Presentation of
Findings
4.1
Introduction 46
4.2
Presentations and Analysis of Data According to
Research Questionnaire 46
4.3
Respondents Characteristics and Classification 51
4.4
Testing Analysis and Interpretation of Research
Hypothesis 61
Chapter Five: Summary, Conclusion and
Recommendation
5.1
Summary of the Study 68
5.2
Conclusion 69
5.3
Recommendations 70
Bibliography 72
Questionnaire 74
Appendix I
Appendix II
CHAPTER ONE
1.0 INTRODUCTION
1.1
BACKGROUND OF THE STUDY
There is no doubt Nigeria banks and other financial
institutions occupy strategic positions in the operation of our economic
system. The importance of these banks and other financial institutions are so
encompassing that one may not imagine the working of the economic system
without them. No wonder that government is always sensitive to the happenings
in the banking sector. In an economy such as ours, things have to be bought and
paid for (e.g. an entrepreneur, buying raw materials from suppliers), such transactions
in modern time and usually done in many cases through the bank credit transfer
system because apart from the large amount of money that may be involved in the
payment, there is also the need to consider the securities of the money. So
bank just act as intermediaries in money business transactions.
Monies kept with bank form the banks deposits since not all
of these monies will be demanded by the customers at a time, there are usually
surplus saving in the bank (i.e. deposits not required at present by
depositors) such surplus savings are usually lent out by the banks who provides
funds for finance of business operations. Such funds are what is regarded as
debt equity capital of a business i.e. part of the capital of a business that
is got through borrowing. Thus, this debt equity capital give by banks to their
customers, especially entrepreneurs is an important financing role which the
banks perform to help develop entrepreneurship of all types. A lot of
entrepreneurs do often approach their banks to give them one kind of loan or
the other, which the banks will be willing to oblige. The various methods by
which banks can lend money to entrepreneurs include:
i.
Over Draft: A credit
facility which allows a customer to draw more money from his account in the
bank than what he or she has in his account such facility is usually extended
to regular and reliable entrepreneurs with an interest calculated on a daily
basis. An entrepreneur can use the facility to pay for current obligation e.g.
salaries (Adeleye 1998).
ii.
Short Term Loan: Is
also a credit facility granted to an entrepreneur for a short term duration,
such as three to six months or a year. This is usually effected by opening an
account (known as loan account) in the bank to which the amount of loan given
is debited (with the interest and the current account of the beneficiary is
credited (Olagunju, 2004).
Small and medium scale enterprises as a concept
defies universal definition both among academics and practitioners. It depends
to a large extent on a country’s level of development..
Identifiable criteria often adopted on an
arbitrary mix in definition include numbers of employee relative size, initial
capital outlays, sales value, financial strength independent ownership and
types of industry (Oshagbemi 1982 ). The 1987 Industrial Policy of Nigeria
defines these enterprises as follows:Small scale are those whose total
investment was between a N100,000 and N2 million excluding working capital,
medium scale. Those with total investment of between N2 million and N5 excluding
land but including working capital.
In 1996, the National Council on Industry (NCI) revised the
definition of small and medium scale enterprises as follows:
a.
Small Scale Industry:
Enterprises with total cost (including working capital but excluding cost of
land above N1 million but not exceeding N40 million with a labour size of
between 11 and 35 workers.
b.
Medium Scale Industry:
Enterprises with total cost (including working capital but excluding cost N50
million with a labour size of between 36 and 100 workers.
Other agencies with varying definition were the central
bank of Nigeria (CBN), the Nigeria Bank for commerce and industry (NBCI), the
Nigeria industrial development bank (NIDB) to mention, but a few.
With the above analysis and various definition and
contributions from various agencies, the research work is to access the
contribution of bank’s to the growth of small and medium scale enterprises.
1.2 STATEMENT OF PROBLEMS
Nigeria business environment which is seen to be highly
volatile and competitive has force a number of organisation especially the
small and medium scale enterprise into winding-up because of their inability to
withstand the storming business environment in accessibility of foreign
exchange as well as the institutional credit, unavailability of basic
infrastructural facilities such as good roads, electricity, water supply and
telecommunication to mention but few, insufficient capital, lack of
insufficient materials (raw materials) lack of good financial body and
strategies adviser, also to mention miss management of funds. The long process
for approval of loans facility but banks in Nigeria due to qualilateral
tendering with other procedure of comfort required by the banks.
In view of the above, it will be difficult for both small
and medium scale enterprises to function effectively as a highly profit making
organisation, the research work is structured in line with the various
contributions and efforts of the Nigeria banks to the above problems undergoing
by small scale and medium scale enterprises.
1.3 OBJECTIVE OF THE
STUDY
This research study is to examine the impact of banks on
small and medium scale enterprises in Nigeria. The economic growth pace,
the effectiveness of Central Bank of Nigeria (CBN) as a regulatory institution
in monitoring banks contribution on the small and medium scale enterprises with
particular reference to Union Bank of Nigeria Plc with other specific objectives
stated below:
i.
To define a meaningful
way of administering the new policy in achieving set goals; so that the small
and medium scale enterprises today will metamorphosize into large-scale
industries in the future.
ii.
