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The Role of
Small Scale Industries in Selected Small Businesses
ABSTRACT
The study
was conducted on Financing Small and Medium industries in Nigeria (A Case Study
of Selected small business in Lagos State sub-urban). The roles play by SSEs as
been confirmed by this study. It therefore means that the SSEs can be
effectively used to improve the country’s employment and growth if the above
stated problems that they face are tackled. More activities of the government
should therefore be directed to the industry. The data were gathered through
the administration of questionnaire to respondents from different department
status in the organization. The findings of this work do not differ
significantly from what have been said by former researcher as reviewed in
chapter two of this work. However, this does not mean that further study into
this area cannot be undertaken since new facts are emerging everyday. Small
Scale Industries do not prepare proper and regular financial report that makes
them not to have one for loan purposes. Policy should be put in place to make
compulsory preparation of business name so that names of from which do not
subsequently prepare financial report may be struck off from the register book.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Interest in
the role of small and medium-sized enterprises (SMEs) in the development
process continues to be in the forefront of policy debates in developing
countries. The advantages claimed for SMEs are varies, this include: the
encouragement of entrepreneurship; the greater likelihood that SMEs will
utilize labour intensive technologies and thus have an immediate impact on
employment generation; they can usually be established rapidly and put into
operation to produce quick returns. SME development can encourage the process
of both inter- and intra-regional decentralisation; and, they may well become a
countervailing force against the economic power of larger enterprises. More
generally the development of SMEs is seen as accelerating the achievement of
wider economic and socio-economic objectives, including poverty alleviation.
Staley and
Morse (2001) identify a ‘developmental approach’ to SME promotion which has as
its objective the creation of ‘economically viable enterprises which can stand
on their own feet without perpetual subsidy and can make a positive
contribution to the growth of real income and therefore to better living levels’.
This approach emphasizes the importance of efficiency in new SMEs. Small
producers must be encouraged to adopt new methods, move into new lines of
production and in the long-run, wherever feasible, they should be encouraged to
become medium- or even large-scale producers. More recent concerns associated
with the growth and efficiency of smaller enterprises has also become
prominent. Using the case of Northern Italy, Piore and Sabel (2009) have argued
that small enterprises are more efficient because they have adopted a flexible
specialization approach. Correspondingly, there has been growing interest in
whether this model has or can be replicated in developing countries (Schmitz,
1998; Pederson, 2002; Schmitz and Musyck, 2003; Schmitz, 2008).
The viewed as
a critical element for the development of small and medium-sized enterprises.
Previous studies have highlighted the limited access to financial resources
available to smaller enterprises compared to larger organisations and the
consequences for their growth and development (Levy, 2003). Typically, smaller
enterprises face higher transactions costs than larger enterprises in obtaining
credit. Insufficient funding has been the major problem confronting SMEs (Peel
and Wilson, 2006). Poor management and accounting practices have hampered the
ability of smaller enterprises to raise finance. Information asymmetries
associated with lending to small-scale borrowers have restricted the flow of
finance to smaller enterprises. In spite of these claims however, some studies
show a large number of small enterprises fail because of non-financial reasons
(Liedholm, McPherson and Chuta, 2004).
The panacea
for solving problems of economic growth in developing countries often reside in
the development of small scale industries. The establishment of those
industries has been the centerpiece of industrial development of many countries
such as India, Malaysia, Pakistan, Indonesia and Nigeria to mention a few. It
is expected that the gains to be derived from the establishment of small-scale
industries will be translated into the generation of employment at a low
investment cost. These industries will also be able to harness raw materials
locally and serve as raw inputs to the large-scale industries.
1.2
STATEMENT OF RESEARCH PROBLEM
The growth
of output of any economy depends on capital accumulation, and capital
accumulation requires investment and an equivalent amount of saving to match
it. Two of the most important issues in developing countries, are how to
stimulate investment, and how to bring about an increase in the level of saving
to fund investment. The primary focus of this research work emanates from the
fact that small scale enterprises owners do not have sufficient finance to
carry on due to the low saving culture of the people in this part of the world.
Besides, the Central Bank stipulated that 20% of banks’ credit should be
granted as loan to the Small Scale Enterprises but this was not adhered to
because of the reason that most loans granted to Small scale holders were not
repaid and so the banks did not consider them as creditworthy. In the light of
these, this research shall evaluate the financial incentive available to the
small-scale enterprises.
1.3
OBJECTIVE OF THE STUDY
The main
purpose of this study is to identify and consequently analyze the financial
incentives that are available to small and medium scale enterprises. Other
objective include:
I.
Contribution of growth of the Nigeria Company.
II. Role
played by financial market in financing small and scale enterprises in Nigeria.
III.
Economic potential of small and scale enterprises in Nigeria
IV.
Strategies that would improve the development, growth and survival of
small-scale enterprises
1.4
STATEMENT OF RESEARCH QUESTIONS
1. Does SMEs
identify the financial incentives
2. Does
financial institutes improve SMEs activities
3. Is their
any economy potential of SMEs in Nigeria enterprise
4. Can the
strategies in place improve the growth and survival of SMEs
5. What are
the roles played by financial market to improve SMEs in Nigeria
1.5
STATEMENT OF RESEARCH HYPOTHESIS
Hi: There is
no relationship between Small and Medium enterprise and economic growth in
Nigeria
Ho: There is
significant relationship between Small and Medium enterprise and economic
growth in Nigeria
HI: The role
played by financial market does not improve SMEs activities in Nigeria
Ho: The role
played by financial market improve SMEs activities in Nigeria
1.6
SIGNIFICANCE OF THE STUDY
The
significance of this study can be viewed from the perspective of the importance
of the industrial sector as a whole to the economy, which could in turn be
examined from the government policies that are meant to promote industrial
development and provide a solid foundation for the long-term growth in the
industrial sector. Above all it is believed that small and medium scale
enterprises will propel the rationalism of economic independence, long after
political independence thus there is a need to evaluate and promote small and
medium scale enterprises. This research work shall contribute to existing
literature on SMEs by providing a detailed analysis of the financing strategies
that are available to small and medium scale industries in Nigeria with the aim
of improving their operations and effectiveness.
1.7 SCOPE
AND DELIMITATION OF THE STUDY
The study
will be limited to SSEs as defined. Also the study shall limit the number of
SSEs to be study to fifty.
1.8 PLAN OF
STUDY
The study
will be divided into five main chapters. Chapter one will cover the general
introduction into the study under which introduction, statement of problems,
objectives of the study, statement of the study are discussed. Chapter two
focus on literature review, which has to do with a general presentation of
views by of former researchers as well as scholars on the main variables of the
study. Chapter three will contain the structural composition of the study under
which the source the finance of small scale enterprises are discussed. Chapter
four will be devoted to data presentation and analysis. The last but by no
means the least in importance chapter will be used for summary, conclusion and
recommendations.
1.9
DEFINITION OF TERM
Small-Scale
Industry: An industry with a labour size of 11-100 workers or a total cost of
not more thanN50 million, including working capital but excluding cost of land.
Medium Scale
Industry: An industry with a labour size of between 101-300 workers or a total cost
of over N50 million but not more than N200 million, including working capital
but excluding cost of land.
Large Scale:
An industry with a labour size of over 300 workers or a total cost of over N200
million, including working capital but excluding cost of land.
Finance: The
act of providing funds for business activities, making purchases or investing,
financial institutions and banks are in the business of financing as they
provide capital to business, consumer and investors to help them active them goals.
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