THE ROLE OF FINANCIAL INSTITUTIONS IN ENHANCING SMALL – SCALE ENTERPRISES DEVELOPMENT IN ENUGU STATE (A CASE STUDY OF FIRST BANK OF NIGERIA PLC, NEW HAVEN ENUGU)
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THE ROLE OF FINANCIAL
INSTITUTIONS IN ENHANCING SMALL – SCALE ENTERPRISES DEVELOPMENT IN ENUGU STATE
(A CASE STUDY OF
FIRST BANK OF NIGERIA PLC, NEW HAVEN ENUGU)
ABSTRACT
A small and medium scale enterprise are
many in our economy and plays the vital role of providing specialized services
to the customers of the large scale enterprises. More so, it is a source of
income or employment for greater percentage on Nigerians. It becomes paramount
that financing of the small and medium scale enterprises to the agenda of the
financial institutions. But are they at all in their agenda? What are their
relationships with regards to financing? It is the aim of this research to find
out the role of commercial banks as the financing of small and medium scale
enterprises, taking the First Bank PLC as a reference point. To delve into the
matter, the research work has five chapters. Chapter one is the general
discussion of the small and medium scale enterprises from different
perspectives. As a further discussion, there was the statement of problems of
the study , the need of the study, the scope, limitations and the definition of
terms. Highlighted is chapter two are the review of
related literature as carried out by authors and researchers.
Chapter three of this researcher
work deals with the design of the study, the data collection method. In other
words, the ways through which the questionnaires were distributed to the
respondent were discussed. In the fourth chapter of the research work, the data
collected were analyzed and interpreted. Finally, the summary of
findings, conclusions and recommendation are made in chapter five.
It is the belief of the researcher that the recommendations
if strictly adhered to by the entrepreneurs and financial institutions will
ensure their mutual survival and growth
TABLE OF
CONTENTS
CHAPTER ONE
1.1
Introduction
1.2
statement of
problem
1.3
objective of the
study
1.4
significance of the
study
1.5
scope limitation and
delimitation
1.6
limitation of the
study
1.7
definition of terms
CHAPTER TWO REVIEW OF RELATED
LITERATURE
2.1
Historical background of small scale
industry
2.2
Importance of small scale
industries
2.3
The major forms of financial
assistance
2.4
The role of banks
finance
CHAPTER THREE
3.1
Research design and
methodology
3.2
Research
design
3.3
Election of Data
3.4
Sources of
Data
3.5
Research
Instrument
CHAPTER FOUR
4.1
Data
presentation
4.2
Analysis and presentation of
responses
4.3
Test of
hypothesis
CHAPTER FIVE
FINDING RECOMMENDATION AND CONCLUSION
5.1
Summary of
Findings
5.2
Recommendation
5.3
Conclusion
Bibliography
APPENDIX
CHAPTER ONE
1.8
INTRODUCTION
The world as it is
today is categorized into two broad groups namely the industrialized bud the
non industrialized nations represent those whose economy have been made vibrant
by the participation of industries small scale and medium scale and activities.
This has never ceased to be the wish of any government that was a capitalist or
a mixed economy.
However, owing to the
differences in the strength of entrepreneurs, the industries are grouped into
three, viz. the small-scale industries (SSI), the medium scale industries (MSI)
and the large-scale industries (LSI) of industries that abound in many
countries of which Nigeria is one. The services of these industries are
indispensable even to the large firms and the need for expansion is always top
on their agenda.
This is where
financial institutions come, in, particularly the commercial banks. The short
fall in the personal financial of the entrepreneurs are augmented by the
financial institutions. However, it is a prominent situation today whereby one
funds the bridge unable to cross to the other side of the river. In Nigeria, as
in many other developing countries, there is the death of financial
institutions, which cater for long and medium term credit needs of business
operations. It suffices here to say that the entrepreneurs suffer a great deal
in their bid to establish themselves in the ever-dynamic business environment
Nigeria is a nation
endowed with abundant human and national resources that have yet been fully
tapped. The issue remains that her pace towards economic development has not
records with other naturally endowed nations. While some sectors of the economy
have recorded some significant growth, others continue to lag behind in spite
of increase financial allocations, resulting in uneven development and the
attendant drift the rural –urban drift.
Government effort to
check the above annualized have not been fruitful, rather the problem seem to
be on high rise with every effort in certain cases. The last straw that broke
the carnels back was the down turn of oil prices, for the growth in oil
production coupled with high sales in the 1980s, has turned the economy from a
production oriented one 5to an import and export one. It was when the oil glut
was witnessed in 1981 that our economy planners recognized the need to reverse
the trend. Hence the concept of diversifying the economy is the establishment
of small scale industries. Again, the importance of these industries to the
economic survival of the country cannot be over emphasized. They have moved
from the sub-existence level of indigenization to period to a position of
importance in the country’s industrialization process.
Nigeria as a
capitalist economy with diverse and populous entrepreneur entrepreneurs in an
attempt to bring about focused and religiously dedicated entrepreneurs in the
many small scale industries their level of operation have to move into a
capital intensive stage. To do this, a reasonable amount of capital is needed.
That nature of capital needed in many cases is beyond the financial institution
capacity of the entrepreneurs who set up the business.
