The Impact Of Micro Finance Bank In The Development Of Small Scale Industries In Nigeria

The Impact Of Micro Finance Bank In The Development Of Small Scale Industries In Nigeria

Chapter One

Preface

Background Of The Study

The development of the colorful sectors of any frugality is the base for its survival, different measures have been put in place by the Federal Government of Nigeria in order to achieve this ideal, similar as, the establishment of the Finance and Research Institution in 2001, provision of direct fiscal backing to small business association, the Small and Medium diligence Equity Investment Scheme( SMIEIS) in 2001, establishment of Small Scale Industrial Credit Scheme, establishment of Government Intervention Strategies in 2002, provision of Credit Scheme, establishment of National Economic Reconstruction Fund( NERFUND) in 1989, establishment of Industrial Development Centres and Industrial Estate Scheme, etc. The original sweats were government- led through the vehicle of large diligence, but recently emphasis have shifted to Small and Medium Scale Enterprises( SMEs) following the success of Small Scale and Medium Enterprises in the profitable growth in the Asian countries.( See Ojo, 2003) as cited in Babajide, 2012). still, the growth of Small and Medium Scale Enterprises over the times has been suppressed because they’ve not been suitable to meet the conditions for carrying fiscal services from the conventional marketable banks, therefore their occasion for expansion has been greatly limited. This failing of the formal fiscal institution is what initiated micro backing.

In 2005, the Federal Government of Nigeria espoused microfinance as the main backing window for SMEs in Nigeria. The Microfinance Policy Regulatory and Supervisory Framework( MPRSF) was launched in 2005 with the core ideal of making fiscal services accessible to a large member of the potentially productive Nigerian population. It also addressed the problem of lack of access to credit by small business drivers who don’t have access to regular bank credit. It also created the frame for licensing, regulation and supervision of intimately possessed microfinance banks, provides for the participation of colorful institutions similar as deposit plutocrat banks,non-governmental associations, microfinance institutions and fiscal cooperatives in the provision of fiscal services. This frame was also extended to SMEs that have little or no access to fiscal services.

The Microfinance Policy( MPRSF) provides for two orders of Microfinance Bank in Nigeria, videlicet Microfinance certified to operate as a unit bank else known as community bank which can only operate branches or cash centres within a original government with the minimal paid up capital of ₦ 20 million and the Microfinance Bank certified to operate in a state or Federal Capital home with the minimal paid up capital of ₦ 1 billion.

Small and Medium Scale Enterprises play important places in the profitable growth in both developing and developed nations. piecemeal from adding per capital income and affair, micro enterprises produce employment openings, enhance introductory standard of living of the crowd, enabling entrepreneurs to be tone reliant, produce wealth, easing the adverse goods of growing population and generally promoting effective coffers application, onsidered critical to negotiating frugality development and growth.( See Tijani,M.O., 2011).( Ogujiuba, Fadila & Stiegler, 2013; Musa & Aisha, 2012) agree that Small and Medium Scale Enterprises regard for well over half of the total share of employment deals and value added and they constitute the most feasible and veritable vehicle for tone sustaining artificial development, as they retain the capability to grow an indigenous enterprises culture further than any other strategy.

still, as cited in Tijani,M.O.( 2011), the part played by Small and Medium Scale Enterprises notwithstanding, its development is constrained by shy backing and poor operation. The unfavourablemicro-economic terrain has also been linked as one of the major constraints which utmost times encourage fiscal institutions to be threat- antipathetic in funding Small and Medium Scale businesses. Also, the disinclination on the part of the fiscal institutions to fund Small and Medium Scale Enterprises can be explained by the inadequate capital base of banks. As a result, these enterprises calculate onpersonal means for working capital, thua making it delicate to operate at full capacity and increase affair and deals which will serve as motivation in adding Gross Domestic Product( GDP) of a nation like Nigeria. therefore, the concern of this exploration is to examine the impact of microfinance bank on the growth of Small and Medium Scale Enterprises in Ilorin megalopolis