To appraise the
relevance of bank’s contribution in promoting growth of small and medium scale
enterprises in both short and long run
iii.
To determine various
ways that bank’s contribute to the growth and survival of small and medium
scale enterprises.
iv.
To evaluate the
participation of small and medium scale enterprises in economic building and
development.
v.
To examine the role of
government in promoting small and medium scale enterprises in Nigeria and
other developing countries.
vi.
To attempt to provide
alternative strategies in effective promoting of small and medium scale
enterprises where necessary.
vii.
To access the bank
under study (Union Bank of Nigeria Plc) as regards her contributions towards
the promotion of small and medium scale enterprises. In the part, and the role
it has played in the economic development through the promotion of small and
medium scale enterprises.
1.4 RESEARCH
HYPOTHESIS
In any research work, there should be some hypothesis to be
tested. As we definitely know that hypothesis can be regarded as tentative
statement about relationship that exist between two or among many variables.
The following are the research hypothesis to be tested in
this study:
1.
Bank participation has
not helped in the growth of small and medium scale enterprises
2.
Small and medium scale
enterprises does not act as catalyst for economic and technological
development.
3.
Banking programmes and
activities has not remain crucial to the
promotion of small and medium scale enterprise.
4.
Success of small scale
medium scale enterprises is not dependent on efficient financial strategy.
1.5 SCOPE OF STUDY
The coverage of the study would span through one to five
years of banks operations i.e. Union Bank of Nigeria Plc through the loans and
advances granted to their various customers operating small and medium scale operations.
Also, the study is confined to Lagos Metropolis because of its vast population
also highly located small and medium scale enterprises because of its
commercialized and industrialized nature of enterprises.
1.6 SIGNIFICANCE OF
STUDY
This research is aimed at giving an insight into the
various ways in which bank’s contribute to the promotion and operations of
small and medium scale enterprises. The relevance of this study cannot
therefore be over emphasized considering the present trend in the Nigeria
business environment. It is seen to be volatile, competitive and dynamic in
nature.
The small and medium scale enterprises of any economy has
vital role to play in the economic growth and development of a nation being the
essential source of innovation and majority of people which serves as an
indicator for improving the standards of living of the citizens and generating
foreign exchange for further development of the economy, so there is great need
for bank’s contribution.
This study also serve as reference materials to their
future researchers who may be interested in the area of study.
1.7 HISTORICAL
BACKGROUND OF UNION BANK OF NIGERIA PLC
Union Bank of Nigeria Plc was established in 1917 with its
first branch in Lagos.
In 1925, Barclay’s Colonial Bank which resulted in the change of the Barclays
Bank (Dominion, colonial and oversea enactment of the Companies Act 1968 and
the legal foreign subsidiaries to be incorporated locally. Barclay in 1969 was
incorporated as Barclays Bank of Nigeria with ownership structure of
Barclays Bank remained unstable when 8.33% of the bank’s shares were offered to
Nigeria.
The bank was listed on the Nigeria Stock Exchange following
the Nigeria Enterprises Promotion Act of 1972, the Barclays Bank of Nigeria
acquired 51.67% of the banks share Barclay Bank Plc, London with only 40% by the enactment of 1977
Nigeria Enterprises Promotion Acts. Barclay International Limited disposed its
share holding to Nigeria
which reflected the new ownership structure and in co-companies and allied
matters acts of 1990, it assume Union Bank of Nigeria Plc.
In line with the Central Bank of Nigeria’s banking policy, Union
Bank of Nigeria Plc acquired the foreign Bank Plc and Broad Bank Ltd and
absorbed its shares on Union Merchant Bank Ltd.
The bank also increased funds through a public offer/rights
issues in the market with these development, Union Bank remains capitalized
bank in Nigeria.
It has the largest shares (N100,500 billion) and it operates through 379
networks well spread across the country, all of which are on line.
Within the Union Bank group are the following subsidiaries
associated companies:
a.
Union Homes Savings
and Loan Plc
b.
Union Assurance
Company Limited
c.
Union Trustees Limited
d.
Union Bank U.K. Plc
e.
Banque International
du Benin, Cotonou
f.
UTL Communication
Services Limited
g.
UBN Property Company
Limited
h.
Union Capital Market
Limited
i.
Union Registrars
Limited
ASSOCIATED COMPANIES
i. Consolidated
Discounts Ltd
ii.
HFC Banks Ghana
Limited
iii.
Unique Venture Capital
Management Company Ltd
Union Bank Group operates on interlocking organisation
whereby some board members of Union Bank of Nigeria external directors in the
subsidiaries and associate arrangement ensures effective sight and
participation decision making process of these companies thereby safeguarding
investments.
Today, the bank is a leading regional bank in subsahara of
its diverse investment across the globe. A global financial summary reveals its
solidity. As at 31st march, gross earnings was N66.576 billion
profit, before billion, the total assets was N667.766 billion and share
N100.500 billion.
Its operations involves fixed deposit
i. Internet
banking
ii.
Strategic business
unit
iii.
Product and services
iv.
Consumer banking
products
v.
Credit and loan
vi.
Foreign exchange
product
vii.
Account enquiries/account
opening
viii.
Customer service
ix.
Electronic E-card and
many others
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