The Role Of Commercial Bank’s Credit On The Performance Of Small Scale Enterpises In Nigeria

Type Thesis
Faculty Administration
Course Business Administration
Price ₦10,000
Key Features:
- No of Pages: 66
- No of Chapter: 5
- Statistical Tables
This study is a survey on the role of commercial bank in the performance of small scale enterprises in Nigeria. The study is significant that it proffers in the modern times, industrial production requires the procurement of equipment, machineries and other inputs. The capital required in procuring the requirements in limited in supply and very few industrialists have access to it considering the type of collateral security required by the banks which must be fulfilled before granting loans. The study adopted secondary data, data was obtained from CBN Statistical Bulletin from the year of 1991 to 2016. The result further indicated the value of R2 as indicated in the result show that about 88.6 percent of changes in the dependent variable is accounted for by changes in the explanatory variables. It also remained strong even after adjusting for the degree of freedom and stood at 0.845. It also stated that the F-statistic which measures the overall statistical significance of the model and explanatory variable in explaining the dependent variable was found to be statistically significant at 5% level of significance. The results stated that the model has a high predictive and forecasting power. It was then concluded The development of SMEs and its effective promotion have not been approached seriously in Nigeria; hence, the lack of their impact in the economy. In Nigeria, various governments instituted various programs aimed at developing SMEs sector. Most of the programs were not given the appropriate backing and as such the impact of the programs could not be felt in the economy. The Non-Governmental organization and donor agencies are currently involved in the promotion of SMEs in Nigeria. Access to credit continues to pose a major problem to SMEs sector in Nigeria since the traditional financial institutions have not been able to meet their credit needs. It was then recommended that the financial institutions should creatively craft and adopt the availability of cheaper funds that would spur the growth of SMEs with the in view to enhancing economic growth.
Table of Content:
Content Pages
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Table of Contents v
Abstract vii
1.1 Background to the Study 1
1.2 Statement of the Problem 3
1.3 Aims and Objectives of the Study 4
1.4 Research Questions 4
1.5 Research Hypothesis 5
1.6 Significance of the Study 5
1.7 Operational Definition of Terms 5
2.1.1 Conceptual Review 7
2.1.2 The Concept of Commercial Banks' Credit 7
2.1.3 The Concept of Small/Medium Enterprises (SMES) 8
2.1.4 Sources of Finance Available to SMEs 10
2.1.5 Characteristics of Small and Medium Scale Enterprise in Nigeria 13
2.1.6 Role/Benefits of Small and Medium Scale Enterprises in the
Nigerian Economy 14
2.1.8 Solutions to Financing Problems of Small and Medium Scale
Enterprises in Nigeria. 21
2.1.9 Types of Loan Facilities Granted 22
2.1.10 The Role of Banking Sector in Financing SMES: 24
2.1.11 Government imitated programmes to boost SMEs in Nigeria 25
2.2 Theoretical Framework 26
2.3 Empirical Review 28
3.1 Introduction 32
3.2 Restatement of Hypothesis 32
3.3 Source of Data 32
3.4 Method of data analysis 33
3.5 Model Specification 33
3.6 A prior expectation 34
3.7 Test of Reliability 35
4.1 Introduction 37
4.2 Presentation of Ordinary Least Square Result 37
4.3 Interpretation of regression results 38
5.1 Summary 40
5.2 Conclusion 41
5.3 Recommendations 43
1.1 Background to the Study
Small and Medium Scale Enterprises (SMEs) are important engines of economic growth, jobs and social cohesion. SMEs play an important role in the economies of many developing countries including Nigeria. Thus, governments throughout the world focus on the development of the SMEs sector to promote economic growth Finlayson, (2003). However, the creation, survival and growth of SMEs are often hampered by access to finance. Thus access to SMEs finance has become a key priority in developing countries like Nigeria. Therefore, Non-availability of debt finance to finance operations and expansion is one of the major causes of failure for SMEs in Nigeria.
According to Global Entrepreneurship Monitor (GEM) Survey in 2008; financial constraint is the primary exit reason for most SMEs failure in Nigeria. However, the need for SMEs growth in Nigeria is beyond question, but access to finance is a major factor stagnating the way of its growth, as a financing tool, debt financing has a distinct advantages over equity financing for the development of SMEs, but debt financing in Nigeria presently comes with significant challenges as can be seen from low responses of commercial banks to finance SMEs. There is evidence that most SMEs in Nigeria with low capital formation raise capital through loans from family and friends because at the initial stage, majority of young budding entrepreneurs lack laudable forms of collateral, business plans and feasibility studies to actually meet the requirement and convince banks to grant them loans Ebube, (2011). This implies that a vast majority of SMEs depend on internal finance (i.e contribution from the owners, family and friends etc). Internal financing is often inadequate for SMEs in Nigeria to survive and grow, as it is increasingly difficult to keep the costs within the constraints of self-financing.
Therefore SMEs need capital from external sources (or Debt Financing). Because of this Nigerian Government over time introduced Small and Medium Enterprises Equity Investment scheme (SMEEIs) as an initiatives through Commercial banks by the CBN to solve financing problem of SMEs and the creation of (Small and Medium Enterprises Development Agency of Nigeria) SMEDAN as an agency to enhance the development of SMEs. The Banking System is very important for any nation because it is the pivot of socio-economic development of any economy Terungwa, (2011).
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