The contributions of insurance companies to the growth of small and medium scale businesses in Nigeria


The contributions of insurance companies to the growth of small and medium scale businesses in Nigeria

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The contributions of insurance companies to the growth of small and medium scale businesses in Nigeria

TABLE OF CONTENTS

 

 

 

 

Cover …………………………………………………..…………….……pagei… Declaration………………………………………………………………………………..

 

Approval………………………………………………………………………………....i

 

Dedication………………………………………..………………………………………iv

 

Acknowledgement……………………….………………………………………………. Table of contents……………………………………………………………………… List of tables………………………………………………………………….………..ix

 

Acronyms ………………………………………………………………………………...x Abstract………………………………………………………………………..…………xi

 

 

 

CHAPTER ONE………………………………………………………………………...1

 

INTRODUCTION............................................................................................................ 1

 

1.0 Background of the study............................................................................................... 1

 

1.1 Statement of the problem……………………………………………………………...2

 

1.2 Research objectives....................................................................................................... 3

 

1.3 Research questions........................................................................................................ 3

 

1.4 Purpose of the study...................................................................................................... 3

 

1.5 Scope of the study......................................................................................................... 3

 

1.6 Significance of the study............................................................................................... 4

 

 

CHAPTER TWO.............................................................................................................. 5

 

LITERATURE REVIEW................................................................................................ 5

 

2.0 Introduction................................................................................................................... 5

 

2.1 Meaning of SMEs.......................................................................................................... 5

 

vi


2.2 Factors affecting   the   growth   of   SMEs……………………...……………

 

2.2.1 Performance indicators of SMEs …………………………………………..….......13

 

2.3              Meaning   of   insurance…………………………………………...15

 

2.4              Contribution   of   insurance   companies16   to   t

 

2.5

Factors inhibiting   the   purchase   of   insurance19   by   SME

2.6

Relationship between insurance companies   and   growth   of   SMEs…………

2.7

Conclusion…………………………………………………………………………...23

 

 

 

CHAPTER THREE........................................................................................................ 25

 

RESEARCH METHODOLOGY.................................................................................. 25

 

3.0 Introduction…………………………………………………………………………..25

 

3.1 Research design........................................................................................................... 25

 

3.2 Survey Population……………………..………………………………………….….25

 

3.2.1 Sample size............................................................................................................... 25

 

3.2.2 Sample design........................................................................................................... 26

 

3.3 Data Sources................................................................................................................ 26

 

3.4 Data collection............................................................................................................. 26

 

3.5 Measurement of Variables........................................................................................... 27

 

3.6 Validity and Reliability of instruments………………………………………………27

 

3.7 Data analysis................................................................................................................ 28

 

3.8 limitation of the study………………………………………………………………..28

 

 

 

 

CHAPTER FOUR……………………………………………………………………...29

 

DATA ANALYSIS, PRESENTATION AND INTERPRETATION…...………….29

 

4.0              Introduction…………………………………………………………………………29

 

 

vii


4.1              Response   rate……………………………...………29…

 

4.2              Personal   data………………………………………………………………………....29

 

4.3  Findings on factors affecting   SMEs   growth……………………………………….

 

4.4

Findings on contributions of insurance companies   to   the   growth   of   SME

4.5

Findings on factors inhibiting the purchase   of   insurance   cover……………

4.6

Findings on relationship between insurance companies   and   the   growth   of

 

 

 

 

CHAPTER FIVE……………………………………………………………………….38

 

DISCUSSION & SUMMARY, CONCLUSION AND RECOMMENDATIONS....38

 

5.0              Introduction…………………………………………………………………………38

 

5.1              Discussion   of   the   findings……………..…………………………………38

 

5.2  Conclusion………………………………………………………………..………….41

 

5.3  Recommendation………………………………………………………………….....42

 

5.4  Areas   for   further……….….………………………research…..………………42

 

REFERENCES............................................................................................................... 43

 

APPENDIX I. .…….………………………………………………………………..48

 

APPENDIX   II…………………………………………………………………………..52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

viii


LIST OF TABLES

 

Table 1 Targeted Sample Size…………………………………………………………………26

 

Table 4.2.1 Showing findings on gender of the respondents………………………………….29

 

Table 4.2.2 Showing findings on age range of the respondents……………………………….30

 

Table 4.2.3 Showing findings on educational level of the respondents……………………….30

 

Table               4.2.4   Showing   findings………………………….ontheresponden31

 

Table 4.3.1 Showing findings on innovation…………………………………………………..31

 

Table 4.3.2 Showing findings on competition…………………………………………………32

 

Table 4.3.3 Showing findings on management skills and actions…………………………….32 Table 4.3.4 Showing findings on lack of credit by SMEs……………………………………..33

 

Table 4.3.5 Showing findings on technological change……………………………………….34

 

Table 4.4.1 Showing contribution of insurance companies to the growth of SMEs…………..35

 

Table 4.5.1 Showing factors inhibiting purchase of insurance cover by SMEs………………..36

 

Table 4.6.1 Showing relationship between insurance companies and the growth of SMEs…..37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ix


ABSTRACT

 

The purpose of this study was to establish the relationship between the contributions of insurance companies and the growth of SMEs in NIC basing on the following objectives; to examine major factors that affects the growth of SMEs; to assess the contribution of insurance companies to the growth of SMEs; to investigate the factors inhibiting the purchase of insurance cover by SME operators and to determine the strength of the relationship between insurance companies and growth of SMEs.

