The topic of dissertation is The Role Of Commercial Banks In Financial Small Scale Industry In Nigeria. A case study of union bank of Nigeria plc.
The major objective of the study is to ascertain the extent to which
union bank ofNigeriaplc has helped to financial small scale industries/.
Instrument of data collection is questionnaires and research
questions which formed the source of primary data, while materials from
various published articles, textbooks, journals and newspaper formed the
The method of analysis is the use of tables, percentages and chi-square .
The major finding of the research is that union bank ofNigeriaplc has
helped to financial small scale industries period under review.
The recommendation based on the finding is that in order to
reduce the risk in small scale industry lending, the central bank
ofNigeriaand the government can do more than they are doing currently
The study concluded that if the desired objective of using small
scale industries as catalysts of development is to be achieved than the
role of commercial banks should be mutually supportive.
TABLE OF CONTENTS
Table of content
1.1 Background to the problem
1.2 Problem statement
1.3 Objectives of the study
1.4 Research questions
1.5 Research hypothesis
1.6 Scope of study
1.7 Limitations of the study
1.8 Definition of study
2.2 Meaning of small scale industry
2.3 Government policy
2.4 Support systems
2.6 Monetary policy development in favour of small scale industries
2.7 Benefits of small scale industry
2.8 Problems facing small scale industry
2.9.1 Financing the project
2.9.2 Technical knows how
2.9.3 Personnel, matters and general administration
2.10 Improving funding small scale industries
3.0 Introduction of the study
3.1 Research design
3.2 Area of study
3.3 Population of study
3.4 Sample size determination
3.5 Instrument for data collection
3.6 Validation of the instrument
3.7 Reliability of the instrument
3.8 Method of data collection
3.9 Data analytical techniques
PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation of data
4.2 Hypothesis testing
CHAPTER FIVE FINDINS:
CONCLUSIONS AND RECOMMENDATIONS
1.1 BACKGROUND TO PROBLEM
The successive development plans ofNigeriahave laid emphasis on the
attainment of self reliance. The need for this national objective is
because much is expected from individuals from the view point of
providing employment opportunities self reliance in basic food and
material production high per capital income, foreign exchange earnings
and the production of industrial raw materials.
Okporobie (1989:10) observes thatNigeriasmall scale industries
continued to decline despite the so called priority given to the sector
However, the discovery by the central bank that this policy was not
enough by it self led to the central bank request with effect from
1970/80 that all commercial bank must reserve a proportion of the
minimum credit allocation to indigenous borrowers for small
scaleNigeriaenterprises. The target prescribed in 1979 was ten percent
(10%) which subsequently raised to sixteen percent (16%).
Even though available data showed that performance of commercial
banks against this directive has been disappointing. The central bank
intends to spare no effort in ensuring that banks fully couple without
compromising the smooth functioning of the nation banning system.
He observed also, that without the development of small scale
industries inNigeria, the nations quest for industrialization will
certainly remain forever at stake. It is the opinion of the researcher
that future development in our industrialization must address the basic
issues of creating linkages without the economy to begin to produce real
inputs to our manufacturing activities .
Priority attention must therefore be given to these industries for
which domestic inputs could easily be produced. This will bring about
agro-allied industries like food processing and other by-products.
The objective should be to maximize the value added in their processing and manufacturing as final goods immediately inputs.
Nzewi and Oze (1985:56) observed that empirical evidence indicates
that strong producer incentives to small scale industrialists are
necessary not also only to meet the food requirement but also to
provide growing input supplies and demand as a foundation for sustained
The present economic constraint may well turn out to be a blessing in
disguise to our industrialization effect particularly for dynamic
manufacturing sector. For instance, the market determinate exchange
rate through seeing with its result and high cost of imported inputs may
serve as an impetus for industrialist to intensify their search for
Ekenyong and Nyong (1992) observed that small scale
enterprises are regarded an organic part of a viable structure for the
attainment meaningful economy development in developing economic
They are significantly more cost effective in bringing about
development than large enterprises because of the perceived linkage and
multiplier effects which small scale enterprises have on the performance
of the economy and economic growth in general.
Osayameh (1989) observes that the strength that make small scale enterprises more amendable for assistance areas as follows.
1. Personal commitment of the proprietor whose life savings usually form the start up capital.
2. Low initial capital out lay requirement
3. Ease of entry and exit and prevalence of just minimal legal constraints
4. Amenability to business advisory services because of their
small size which makes than more responsive to improvement suggestions.
Olashore (1987) Observes that the four main sources of
enterprises financing open to small scale industry inNigeriaare.
i. Formal financial institutions such as commercial banks merchant banks, insurance companies and the development bank.
ii. Informal financial landlords, credit and savings associations “esus” friends and relations personal savings and .
iii. Other financial scheme, NERFUND NEXIM
in 2001, there was an introduction of small and medium industries
equity investment scheme (SMIEIS) in which N359 million was set aside to
date by banks under small medium industries equity investment scheme.
Through union bank small and medium scale enterprises (SMES)
department, the bank has remain ed in fore front of SMES financing
nations was extended to the SMES as at 31st March 2004.
Small scale industry is any industry not exceeding N750,000 including working capital but excluding cost of land.
It is also defined by center for industrial research and development
of Obafemi Awolowo university Ile Ife as those industries whose total
assets in plant, equipment and working capital do not exceed N250,000
with not more than 50 employees.
