SME FINANCING AND ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

 GENERAL INTRODUCTION

1.1BACKGROUND OF
THE STUDY

Small and
Medium Scale Enterprises (SMEs) are the backbone of every economy and are key
source of economic growth, dynamism and flexibility in advanced industrialized
countries, as well as in emerging and developing economies. SMEs constitute the
dominant form of business organization, accounting for over 95% and up to 99%
of enterprises depending on the country (Osagie 2004:25). They are responsible
for between 60-70% net job creations in less-developed or developing countries.

While not
every small business turns into a multinational, they all face the same issue
in their early days – finding the money to enable them to start and build up
the business. It is harder for them to borrow money from banks or finding
private investors than for larger firms.

Microfinance
institutions are semi-formal organization and a subset of flexible structure
and systems which provide a wide range of financial and saving needs of small
scale enterprises in developing countries where top-town formal financial
institutions have failed to address the credit need of the real sector of the
economy.

Hence, the
intention of this research is to undertake a survey of financing options for
small and medium scale enterprises in Sokoto State.

1.2STATEMENT OF
THE RESEARCH PROBLEM

Small and
Medium Scale Enterprises (SMEs) in Nigeria have not performed creditably well
and hence have not played the expected vital and vibrant role in the economic
growth and development of Nigeria.

This situation
has been of great concern to practitioners and the organized private sector
groups as well as non-governmental organizations. For the purpose of this
research work, the research questions are:

a.                
What extent does financing
of SMEs affect economic growth of Sokoto

State?

b.                
Does small and medium
scale enterprises stimulate economic growth? 

c.                 
Does microfinance
loan to small and medium scale enterprises actually leads to high
effectiveness. 

d.                
Does SMEs access
capital loans from microfinance institutions.

1.3OBJECTIVE OF
THE STUDY

Every
research work should have objective(s) upon which it is being undertaking. This
study attempts to examine the financing of small and medium scale enterprises
for economic growth. The objectives of the study are:

a.                
To determine whether
SMEs stimulates economic growth

b.                
To investigate the
extent to which financing of SMEs affects economic growth in Sokoto State. 

c.                 
To investigate
whether microfinance loans to SMEs actually leads to high effectiveness. 

d.                
To find out whether
SMEs are able to access capital loans from micro

institutions. 

1.4RESEARCH
HYPOTHESES

These
are tentative statements that test the validity of the research questions. For
the purpose of the research work, the following hypothesis would be considered.

The
significance of the research work is to add to the general body of knowledge.
The research would serve as a reference literature for students of management
especially students of business administration and banking and finance.

However the
research also serves as a guide to the government in order to access how SMEs
promotes economic growth. It also serves as a guide to SMEs operators on how
they could access different sources of loans to finance their activities.

The research
also serves as a guide to banks and other financial institutions of the various
types of loans that could be given to SMEs practitioners.

1.6SCOPE OF THE
STUDY

The scope of
the research is limited to Sokoto State metropolis. This is to enhance accurate
and reliable data in order to achieve the objective of the study.  Small and medium enterprises would be
scontacted in Sokoto State metropolis.

1.7CHAPTER SCHEME

The research
work comprised five chapters. The chapter one is the general introduction of
the research work. It discuss the background of the study, statement of the
research problem,  objective of the
study, research hypothesis, significance of the study and scope and limitations
of the study.

Chapter two of
the research is the literature review. It discusses the various definitions
given by different scholars on the subject matter, their sources of finance and
the challenges faced by SMEs in accessing finance.

Chapter three
is the research methodology. It explains the research design to be adopted, the
population, the sample size and the sampling techniques, data collection method
and the data analysis technique.

Chapter
four is the data presentation and analysis. It explains how the data collected
are presented and analyzed. It also explains the hypothesis

testing. 

Chapter
five is the final and concluding chapter of the research work.

summarized the entire
research work, proffers recommendation and concludes the research work.