 

The research was descriptive in nature involving quantitative methods which was administered through questionnaires. The total sample comprised of 65 respondents of all the managers and employees of NIGER INSURANCE CORPORATION. Simple random sampling was used whereby the researcher went to NIC and administered questionnaire to the sampled or selected employees. Primary data was obtained from the library materials, textbooks, NIC brochures, internet and journals. Data analysis was carried out using SPSS and frequency distribution tables.

 

Findings revealed that innovation is a strong empirical evidence for fast growing SMEs, competition has a great effect on SMEs industry and credit remains a great challenge to the growth of SMEs. Besides that insurance companies mitigate risks and enhance loan acceptability by SMEs sector with banks. However low income earned by SMEs, high premium cost and paperwork and experience and beliefs inhibit the purchase of insurance cover by SMEs. Nevertheless, there is a strong positive relationship between insurance companies and the growth of SMEs at Spearman Correlation Coefficient.

 

It was concluded that improvement in business skills increases the performance of SMEs. However insurance companies do not lowers insurance rates and offer protection to SMEs income statements. In addition SMEs being small in size and their inability to fully understand the document limits them to get insurance cover. It was recommended that management of NIC need to build a great relationship with SMEs as their customers in orders to develop and grow them in trust and also lower the premium rates to SMEs in order to improve on their performance. Also NIC need to have a fresh look at the scope and spectrum of services provided to SMEs and has a better understanding on the scale of enterprise sector.

 

 

 

xi


CHAPTER ONE

 

INTRODUCTION

 

1.0 Background

 

The substantial growth of small and medium enterprises (SMEs) activity clearly marks SME as one of the most remarkable economic phenomena. SME is a business that is privately owned and operated with a small number of employees and relatively moderate volume of sales. The definition of SMEs varies from country to country depending on the level of development and the strength of the economy. The lower limit for small scale enterprises is set at between five and ten workers and the upper limit is set at between fifty and one hundred workers. The upper limit for medium scale enterprises is set between one hundred and two hundred and fifty workers (Hallberg, 2000).

 

In Nigeria there are approximately 1,069,848 SMEs currently in operation and they comprise over 90% of the private sector. They contribute to employment, provision of basic goods and services, and generation of export and tax revenues for national socio-economic development. Their Gross Domestic Product (GDP) contribution to the economy is 75% and they employ about 2,500,000 nationals. The location of these SMEs is mostly in urban areas with 80% located therein. They operate business like restaurants, accountants, hairdressers, conveniences stores and guesthouses (Hatega, 2007).

 

On the other hand insurance is a contract by which one party undertakes in consideration of a payment called premium to secure the other against pecuniary loss by payment of a sum of money in the event of destruction or damage to property, fire, accidents or death of a person. Economy, investment and finance reports (2010) defines insurance as a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages. An insurance contract is an agreement by which the insurer promises, from a premium or assessment, to make a payment to a policy holder or a third person if an event that is the object of a risk occurs. SMEs often face a variety of problems related to their size. Frequent causes are bankruptcy, theft, fire, death, automobile accidents and workers injuries.

 

 

1


1.1 Statement of the problem

 

 

Despite the contribution of insurance corporations to the growth of SMEs in economic development, failure and slow growth still exists and the public doubts its management (Ocici, 2007). Research suggest that 80% of the businesses affected by major incident close down within 18 month, and 90% of those who lose data close down within 2 years. This is due to the failure of small businesses to have adequate insurance cover and proper business continuity plans (cover sure, 2007). However literature has shown that insurance companies are not willing to insure SMEs and it was the aim of this research to establish whether a relationship between these two variables exists.

 

The contributions of insurance companies to the growth of small and medium scale businesses in Nigeria

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The purpose of this study was to establish the relationship between the contributions of insurance companies and the growth of SMEs in NIC basing on the following objectives; to examine major factors that affects the growth of SMEs; to assess the contribution of insurance companies to the growth of SMEs; to investigate the factors inhibiting the purchase of insurance cover by SME operators and to determine the strength of the relationship between insurance companies and growth of SMEs. The research was descriptive in nature involving quantitative methods which was administered through questionnaires. The total sample comprised of 65 respondents of all the managers and employees of NIGER INSURANCE CORPORATION. Simple random sampling was used whereby the researcher went to NIC and administered questionnaire to the sampled or selected employees. Primary data was obtained from the library materials, textbooks, NIC brochures, internet and journals. Data analysis was carried out using SPSS and frequency distribution tables. .. insurance project topics

The contributions of insurance companies to the growth of small and medium scale businesses in Nigeria

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