project work was carried out primarily to assess the role of commercial banks
in financing small scale industries with particular reference to UBA Plc Awka
Branch. In this exercise two vital categories of functional areas were
investigated. The two groups under investigation were the staff and customers
of UBA. They were considered to stand better chances of evaluating the Impact
of Commercial Banks Loans in Financing Small Scale Industries. The instrument
of data collection was questionnaire approach. The questionnaire items were
distributed to the staff and customers whose opinions formed the basis of the
analysis. The data and material collected were presented in tabular form and
complemented by chi-square method. Based on the analysis from the information
gathered, it was revealed that small scale industries have positive impact on
the economy of the Nation because it provided employment opportunities to the
youths. Based on the outcome of the projects on the basis of analysis,
recommendations were offered on the best way the commercial banks could finance
the small scale industries for the welfare of the people.
TABLE OF CONTENTS
of the Study
of the Problem
of the Study
of the Study
of the Study
2.0 REVIEW OF RELATED LITERATURE
2.1 Historical Small Scale Business
2.2 Importance of Small Scale
2.3 Features/Characteristic of Small
Scale Business Enterprises
2.4 The Major Forms of Financial Assistance
2.5 Problems of Small Scale Industries in Nigeria
2.6 The Roles of Banks in Financing Small Scale Enterprise
2.7 Advantages of Banks as Sources of Finance to
2.8 Disadvantages of Banks as Source of Finance to Small Scale Enterprise
3.0 RESEARCH DESIGN AND METHODOLOGY
3.2 Research Design
3.3 Area of
3.4 Population of the Study
3.4 Sources of Data Collection
3.5 Questionnaire Designs
3.6 Method of Data Analysis
3.7 Statistical Technique
Validity of the Test
4.0 DATA PRESENTATION, ANALYSIS AND
of Distributed Questionnaire
4.3 Test of Hypothesis
4.4 Summary of Data Presentation and Analysis
CHAPTER FIVE: SUMMARY OF FINDINGS,
CONCLUSION ANN RECOMMENDATIONS
5.2 Summary of Findings
5.2.1 Findings Associated with the Financial Institution
5.2.2 Findings Associated with the Government
5.2.3 Findings Associated with the Small Scale Enterprises
1.1 Background of the Study
In Nigeria, as in many other
developing countries there is dearth of financial institutions which cater for
long and medium term credit needs of business operations. In exception to this,
they suffer a great deal for want of capital for development and expansion.
By definition, commercial bank is an
institution where money and other valuable items are kept for security purposes
and at the same time transact business such as giving of loans and advances.
Among the most important commercial
banks in Nigeria are: The First Bank Plc formerly known as the bank of West
Africa which has the largest assets and located its head office in Nigeria at
37 Marina, Lagos. The Union Bank formerly known as Barclays Bank which was
established in the year 1917 in Lagos as the first branch and is the first bank
to hit one billion naira customers’ deposit. The commercial banks trend made
through British and French Banks now called the United Bank for Africa Limited
which was established in 1949 making it the third expatriate bank of dominate
the early Nigerian Commercial Banking.
The issue however remains that her
pace, towards economic development has not kept record with the naturally
endowed nations. While some sectors of the economy have recorded some
significant growth, others continued to lag behind inspite of increased
financial resource allocations.
While most of the villages still lack
the basic necessities of life, potable drinking water, electricity and health
facilities, many of the urban areas are becoming dotted with sky-scrappers.
Thus parallel growth structure between the two areas. Hence giving rise to
migration from the rural to the urban areas. The ultimate effect has been the
abandonment of natural resources in the rural areas to urban crimes and
Government’s efforts to check the
above analyzed problems have not been fruitful rather the problems seem to be
complicated in certain cases.
The straw that broke the camel’s back
was the down-turn of oil prices for the growth in oil production coupled with
high sales in the 1970’s has turned the economy from a production oriented one
to an import and distribution one. It was what the oil glut was witnessed in
1981’s that our economic planners recognized the need to reverse the trend, hence
the concept of diversification. One of the militating factors of diversifying
the economy is the establishment of the small scale industries.
The importance of these industries to
the economic survival of the country cannot be overemphasized. They have moved
from the sub-existence level of pre-indigenization period to a position of
importance in the country’s industrialization process. In an attempt to
modernize many small scale enterprises, their standard of operations have moved
into the capital intensive stage. To do this, a reasonable amount of capital
needed in many cases are beyond the financial capacity of the entrepreneurs who
set up the business.
The major alternative for the
provision of such capital is the financial institution. Among the financial
institutions operating in the country, the commercial bank is one of the major
sources of credit to various sectors of the economy. However, it is a common
knowledge that getting the financial support from the commercial banks getting
the financial support from the commercial banks has been grossly inadequate for
building indigenous entrepreneurs and even for those who have been in the
manufacturing business for a long time.
1.2 Statement of the Problem
In any economy, small scale industries
are powers to reckon with in terms of provision of employment to the people.
Small scale industries can perform their roles effectively if they are
empowered economically. In Nigeria, small scale industries have not been
encouraged enough by the government due to some constraints; such as lack of
clear policy on the part of the government to strengthen their operations, lack
of capitals, lack of facilities in the form of power, water supply, good road
networks, and a host of others. The enabling environment is necessary to make
them operate fully. The principle factor hindering their operations is lack of
capital. The capital for such business could either come through personal
savings, through pooling of resources from friends or through commercial banks
as the case may be. Commercial banks have enormous roles to play to help small
scale enterprises but they could not come due to several factors. In Nigeria,
commercial banks do not actually play the intermediation roles due to lack of
capital, lack of defined policy for lending to the public and heavy collaterals
among others. Lack of defined interest rate, man-know-man syndrome and other
constraints prevent small scale industries from performing their roles.
