CHAPTER ONE
1.1 Background to the Study
Microfinance constitute the
facilitation of financial services to meet the needs of low income
individuals such as micro-entrepreneurs, through the provision of
small loans (microloans), small savings deposits (micro-savings),
micro-insurance and enhancing simple payments services required by
micro-entrepreneurs and economically active poor people who cannot gain
access to financial services provided by the formal banking
sector.(USAID, 2000). The loans provided are small in amount and
directed for entrepreneurial ventures. The loans are collateral free and
grouped based and mostly direct to entrepreneur, generally with low
interest charges or interest free .This is because of their ability to
handle meager amount of money profitably (UNITUS, 2000
The National Council of Industries
define SMEs as those business enterprises having a total cost excluding
land not more than two million naira (N2, 000,000) only. SMEs are also
defined by the federal ministry of commerce and industry as those
business enterprises with paid employees of up to 50 persons and with a
total investment worth up to 750000 excluding cost of land. SMEs play
significant roles towards the economic development of the nation. This
roles include technological and industrial development, Employment
generation, Technology acquisition, capacity building, promoting growth,
increased standard of living, industrial spread, serving of large scale
industries, export promotion, rural development, Innovation. The
research seek to investigate the impact of micro financing on the
growth of small and medium scale businesses in lagos Nigeria.
1.2 Statement of the Problem
Several years after the policy on micro
financing, a greater number of the poor and vulnerable poor segment are
yet to fully maximize the benefit of financial services of obtaining
micro credit facility for entrepreneurial businesses. The National
Council of Industries define SMEs as those business enterprises having a
total cost excluding land not more than two million naira (N2, 000,000)
only. SMEs are also defined by the federal ministry of commerce and
industry as those business enterprises with paid employees of up to 50
persons and with a total investment worth up to 750000 excluding cost of
land. SMEs play significant roles towards the economic development of
the nation. This roles include technological and industrial development,
Employment generation, Technology acquisition, capacity building,
promoting growth, increased standard of living, industrial spread,
serving of large scale industries, export promotion, rural development,
Innovation. It is pertinent to note that while the microfinance bank are
willing to disburse funds to this segment they are however constraint
by limited financial resources to meet the large number of client
wanting to obtain micro credit. Savings deposit is low due to the nature
of the activities carried out by the segment. Consequently there is the
need to re-appraise the activities of micro financing on the
performance of small and medium scale enterprise with a view to
determing the challenges Confronted by micro finance banks towards the
effective delivery of their constitutional mandate to provide financial
service to the economically active but poor segment of the society.
Therefore the problem confronting the research is to determine the
impacts of micro financing on the growth of small and medium scale
businesses in Lagos Nigeria
1.3 Objectives of the Study
To determine the impact of micro financial institutions on the growth of small and medium scale business in Lagos Nigeria
1.3 Research Questions
What is the nature of micro financial institutions and small and medium scale business in Lagos Nigeria?
What is the level of impact of micro financial institutions on the growth of small and medium scale business in Lagos Nigeria?
1.4 Significance of the Study
The study proffers an appraisal of the
impact of micro financial institutions on the growth on small and medium
scale business in Lagos Nigeria
1.5 Research Hypothesis
Ho The level of impact of micro financial institutions on the growth of small and medium scale business in Lagos Nigeria is low
Hi The level of impact of micro financial institutions on the growth of small and medium scale business in Lagos Nigeria is high
1.6 Scope of the Study
The study focuses on the appraisal of
the level of impact of micro financial institutions on the growth of
small and medium scale business in Lagos Nigeria
It shall also serve as vital source of information to policy makers
1.7 Limitations of the Study
The study was confronted by some constraint including logistics and geographical factors.
1.8 Definition of Terms
SME
The National Council of Industries
define SMEs as those business enterprises having a total cost excluding
land not more than two million naira (N2, 000,000) only. SMEs are also
defined by the federal ministry of commerce and industry as those
business enterprises with paid employees of up to 50 persons and with a
total investment worth up to 750000 excluding cost of land
MICROFINANCE BANK DEFINED
Microfinance constitute the
facilitation of financial services to meet the needs of low income
individuals such as micro-entrepreneurs, through the provision of
small loans (microloans), small savings deposits (micro-savings),
micro-insurance and enhancing simple payments services required by
micro-entrepreneurs and economically active poor people who cannot gain
access to financial services provided by the formal banking
sector.(USAID, 2000).
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