The major alternative
for provision of such capital is the financial institutions. Among the
financial institutions operations in the country, the commercial banks is one
the major sources of credit to various sector of the economy. However, it is a
common knowledge that getting financial support from the commercial banks has
been greatly unorganized for building indigenous entrepreneurs and even for those
who have been in the manufacturing business for a long time.
1.9
STATEMENT OF PROBLEM.
The role of bank in financing
small-scale enterprises is a quest any day as the researcher seeks to determine
the role of banks in being the bridge between the small scale enterprises. This
as well will as the yardstick for determining the actual achievement of the
lending banks (commercial banks) in terms of size of loans, accessibility of
credit, the frequency of lending, technical; assistances, etc. That small-scale
enterprises have benefited appreciably from banks in terms of capital provision
is a question which its answer will surface at the and of the research.
Practically, the major problems of
small scale and medium scale industries consist of finance, organization. To be
undertaken in this research is banks performance with other research is banks performance
with other sources open to small scale industries to find out which source of
industries to find out which source of credit is are most useful and important
to small scale enterprises.
1.10
OBJECTIVE OF THE STUDY
In view of the
problem of small-scale industrialist, the objective of this study is to
evaluate the role of banks in financing small-scale industries in Nigeria. The
specific objectives are:
i.
To identify the problems encountered by the industrialist in obtaining finance from
banks.
ii.
To appraise the situation and make recommendation on how to improve the banks
iii.
To highlight the extend to which the commercial banks have helped to
finance small-scale industries and problems hindering such.
iv.
To create attractive opportunities for investment in Nigerian industries and
provide outlets for production investment of Nigerian savings.
v.
To conduct research into other aspects of banking operations like acceptance of
tem deposit and provision of loans to Nigerians.
1.11
STATEMENT OF HYPOTHESIS
In the process of carrying out this
study, the following assumptions were made:
a.
The small-scale industrialists frequently apply for overdrafts from commercial
banks.
b.
The small scale industrialists frequently apply for loans from commercial banks
c.
An increase in bank interest will result in a decrease in industrial
production.
I.5 SIGNIFICANCE OF
THE STUDY
The significance of the study is to evaluate the extent to which the
small-scale industrialists have been able to obtain the assistance of banks in
capital funding of their business. The research will be importance in that it
will provide data for future studies in the subject. Thus, the study will be of
benefit to students, who will live to carry out research on related topic in
future, it will make their work easier because already a foundation has been
laid.
Industrialists will
benefit because the research project will reveal any problems in relationship
between the banks and the small scale industrialists when there problems are
revealed it will aid small scale borrowers ti obtain loans easily without much
problems.
Banks will benefit because the actual
size they play in financing of small-scale industries will be revealed. This
gives them the reason to ask federal government for loan, when they have needed
for that.
Individuals will also gain because when banks give loans to industrialists, the
needs of the people are provided if not fully but to an extent that a good
number of people benefit.
1.6 SCOPE
This topic “The Role of Financial institutions in Enhancing Small – Scale
Enterprises” (A case study of First Bank PLC) is very vast but for purpose of
manageability, and financial constraints, it has therefore been restricted or
limited itself to banks in Enugu state. In choosing the banks the researcher
has limited his research to those areas of the banks or operations of the institutions
that enhance economic emancipation of Nigeria and used inference drawn upon to
apply to other development financial institution. This has been so because the
research assumes that all-financial institution are saddled with the sole
responsibility of enhancing even growth in the economy and assisting the small
scale industries.
I.8 DEFINITION OF
TERMS
Some of the words used in this research work have their meanings in the English
usage but are given contextual meaning in this research work. The words or used
will be given their contextual meanings:
Small Scale Industry: - Bearing in mined
the literary
meaning of small-scale industry,
different authors have different views of what a small-scale industry is.
According to Kerelu F.N. (1990), a small-scale industry is one whose paid up
capital falls within the range of N750.000. The Nigeria Bank for
commerce and Industry (NBCI) which currently plays an active role in the
promotion of small scale industries defines a small scale industry as one
employing up to N500, 000. In most cases, the varied definitions
appeared the definition and the stage of development in which the definition
was employed. Generally, a small-scale industry is defined, as one which is
owned and managed by one or two persons, influenced by the family in decision
making, has no undifferentiated organizational structure, market share is small
and employs less than fifty (50) persons. The National Economic Reconstruction
Fund (NERFUND) defines small-scale industries as one whose annual turnover is
less than five hundred thousand Naira (500,000) as a small-scale industry. To
National directorate for Employment (NDE) defines small scale industry to
include projects with capital investment of below five hundred thousand naira
(500,000) and a staff strength of three (3) persons.
Role: For the purpose of this study role
should mean and
includes all parts played and exhibited
by financial institutions.
Loans: This is the transfer of fund from one
economic
entity to another who must be repaid
with interest over a stipulated period of time.
Credit: The word credit
comes form a Latin word “Cred”
meaning “I believe”. It means the
ability to command the capital of another in return for a promise to repay as
specified in the future.
Finance: This is concerned
with available money and
capital goods for investment in
industries to boost production.
Industrialisation: This could be
defined as a strategy
through which more industries are
encouraged to spring up.
Money: Money can be defined
as anything which i9s
generally acceptable in a given society
or locality as a means of exchange and for settlement of debt.
Short Term Loan: This is a source of
fund, which has a
short period of maturity usually less
than a year.
Period of Maturity: This is the time in
which money
borrowed is due for repayment to the
lender with the accrued interest if any.
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