This research is essentially designed
to investigate why commercial banks hesitate to offer assistance to small scale
industries with a view to finding solutions to these problems.
1.3 Objectives of the Study
In view of the problems of small scale
industries, the primary objective of the study is to evaluate the role of
commercial banks in financing small scale industries in Nigeria.
Other secondary objectives include the
identify the problems encountered by the industrialist in obtaining finance
from commercial banks.
appraise the situation and make recommendation, as to how to improve on the
highlight the extent to which the commercial banks have helped finance small
scale industries and problems hindering such.
create attractive opportunities for investment of Nigerian industry and provide
outlets for production investment for Nigerian savings.
conduct other aspect of commercial banking operations like acceptance of terms
deposit and provision of loans to Nigerians.
vi. To lay
emphasize on the provisions of basic ingredients of economic development
necessary to finance enterprise, managerial and technical assistance which are
in short supply in the rural areas. This study will help to define the
contributions of banking programmes in extending banking services to every part
of the country.
know the roles of commercial banks and suggested ways of minimizing their
problem of the financing of the small scale industries in Nigeria. This study
will help to promote the financing of small scale industries of the country
both at rural and urban areas.
study will also help to make recommendations on how best some of the commercial
banks activities will be handled.
1.4 Significance of the Study
The significance of the study includes:
help Nigerian businessmen to hold on to their own commercial fields.
make Nigerians operate in such a way as to give confidence to work effectively
in the commercial and industrial fields. Industrialist will benefit because the
research project will reveal any problem relating to relationship between
commercial banks and the small scale industrialist. When these problems are
revealed it will aid small scale borrowers to ask for loan easily without any
help Nigerian establish industries and own properties with the encouragement of
help individuals both entrepreneurs and investors to benefit from loans
advances, overdrafts and business opportunities offered by commercial banks.
Individuals will also gain because when commercial banks give loans to
industrialist, it will help to act that the needs of the people are provided if
not fully but to an extent that a good number of people will benefit.
help potential researchers who have the same or related topics to write on, and
make use of this work. The research will be of importance in that, it will
provide data for future studies on the subjects. Thus the study will be of
benefit to students who will like to research on related topics in future; it
will make their work easier because already a foundation has been laid.
this study, the government shall become aware of the problems inherent in
initiating such a project and avail themselves of such future problems in
initiating other future projects in the same line.
work or study shall also help the appropriate authorities to ascertain the
contributions and effectiveness of commercialization of banks.
1.5 Limitations of the Study
This topic “The Impact of Bank Loan in
Financing Small Scale Enterprises” (A Case Study of UBA Plc, Awka Branch) is
very verse but for purpose of manageability and financial constraints, it has
therefore resisted or limited itself to some specific banks in Awka, Anambra
In choosing this bank, the researcher
has limited her research in these areas of operation in the institutions that
enhance economic emancipation of Nigeria and use inference drawn to apply to
other development of financial institutions. This has been so because the
researcher assumed that all financial institutions saddled with the sole
responsibility of small scale industry have the same goal and objective of
enhancing small scale industry.
1.6 Research Questions
The following research questions have
been put forward to enable the researcher draw conclusion:
are the major constraints the small scale enterprises face in obtaining loans
from commercial banks?
are the roles of commercial banks to the growth of small scale industries in
your opinion to what extent do you think that small scale enterprises can grow
without assistance from the commercial banks?
roles do you envisage government will play to encourage the small scale
enterprise in Nigeria?
what extent would small scale enterprises contribute to reduction in
unemployment among youths in the country?
what extent could small scale enterprise survive in Nigeria in the midst of
competitions in banking activities?
1.7 Research Hypotheses
The following hypotheses have been put
forward to help the researcher determine result of this research work.
1. Ho: Small and medium scale enterprises in Nigeria
contribute to the growth of the economy in Nigeria.
and medium scale enterprises in Nigeria contribute significantly to the growth
of the economy in Nigeria.
2. Ho: Small and medium scale enterprises have no
with employment programmes in the country.
Hi: Small and medium scale enterprises have
with employment programmes in the country.
3. Ho: Small and medium scale enterprises have no
with poverty alleviation programme in the country.
and medium scale enterprises have direct correlation with poverty alleviation
programme in the country.
1.8 Definition of Terms
Scale: Different authors have different views of what a
small and medium scale industry stands for or mean. According to Kerelu F.N
(1988). A small scale industry is one whose paid-up capital falls within the
range of about N750.000.
The Nigerian Bank for Commerce and
Industry (NBCI) which currently plays a very active role in the promotion of
small industries defines a small scale industry as one employing up to
N500,000. Ezeije (1990).
In most cases, the varied definitions
appear to be governed by the interest of the perceived, the purpose of the
definition the state of development in which the definition is employed.
Generally a small business is defined as one which is owned, managed by one or
two persons, influenced by the family in decision making has no
undifferentiated organizational structure, market shares are small and employ
less than fifty (50) persons.
the purpose of this research, role should mean and includes all parts played
and exhibited by financial banks.
is the transfer of fund from one economic entity to another which must be
repaid with interest over a stipulated period of time.
word credit comes from Latin word “Credo” meaning, I believe, ability to
command capital of another in return for a promise to repay as specified in the
Finance: This is concerned
with availability of money and capital goods for investment in industries to
be defined as a strategy through which more industries are encouraged to spring
can be defined as anything, which is generally acceptable in a given society or
locality as a means of exchange and for settlement of debt.
Term Loan: A source of fund which has a short
period of maturity.