Statement of the Problem

The microfinance banks( MFIs) promoted by the Federal Government of Nigeria was meant to purview credits entrepreneurs who possessed Small and Medium Scale Enterprises because of their limited access to sources of finance. Small and Medium Scale Enterprises face a lot of problems in carrying finance from the conventional finance banks because of the cost of finance, contributory security and the bureaucracy involved in penetrating loans; the high interest rate etc. In addition, this entrepreneurs are generally made up of illiterates who can not understand all the paperwork involved in applying for a loan. Also, the banks aren’t veritably agitated because of the fact that the credit deposited by them is so little compared to what’s deposited by guests in other big businesses. These problems and further needed the emergence of the MFBs.

Statement Of The Exploration Questions

therefore, the below problems raises the following questions

i) What are the nature of SMEs financing before the establishment of MFBs?

ii) What part does microfinance banks play in the growth of SMEs?

iii) What are the problems Microfinance banks faces in furnishing finance to SMEs?

iv) In what ways can the services rendered by microfinance banks be bettered upon to enhance the growth of SMEs?

Objects Of The Study

The broad ideal of this study is to examine the impact of microfinance banks on the growth of small and medium scale enterprises in Ilorin megalopolis. This specific objective include the following

• To examine the nature of SMEs financing before MFBs establishment?

• To examine the part of microfinance banks ’ in the growth of SMEs in Ilorin megalopolis.

• To examine the problems Microfinance banks face in furnishing finance to SMEs.

• To examine in what ways the services rendered by the Microfinance banks can be bettered upon to enhance the growth of SMEs.

Defense For The Study

A considerable number of literatures have been written on this subject matter both inside and outside the country( see Babajide, 2011; Olowe, 2013; Moradeyo, 2013; Babalola, 2013 and Agboola, 2012). To the government and policy makers, the study on the impact of microfinance banks on the growth of SMEs will enable them come up with programsi.e financial and financial programs to ameliorate the effectiveness of the SMEs. The result from this finding would enable the stakeholders to employ ways to ameliorate the donation of SMEs to the country. This exploration work will contribute to the literatures on the impact of microfinance on the growth of SMEs for the benefit of experimenters.

compass of the Study

This study covered microfinance banks and Small and Medium Scale Enterprises in Ilorin megalopolis because Ilorin megalopolis is a fast developing megacity where numerous Small and Medium Scale Enterprises are springing up and further microfinance banks are being established and also because of the convinience and low cost of carrying out the exploration work. This work covered the period of 5 yrs from time 2009- time 2013.

Five times is frequently used as a mark for survival by demographers( Alexander, Davern and Stevenson, 2010) to permit lesser balancing of statistical power of test( as cited in Babajide, 2011).

Thesis Of The Study

The thesis for this study is stated in null form as follows

There’s no significant difference between the places of microfinance banks and the growth of SMEs in Ilorin megalopolis.

There’s no significant difference between microfinance banks and the problems they face in furnishing finance to SMEs in Ilorin megalopolis.

The services rendered by MFBs have no significant difference on the growth of SMEs.

Description Of Terms

Microfinance Banks These are special banks established by the civil government to promote the growth and development of Small and Medium Scale Enterprises businesses.

Microfinance It’s the provision of a broad range of fiscal services similar as deposits, loans, payment services, plutocrat transfer and insurance to the poor and low income homes and their microenterprises.( Asian Development Bank, 2000).

SMEs Nigeria’s public Council on Industry; an SME is defined in terms of employment i.e. as one with between 10 and 300 workers.

Entrepreneurs This refers to the owner or proprietor of a intimately possessed business enterprise. The entrepreneur employs his capital in the business, manages the business coffers and takes the threat of business alone. He’s tone employedi.e he’s not employed by anyone but rather he employes others to work for him.

Retrogression analysis This is a statistical approach to soothsaying change in a dependent variable on the base of change on further independent variables.

Development An event constituting a new stage in a changing situation.

GDP( Gross Domestic Product) It’s the value of goods domestically produced in a country.

Growth An increase in size, number, value or stren ght.