CHAPTER
ONE
INTRODUCTION
1.1
Background to the Study
It is
necessary to stress the point that to succeed in business require some measure
of discipline. Most industrialist expect to make a reasonable profit
from the investment of time and resources, that they have to make in other to
bring a project to fruition.
While this may sound simple enough, the bother line is
the fact in an economy wide context, the rate or level of reward that can
accrue to various level of effort, discipline and productivity should never be
allowed to get out of proportion in relation to effort put in.
Experience has shown that industrial pursuits have
been found to yield for the patient and disciplined industrialist rather than
stand for business concern with all kinds of effort mostly unproductive and
require no legitimate effort to reap profits in multiple fields.
After considering the above mentioned statement of
facts about industry. The question is how far are we from being
industrialized bearing in mind that it yields for disciplined and patient
industrialist, all things being equal.
Taking cognizance of the fact that a step forward is
the beginning of a mile. Some, therefore Nigeria’s business
industrial evolution will only start when positive steps are taken towards
adequate financing of small scale business. The experience of newly
industrialized countries has been an eye opener.
Finance is the greatest problem we are likely to face
whenever we talk of establishing a small scale industry. This is the
most crucial aspect of business business and a lot of controversy surrounding
the problem of inadequate finance. A close look on the small scale
industries/business, all over the country would help to throw further light on
the effect of lack of fund on growing business. The drastic effect
is mostly felt when one tries to study the rate at which our young industries
are gradually collapsing. Even surviving ones are terribly looking
for assistance that they are not sure of.
Funds are scare, hence the growing industries as
regarded in this part of the world as never-do-wells especially
Nigeria. When an economy is shaky, growing industries in that
economy tend to suffer most and usually stand the taste of
time. Hence, an increase in the number of causalities in this
regard.
The researcher aimed at exploiting the possibilities,
problems of financing small scale business/industries. The project
centers on management and financial problems
1.2 Statement of The Problem
The key problem facing most small scale business
is lack of finance whether for the establishment of new industries or to carry
out expansion plans. The inability to attract financial credit or resources has
hindered or stifled the growth of small scale business. The reasons for the
lack of fund include the followings:
·
High rate of inflation that led to the vast depreciation of
Naira exchange rate, thus making it difficult for most Small Scale business to obtain required inputs for
expansion.
·
Low level of savings in the economy, which leads to low
capital formation.
·
High rate of interest charged on loans, which scares off
potential Small Scale business.
·
The unwillingness of retail banks to grant credit to Small
Scale business because of the low
creditworthiness of these businesses has also hampered their growth over the
years.
Bothered by the persistent decline in the
performance of the industrial sector and with the realization of the fact that
the small and medium scale businesses
hold the key to the revival of the manufacturing sector and the economy,
the Central Bank of Nigeria successfully persuaded the Bankers’ Committee in
2000 to agree that each bank should set aside 10 percent of its annual pre-tax
profit for equity investment in small and medium scale business. To ensure the
effectiveness of the programme, banks were expected to identify, guide and
nurture businesses to be financed by the scheme. The activities targeted under
the scheme included agro-allied, information technology, telecommunications,
manufacturing, educational establishments, services, tourism and leisure, solid
minerals and construction. The scheme was formally launched in August 2001. As
at end-December 2009, the cumulative sum set aside by banks was N42.2 billion.
The sum of N28.2 billion or 67.1 per cent of the sum set aside had been
invested (CBN, 2009). But the fact still remains that with these provisions
made are in most cases not accessible to the Small Scale Industries.
The main thrust of this study is to evaluate the financial problems and
survival strategies of Small Scale business in Aguata Local Government Area of
Anambra State.
1.3
Purpose of the Study/Objective Of The Study
The purpose of this study is the
financial problems of small scale business and specifically, the study seeks to
i.
To ascertain if the financing options available to the SSE
are practically obtainable to support the capital required for their operation.
ii.
To examine the extent to which Small Scale business
contribute to economic development.
iii.
To identify the problems they encounter in sourcing out
funds.
iv.
Identify survival strategies needed by Small scale
industries.
1.4
Research Questions
This
study was guided by the following research questions:
1.
What are the various sources of funds available to the
small business ?
2.
To what extent do small scale business contribute to towards
economic development of a nation?
3.
What are the problems encountered by the small scale business
in sourcing for funds?
4.
What are the survival strategies to be adopted by the small
scale business?
1.5
Statement Of The Research Hypothesis
The following null hypothesis was
given for this study
i.Ho:There is no significant relationship between the source of fund
available to small scale business and the funds available to them.
Hi: There no is significant relationship between the source of fund
available to small scale business and the funds available to them.
ii.Ho: There is no significant relationship between the development of
small and medium scale industries and the economic development of that nation.
Hi: There is significant
relationship between the development of small and medium scale industries and
the economic development of that nation.
iii.Ho:There
is no significant relationship between the problems encountered by the small
scale business in their source of funds.
Hi
:There is significant relationship between the problems encountered by the
small scale business in their source of funds
iv.Ho:There
is no significant relationship between the survival strategies adopted by the
small and medium scale industries and the survival of small and medium scale business.
Hi.
There is no significant relationship between the survival strategies adopted by
the small and medium scale industries and the survival of small and medium
scale business.
1.6
Scope Of The Study
This research covers the area of financing of small-scale businesss
in Nigeria, paying special attention to Aguata Local government Area of Anambra
State.
1.7
Significance of the Study
Small-Scale Businesses in Africa rely largely on own savings, not only
to grow but also to innovate, firms often need real services support and formal
finance assistance. This study will be of benefit to the operators of the Small
and Medium Business, the government, and the general public on the possible
financing options and survival strategies available to the Small and Medium
Scale business and give the possible means of accessing them
1.8 Limitation of the Study.
Some factors may limit the level of accuracy and reliability of this study.
Such factors include.
i. Difficulty in obtaining data.
ii. Low response rate from involved parties.
In the absence of the above mentioned limitations, all other errors and
omissions are entirely those of the researcher
1.9 DEFINITION OF TERMS
PRODUCTION: Any business
oriented action which aimed at converting input into output of
goods
or services.
INVESTMENT: The outlay of money
for income or profit the sum invested in business or the property purchased.
CAPITAL: Accumulated
wealth especially when used to produce more wealth.
STRATEGY: This
is the firms action plan aimed at achieving its objectives, satisfying the need
of the customers and surviving the competition in its environment.
FEASIBILITY STUDY: This is the finding aimed at
determining the business profit potential and return on investment.