ABSTRACT
In view of the important of SMEs, government has been
playing an appreciation 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 enterprise
(SMEs). Indeed the establishment of that industrial and economic development of
such India, Malaysia, Pakistan and Indonesia to name just a few.
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 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 articulate 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 vein,
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 institutions to provided 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.
TABLE OF CONTENTS
Pages
Title page
Certification
Dedication
Acknowledge
Abstract
TABLE OF
CONTENTS
CHAPTER ONE
GENERAL
INTRODUCTION
1.1 Background
of the study
1.2 Statement of
Problem
1.3 Objective of
Study
1.4 Research
Questions
1.5 Research Hypothesis
1.6 Significant
of the study
1.7 Scope and
Limitation of the Study
1.8 Research Methodology
1.9 Organization
of the study
CHAPTER TWO
LITERATURE
REVIEW
2.1 Introduction
2.2 Conceptual
Clarifications
2.3 Banking
sector Reforms
2.4 Post-Banking
Sector Consolidation
2.5 Nigerian Banks and the Problem of Financing SMES
2.6 Government
Involvement in Development of Small and
Medium Scale enterprises
2.7 Definition
of Small and Medium Enterprise
2.8 Government
Agencies as Source of Finance
2.9 Survival
Strategies for Small Scale Business in Nigeria
2.l0 Sources of
Finance and small Scale Business in Nigeria
2.l1 The Role of
Banks in Providing Dept. Finance to SMES
2.12 Survival
Strategies for Small Scale Business in Nigeria
CHAPTER THREE
RESEARCH
METHODOLOGY
3.1 Introduction
3.2 Research
Design
3.3 Restatement
of Research Questions
3.4 Restatement
of Research Hypothesis
3.5 Characteristics
of the Studied Population
3.6 Sampling
Design and Procedure
3.7 Data
Collection Instrument
3.8 Administration
of the Data Collection Instrument
3.9 Procedure
for Analyzing collected Data
3.10 Limitations
of the Research Methodology
CHAPTER FOUR
DATA PRESENTATION ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Data Presentation
and Analysis
4.3 Analysis of
Respondents
4.4 Test of
Hypothesis
CHAPTER FIVE
SUMMARY, RECOMMENDATIONS AND
CONCLUSION.
5.1 Summary of
Findings
5.2 Recommendations
5.3 Conclusion
Bibliography
Appendix
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
In most of the developing countries, the corporate world
is usually characterized by low investment rate occasioned by inadequate of
instable funds and poor economic condition. Many of such nations therefore feel
the need to revitalize their economies by embarking on economics 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 articulate 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 vein,
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 institutions to provided 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. Slightz 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 on the performance of SMEs?
·
Does adequate
financing or 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: SMEs
does not have better access to funds due to bank consolidations.
Hi: SMEs has better access to funds due to bank
consolidations.
3. 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 of 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 the secondary data will be collected from organization
news, journals and other related publications.
Responses to the research questions will be analyzed
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 or privately owned or controlled. The word is used interchangeably
with organization in this study.
·
Performance: The degree of efficiency and effectiveness with which the
organization 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.
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