1.2 STATEMENT OF THE PROBLEM
The problem of credit to small scale industries may not necessarily
be as a result of financing insufficiency but rather for some other
reasons among which are.
i. Insufficient preparation on the part of small scale entrepreneurs in their request for credit assistance.
ii. Information gaps as to range of funding institutions and scope of services available in these institution
iii. Moreover, servicing of small business accounts is
relatively experience, risky and difficult to monitor with low turn over
However, the parishioners in the sector small scale industry do not
display competence in preparing justification for their project. It is
are to see most of them coming up with cash flow projections, projected
balance sheets, among others. They are based on personal rudimentary in
formation and speculation. At times when they seek the advice of
consultants, the outcome that are made figures project based on
assumptions which are most of their time unrealistic.
As a result such proposals are out rightly rejected by banks.
There are suitable when credit demands in this sector are not in
compliance in this government monetary policy and credit guidelines
which must be adhered to by banks.
The researcher identifies these problem and considers it necessary to carry our study on them.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study include:
a. To ascertain the extent to which the union bank of Nigeria plc has helped to finance small scale industries.
b. To identify the problems encountered by small scale industrialists in obtaining finance from union bank of Nigeria plc.
c. To evaluate various measures introduced to boost industrial
production and its financing and how this has affected realization of
the set goals.
d. To determine the causing changes in small scale industrial financing by union bank of Nigeria plc.
e. To make suggestion and recommendations based on the data generated by the study.
1.4 RESEARCH QUESTIONS
The critical appraisal to give answers to the following questions.
a. To what extent has union bank of Nigeria plc helped to finance small scale industries?
b. What are the problems encountered by the small scale
industrialists in obtaining finance from union bank if Nigeria plc?
c. What are the various measures introduced to boost industrial
production and its financing and how this has affected the realization
of the set goals?
d. What are the causes of changes in small scale industrial financing by union bank of Nigeria plc?
e. Does any linear relationship exist between lending to small
scale industries and economic recovery and self reliance on the economy?
1.5 RESEARCH HYPOTHESIS
a. There is no linear relationship between lending to small
scale industries and economic recovery and self-reliance of the economy.
b. there is no relationship between union bank of Nigeria plc
lending to small scale industries and the attitude of this customers
1.6 SCOPE OF STUDY
The scope of the study is the role of commercial banks in financing
small scale industries inNigeria. A case study of union bank of Nigeria
plc. It does not cover the role of commercial banks in financing medium
and large scale industries.
1.8 LIMITATION OF STUDY
However, there wee constraint imposed on the researcher this includes the following.
a. Time a study of this nature, needs a relatively long time
during which information for accurate or at least near accurate
inferences could be drawn. The period of the study was short, hence time
posed as a constraint to the researcher.
b. Cost: The researcher would have extent the survey to areas.
But limitations here included cost of transportation to source for
materials and cost of type setting the already completed work.
c. Dearth (Scarcity) of statistical data:
lack of statistical data from our financial institutions like central
bank of Nigeria (CBN) ministry of financial and economic development,
commercial and merchant bank posed a constraints.
Commercial banks adhere strictly to the rule of secret, in banking thus they refused to released information.
1.8 SIGNIFICANCE OF THE STUDY
This study will highlight problems associated with the role of commercial banks in financing small scale industry inNigeria.
It will give information on the possible areas for improvement.
Furthermore, the study will help commercial banks to assess and
appraisal their role in financing small scale industry inNigeria.
Moreover, suggestions and recommendations made in this paper will
help policy makers formulate new economic policies maintain or modify
the existing one.
It will equally serve as a guideline to researchers who may wish too decide with this study in the future.
It will also help small scale entrepreneurs to make sufficient preparation in their request for credit assistance.
It will guide the entrepreneurs in making credits demands that are compliance with government monetary policy.
The last but not the least it will help the entrepreneurs to
displayed competence in preparing justification for their project. It is
rear to see most of them coming up with cash projections, projected
1.9 DEFINITION OF TERMS
Any industry with capital not exceeding N750,000 including capital but excluding cost of land.
It is also defined by center for industrial research and development
of Obafemi Awolowo University Ile Ife as those industries whose total
assess in plant equipment and working capital do not exceed N250,000
with not more than 50 employees.
2. COMMERCIAL BANK
a financial institution that acquires deposit from savings surplus unit and give out loans to savings deficit units.
3. INDUSTRIAL DEVELOPMENT CENTER:
Provide management, technical, consultancy and extension services for the small scale.
4. INDIGENISATION DECREE:
A decree that stipulates that most business become, at least 60 percent owned by Nigerians.
5. SOLE PROPRIETORSHIP:
Is a business owned and conducted by one person presumably assisted by one or more persons for intakes wife and children.
SS/CS small scale industry credit scheme.
Agbo O.G (2000) Small scale Business Management
Okobie M.N (1989) Banks Role to Small Scale Business. Business Time
Nzewi U.C. and Ozo . E.O (1985) Strategies forNigeriaEconomic
Recovery Oko, Anambra Polytechnic
Epkpenyong D.B and Nyong M.O (1992) Small Scale Enterprises
inNigeriaSeminar Paper on Economic Policy
Research for Policy Action and Management
Ojo A.T (1992) Bank and Small BusinessLagosF and t Publisher LTD
Olashore O.(1987): Banks Loans to Small Scale industries Lagos Macmillan Publishers