THE IMPACT OF BANK LENDING ON SMALL-SCALE INDUSTRIES (A CASE STUDY OF SOME SELECTED SMALL SCALE INDUSTRIES IN ABA METROPOLY)
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THE IMPACT OF BANK LENDING ON
SMALL-SCALE INDUSTRIES
(A CASE STUDY OF SOME SELECTED
SMALL SCALE INDUSTRIES IN ABA METROPOLY)
ABSTRACT
The title of this project is The Impact of Bank
Lending on Small-Scale industries, (A case study of some selected small-scale
industries in Aba Metropoly). In the course of this study, four research
questions were stated, while three research questions were formulated using
percentage and statistical chi-square technique for the analysis respectively.
A total of 127 copies of questionnaire were administered to respondent, while
120 copies were correctly completed and returned. The findings are: it was found
that their exist a divergence of opinion regarding. The reason for
default and most appropriate way of improving bank credit to small-scale
industries. In setting up policies for banks, for banks concerning small-scale
industries, the main purpose of bank operation should not be over looked. In
terms of the need for bank credit for the growth of small-scale industries both
banks and small-scale entrepreneurs should agreed that there
is need for extra finance for small scale entrepreneurs feel that lending
requirements for this are not economically feasible and so tend lo to
look for other sources of funds which is usually insufficient.
Based on the above findings, the following recommendations are made: Banks
should promote advisory services and counseling to small-scale industries. The
option of refinancing of loans should be used regularly. The need for regular
payment of interest and loans should be stressed by banks the need for
government intervention is very necessary.
TABLE OF CONTENTS
CHAPTER ONE
Introduction
1.1
Background
of the
study
1
1.2
Statement
of the
problem
4
1.3
Objective
of the
study
4
1.4
Research
question
5
1.5
Research
hypothesis
6
1.6
Significance
of the
study
7
1.7
Scope
and limitation of the
study
9
1.8
Definition
of
terms
9
CHAPTER TWO
2.0
LITERATURE REVIEW
2.1
Need for
industrial development in Nigeria
question and
hypothesis
16
2.2
Important
of small-scale
industry
18
2.3
Problem
of small-scale
industry
20
2.4
How and
why do we
lend
23
2.5
Budgeting
and discussion making in
small-scale
industry
25
2.6
Bank and
small-scale
industry
28
2.7
Summary
30
CHAPTER THREE
3.1
The
design of the
study
32
3.2
The Area
of the
study
32
3.3
Population
of the
study
33
3.4
Sampling
and sampling
technique
34
3.5
Method
of data
collection
35
3.6
Method
of data
analysis
36
CHAPTER FOUR
PRESENTATION
AND ANALYSIS OF DATA
4.1
Preamble
38
4.2
Analysis
of main data
39
4.3
Test of
research
hypothesis
54
4.4
Discussion
of
findings
65
CHAPTER FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1
Restatement
of the
problem
67
5.2
Summary
of
findings
68
5.3
Conclusion
68
5.4
Recommendations
69
5.5
Suggestions
for further
Study
71
Reference
Appendix
Questionnaire
LISTS OF TABLES
1.
Response
to research question table (1-13)
2.
Hypothesis
Table (5, 8, & 9)
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
Banks as business concern must make profits in
order to study in business. They usually have a range of multi-product
services, which they render to the public, which are of crucial concern to the
public, industries, depositors and regulatory authorities.
The main operation of banks is
the lending of fund to other sectors of the economy through funds deposited by
depositors. According to A. N Nwankwo (1987:164) he stated that:
Lending
is considered effective of it successfully resources the bankers obligation of
maximum profitability to share holders and maximum liquidity to the depositors.
This is because highly profitable lending, which also ensures liquidity for
depositors may always be effective.
Lending for commerce proposed may be considered
effective in the profitability and liquidity sense but may be ineffective
in terms of maximum contribution to economic development. Similarly, lending to
small-scale industries may be considered ineffective in the development sense.
This effective lending in a development economy like Nigeria may be
defined as that equation of lending which maximums the objective of
liquidity and profitability and the economy’s objectives of development. In
Nigeria, the need for small-scale industries when was not fully realized until
the early eighties when government started laying emphasis on direct credit to
small-scale industries. This was one of the main objectives of the economic
reconstruction programme under the structural Adjustment Programme (SAP), which
was meant to boast the level of economic activities in the economy. Under the
monetary policy, the banks are to allocate 20% of their loan-able funds to
small-scale industries. The banks that do not comply are to be penalized by the
Central Bank Of Nigeria (CBN). However, the banks have undergone a lot of
problem in gravity such loans.
They includes:
i.
High rate
of default
ii.
Amount
spent of research and other portfolios as highly compared to the profit got
from interest on the loans
iii.
Most
applicants do not have any form of collateral.
All these factors have
contributed to the low level of bank lending to small-scale industries.
