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ABSTRACT

 

This study examined the impact of small and medium enterprises financing on poverty reduction in Nigeria: 1991-2010. The broad objective of the study is to determine the role of small and medium enterprises in Nigeria and its contribution towards industrialization. Three research questions were posed for the study and three hypotheses formulated in line with the objectives. The instrument for data collection was questionnaire which was used in analyzing the research question while hypotheses were tested with Chi-Square(X²). The population of the study is 150. Therefore, the study revealed that small and medium enterprises provided employment opportunities, training ground, and harness utilization of local resources. The study concluded that a good development strategy if employed by these industrialists will grow to large-scale capital intensive. The study recommends that SMEs should source their loans from the financial institutions where interest rates are low.

 

 

 

 

CHAPTER ONE

INTRODUCTION

Background of the Study

Small and medium enterprises have made great contributions in eradicating poverty in Nigeria. SMEs are regarded as the engine of economic growth to any nation’s development. The main advantage of the sector is its ability to employ at low capital cost. The labour intensity of the SMEs is much higher than that of the large enterprises.  SMEs as a nursery of entrepreneurship are often driven by individual’s creativity and innovation. Besides the growth potentials and its critical role in the manufacturing and value chains, there wide spread in Nigeria and the multiple effects they have on the rest of the economy enable them to be the engine of economic progress. SMEs are main drivers of innovation, job creation, poverty reduction, wealth creation, income distribution and reduction in income disparities.  After the economic reform on 1986, the small and medium scale Enterprises are seen as a key to Nigeria’s growth and poverty alleviation and unemployment in the country. Therefore, there is need to promote such enterprises in developing economies like Nigeria because since it brings about a great distribution of income and wealth, economic self-dependence, Entrepreneurial development employment and a host of other positive economic uplifting factors. In Nigeria where adverse Balance of payment situation is low, the growing activities of the small scale industries sector in its export portfolio goes a long way in generating foreign exchange and smoothening out the adverse balance of payment situation.

 

Awosika (2011), Schmitz (2010) and Aremu (2010) posited that small scale enterprises provides income, saving and employment generation. They are seen as veritable engines for the development of entrepreneurial capabilities and indigenous technology which will generate employment in the country. It has been estimated that SMEs employ 22% of the adult population in Nigeria. Because of the SMEs roles in the development and growth of various economies, they have aptly been referred to as “the engine growth” and catalysts for socio-economic transformation of any country. The various activities of small business firms have resulted in the mobilization of the resources of the environment and thereby improving on the standard of living of the population or people. They have contributed a lot to the labour market by absorbing on ever growing supply. In doing this, they have sufficiently helped to curtail the rising unemployment rate in Nigeria. Other impacts of this sector are its contribution to the development of indigenous entrepreneurs like Innoson Group of company, Tummy-Tummy, Chikason Group of Company, Dozy Power flow etc.

 

SMEs can be said to be a good agent for disposal of industrial products and some service and have immensely increase the production of raw-materials in the form of semi-processed goods for use by bigger industries. It is also a base for the development of appropriate technology and provides a veritable ground for skilled, unskilled and semi-skilled workers. Anambra state has in recent years become an important industrial zone tool. Its prominence has become generally recognized to the extent that the Oyeleran Oyeyinka (2000) described it, as an emergent industrial cluster` in Nigeria Englama. Bamidele (2010) aptly summarized the definition of poverty in both absolute and relative term as a state where an individual is not able to cater, adequately for his/her basic needs of food, clothing and shelter, meet social and economic obligations, lack gainful employment, skills assets and self-esteem, and has limited access to social esteem and economic infrastructures. Small and medium enterprises constitute over 90 percent of business operations and contribute toward over 50 percent of the nation’s total employment opportunities and gross domestic product. Therefore, this study tends to examine the role of SMEs in poverty eradication in Anambra State Nigeria.

 

Statement of the Problem

The role of small and medium enterprises in eradicating poverty cannot be over emphasized. When you look at Nigerian economy it shows that greater consideration and encouragement should be given to small and medium enterprises. However, little attention or none is given to SMEs as they are left purely in the hands of individuals to initiate and run them. The essence of this study therefore is to find out why the government has not cared to give the same level of attention to small and medium enterprises. When this is known, it will be of paramount importance to point out all the benefits of small and medium enterprises in eradicating poverty. Against this back drop therefore, the study tends to find out the Lack of appropriate and adequate managerial and entrepreneurial skills with the lack of strategic plan, business plan succession plan, adequate organizational set up, transparent operational system etc on the part of many founders and managers of small and medium enterprise.

 

Objective of the Study

The broad objective of this study is to examine the impact of small and medium enterprises financing on poverty reduction in Nigeria: 1991-2010 while the specific objectives are to: 

1. Determine the role of small and medium enterprise in eradicating poverty in Nigeria.
2. Examine the problems of financing small and medium enterprises.
3. Examine the contribution of SME’s towards industrialization.

 

Research Questions 

The following research question guided the research;

1. To what extent can small and medium enterprise be an instrument for poverty eradication?
2. What is the major challenge encountered by small and medium enterprises in eradicating poverty.
3. To what extent has small and medium enterprises contributed to industrialization?

 

Hypothesis of the Study 

In order to answer the research questions posed for the study, the following hypotheses were formulated in a null form

Ho₁: Small and medium enterprise is not a good strategy for eradicating poverty.

H₂:  The major difficulty encountered by small and medium enterprises in eradicating poverty is not lack of funds to finance their business and how to obtain funds for their operation.

H_3: Small and medium enterprise has not contributed to industrialization

 

Significance of the Study

• This study would be of immense interest and benefit to large scale industries if they would adopt whatever viable recommendation that comes out of this research assiduously in order to maximize their productivity and make a more positive impact.
• Entrepreneurs and business individuals shall benefit from findings of the study particularly as it affects legal and other operational frameworks and benefits accruable to investor. Information derived from this study will be valuable to small and medium enterprises in the area of obtaining loans and credit facilities since these pose the greatest problems to the industrialists.

It will also be beneficial to government and the policy makers in Nigeria in policy formulation especially on those policies that are meant to promote the performance of small and medium enterprises.