Assessment Of The Problems And Prospects Of Small And Medium Enterprises Financing In Nigeria

Download complete project materials on Assessment Of The Problems And Prospects Of Small And Medium Enterprises Financing In Nigeria from chapter one to five

ABSTRACT

The role of commercial bank financing in the development of the real sector in general and the SMEs sub-sector in particular cannot be overemphasized. This is due to its significance in contributing to the achievement of the potentials of SMEs such as increasing output, employment generation, capacity utilizations, etc in the economy.

For instance bank loans are capable of raising investment which increases income and hence raises the standard of living of the populace. Statistical analysis was applied to the data collected and the result showed that an increase in loans to SMEs will lead to increase in output. Also, an increase in interest rate can result to increase in output.

In this regard SMEs should not resort only to private finance but also source for external finance. Banks on the other hand, should increase the volume of loans to SMEs having recognized their roles as catalyst in the industrialization process of the country. Also government participation, in funding SMEs should enhance their capacity, thereby reducing the impediments to economic growth in Nigeria.

TABLE OF CONTENTS

Page

Title

Approval

Dedication

Acknowledgment

Abstract

Table of contents

 

CHAPTER ONE: INTRODUCTION

Background of the Study 1

Statement of the Problem 3

Research Questions

Objectives of the Study 5

Statement of Hypotheses 6

Significance of the Study 6

Scope and Limitation of the Study 7

Definition of Terms

CHAPTER TWO: LITERATURE REVIEW

2.1    Theoretical Framework

2.2    Importance of SMFs to an economy

2.3    Problems of SMEs in Nigeria

2.4    Commercial bank funding and the development of SME’s in Nigeria

2.5    An overview of SMEs Financing in Nigeria

2.6    Commercial Bank rules and evaluation of SMEs for funding

2.7    Causes of Banks’ risk averse behaviour to financing SMEs in Nigeria

2.8    Current SMEs Financing initiative in Nigeria and the way forward

2.9   An overview of small and medium industries equity investment

scheme (SMIEIS)

2.10  Operation performance of the SMIEIS so far/challenges

Reference

 

CHAPTER THREE: RESEARCH METHODOLOGY

3.1    Method of Data collection and analysis

3.2    Research Design and Sample procedure

3.3    History of Union Bank of Nigeria Plc

 

CHAPTER FOUR: DATA PRESENTATION AND DATA ANALYSIS

4.1    Presentation and analysis of data

4.2     Testing of hypothesis/Examination of the relationship Between total

Credit of Commercial Banks and Actual Loans  Granted to SME’s

4.3    Discussion of results

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1    Summary

5.2    Conclusion

5.3    Recommendations

Bibliography

Appendix

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Industrialization forms the basis of the development of any nation, which usually starts from small and medium Enterprises (SME). Nigeria as a nation has witnessed different schemes by various administrations to transform her economy through SMEs. The reason for this is not far fetched. SMEs offer prospects or a potential of a growing availability of manufactured goods, increased employment, improved balance of payments and a great efficiency and modernization (Udell, 2001).

Also, it is characterized by high technological innovations, the development of managerial and entrepreneurial talents and improvement in technical skills which normally promote rising productivity (Berger, 2001). Improvement in the living standards in turn, create growing demands for manufactured goods.

Financial Problems Facing Small Scale Industries

The Need For Quality Control In A Manufacturing Organization

It is however, noteworthy that for SMEs to be able to meet these challenges in any economy, they need to be operating optimally under business friendly conditions that will aid their productivity and growth overtime. Thus it is the role of the government of any country to ensure that it creates the enabling environment for its SMEs to perform efficiently, to fully attain their anticipated potentials in the overall economy.

Before any government can effectively create the enabling environment for the SMEs to meet their potentials, there is a need to adequately identify the likely factors that can serve as constraints to the performance of SMEs with the view to eliminating them. Amongst the various factors serving as impediment to the performance of SMEs are:

Inadequate credit facility

Foreign competition as result of traditional liberalization as advocated by proponents of globalization.

Poor accounting standard management

Lack of adequate extension services

Poor state of infrastructures

However, it is widely held view that availability of credit is the most critical to the performance of SMEs. Some studies show that a large number of SMEs fail because of financial reasons (Osuwa, 2005).

The role of finance on the development of any economy’s manufacturing sector in general and SME sub-sector in particular is very vital. It is for this purpose that this study is embarked upon to find out basically the role of commercial banks in financing SMEs in Nigeria.

From available records it appears commercial Banks have been financing this sector, yet there is nothing on ground to show for it. This has developed more research questions.

This project intends to assess the financing of SME in Nigeria by commercial Banks between 1988 and 2008 from available records.

1.2    STATEMENT OF THE PROBLEM

The SME sector is known to have huge potential for generating employment, serving as base for industrialization and economic growth, increased utilization of local materials for production, serving as value added intermediaries, providing forward and backward linkages between various production outfits, development of local technologies etc (Fazari, 1988).

However, it is well known fact that in Nigeria today, unemployment rate is high, economic growth is nothing to cheer about, the process of industrialization is at best stagnant and capacity utilization is regrettably at a low level.  All these negative trends are indicative of a malfunctioning manufacturing sector in general and an under performing SME sub-sector in particular.

Under the small and medium industries Equity Investment scheme (SMIEIS) as at July 2005, 196 projects valued at N10.018 billion in 24 states including Abuja had benefitted from the scheme. This figure represents projects already verified by CBN. Unverified and committed funds for projects stand at N11.7 billion giving a total investment of N12.718 billion. This represents about 70% of N30.999 billion accessible to SMIEIS funds (Ibru, 2005).

Yet with the above figures the impact is marginally felt among Nigerian citizens. This poses certain questions in our mind. What effect does available finance by commercial Banks have on SMEs sub-sector? Why the variation on total credit and loans for SMEs?

1.3    RESEARCH QUESTIONS

Research Questions are sine-qua-non in any research work because it is upon them that the objectives and hypothesis of the research rest. In the prosecution of this research the following questions were raised:

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