Although, government policies in the terms of economic development is to
stimulate the establishment and growth of small-scale industries, which
contributes both directly and indirectly to economic growth and to enable
Nigeria to participate on an increasing extent in the ownership. The government
of Nigeria industries a same as of balanced growth and to payment positions, It
is against that background that the expansion of banks lending to small-scale
industries can be fully appreciated.
1.2
STATEMENT
OF THE PROBLEMS
While provision of credit to small-scale
industries has concerned policy makers in Nigeria, the result has not been
encouraging compared to the huge amount of resources expended. Banks are very
reluctant to give credit to small-scale industries. The rate of failure of
small-scale industries in economic development cannot be neglected.
1.3
OBJECTIVE
OF THE STUDY
The objective of this research is to analysis the
impact of bank lending on small-scale industries.
i.
To
evaluate, the impact of bank lending on acquisition of technological skill and
capability building of small-scale industries.
ii.
To
identify the factors that affect bank lending to small-scale industries.
iii.
To
determine the impact of bank lending to small-scale industries.
iv.
To find
out technologies mostly used in bank in lending to small-scale industries.
1.4
RESEARCH
QUESTION
The research question must specifically raise
question, which the work is set to answers. The research questions are to a
very large extent similar to the purpose of the study. The only different
however lies in the fact that the purpose loans in the form of statement, while
the research question loans in question form. The question are as
following:
i.
What is
the impact of bank lending on technology skill and capacity building of
small-scale industries.
ii.
What are
the factors that affect bank lending on small scales?
iii.
What are
the impacts of bank lending on small-scale industries.
iv.
What
techniques are mostly used by bank in lending on small-scale industries?
1.5
RESEARCH
HYPOTHESIS
A hypothesis is a proposition assumed the sake of
argument or a theory to be proved or disapproved by reference to fault. It
serves as a guild to a research work. Once stated, the research must try as
much as possible not to used for the study.
1.
Ho: Evaluation of bank lending on acquisition of
technology, skill does not play a significant role
to small-scale industries.
Hi: Evaluation of bank lending on acquisition of
technology, skill plays a significant role to small- scale
industries.
2.
Ho: There are no factors that affect bank lending on
small-scale industries
Hi: There are factors that affect bank lending on
small-scale industries
3.
Ho: There is no impact of bank lending on small-scale
industries
Hi: There is impact of bank lending on small-scale
industries
1.6
SIGNIFICANCE
OF THE STUDY
Bank lending on small-scale industries
particularly those with high contents of local value adders and providing them
with technical services are matters to which we will devote great attention, In
developing the economy of a nation, the development of small-scale industries
are seen as an integral and fundament part of the nation’s broad policy of
industries growth.
Small-scale business accounts for about eight
percent of the total number enterprises in the country, thus what occurs in the
sub-sectors to a large extent influences the other sectors of the economy.
Therefore, the analysis of the research project will be useful to private
individuals, the government and the general public as stated below;
1.
The
small-scale business and prospective investors have the version of small-scale
business will be able to receive reinvent information, which will assist in
managing the finance of small-scale business.
2.
The
commercial and merchant banks through this research will be in no doubt
assisted to made useful impact for efficient performance.
3.
The
public will be aware of the problems and prospects of small-scale industries in
a perspective that will widen the knowledge of the public in Nigeria.
4.
Also the
significant of this study will add to the existing literature about the
constants and relevant fact, which will level to the improvement of the
research problem.
5.
The
study would help the federal and state government to ensure that various
government policies are implement and request for recommendation will be
provided to enhance performance.
6.
Finally,
the research apart from being mandatory for the Higher National Diploma of Abia
state Polytechnics, it will help to widen my academic horizon in the area of
the subject matter.
1.7
DEFINITION
OF TERMS
LENDING: The act
of giving money. Lending is one of the most important functions of the bank.
LIQUIDITY: The
state of owning things of value that can easily be changed into cash.
QUANTUM OF LENDING: A very
small quantity of lending.
GOVERNMENT POLICIES: Government
plans of action, statement of ideas etc, and proposal or adopted by a
government for a particular purpose.
COLLATERAL: Property
offered by somebody as a guarantee that he will pay the loan simply put, is
what he will pay the loan simply put, is what one give out in case
he does not provide what is given to him on credit.
PROFIT: Additional
money gained in business that is the different between the amount spent and the
amount earned.
PORTFOLIO: Here, I
mean a set of investment owned by a person, bank etc.
DEVELOPMENT: The
action or process where new industries are encouraged in order to create jobs
for the unemployed. The process of being developing or developed.
BANK: The
organization or a place that provide a financial services. A place where money
are kept for security reasons
REGULATORY AUTHORITY: Board
establishment by government to ensure that its policies work in accordance with
the law. They give orders and punish the offenders.
SMALL-SCALE: It can
be seen as firms or companies with assets (including working capital but
excluding land) not exceeding N750, 000 and paid employers up to 50 persons.
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