The study was conducted on Financing Small and Medium industries
in Nigeria (A Case Study of Selected small business in Lagos State
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
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 every day.
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.
1.1 BACKGROUND OF 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
Staley and Morse (2011) 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 emphasises
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
specialisation 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;
The role of finance has been 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, 1993). 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, 1996). 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
thatsmall 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
ascreditworthy. 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
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
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
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.