THE ROLE OF COMMERCIAL BANK IN FINANCING SMALL SCALE INDUSTRIES
(CASE STUDY OF UNION BANK PLC)
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ABSTRACT
It is to review what essentially constitutes small scale industries for an adequate discussion of the issue involved:- financing of small scale industries by the commercial banks. Often, there is no single criticism for classification of business unit as small scale. The central Bank of Nigeria for example defines small scale enterprises as any enterprise whose annual turnover is less than (N 500,000) five hundred thousand Naira as small scale.
Furthermore the National Directorate of employment (NDE)defines it to include projects with capital investment of below five thousand Naira (N500) and a staff strength of three (3) persons. While the centre for management Development (CMD) gave the definition of small scale industry in the policy proposal it submitted to the federal Government in June 1982 as follow; “A small scale industry in a factory or production type of operations, employing up to fifty (50) full time workers. Investment in plant and machinery but excluding land and building shall not exceed five hundred thousand (N500,000) Naira power, plant and machinery are utilized its operations.
In a nutshell, a small- scale industries are classified in the following criterion; initial capital outlay, ownership structure, initial capital outlay, ownership structure, management style, profit level market share, number of employees and total assert size etc.
The objective of this project work will include the extent to which small scale industries in Nigeria have been able to obtain loans and advances from Nigeria commercial banks as a major source of finance to the economy and many others.
The project was carried out by using Union Bank PLC, Okpara Avenue, Enugu as a case study.
CHAPTER ONE
1.1 Background of study
1.2 Statement of Study
1.3 Objective of the study
1.4 Scope and limitation
1.5 Research questions
1.6 Hypothesis
1.7 Significance
1.8 Definition of terms
CHAPTER TWO
2.1 Introduction
2.2 Meaning of small scale industries
2.3 Government policy
2.3.1 Projection and promotion
2.3.2 Monetary and Fiscal policies adopted by government
2.3.3 Effects of Government Polices on small scale industries
2.4 Financing
2.5 Problems facing the small scale industrialists
2.6 Improving funding to small scale industries
CHAPTER THREE
3.0 Methodology
3.1 Research design
3.2 Area of the study
3.3 Population of the study
3.4 Sample and sampling procedure
3.5 Instrument for data collection
3.6 Validity of the research instrument
3.7 Reliability of the research
3.8 Method of administration of research instrument
3.9 Method of data analysis
CHAPTER FOUR
4.1 Data presentation and results
4.2 Testing Hypothesis
CHAPTER FIVE
5.1 Summary of Finding
5.2 Recommendation
5.3 Conclusion
5.4 Bibliography
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
The concept of self-reliance has occupied a place in the literature of economic development over the years, basically as a manifestation of the various attempts by the developing world to state new economic strategies, which world relieve them form economic dependence of their fromer colonial masters in Europe. Today, some years after, the concepts of self reliance continues to be misunderstood in its fundamental ramifications and has remained elusive in large sections of the developing world.
In Nigeria in particularly, neither the mixed economy approach to development nor the capitalist approach appears to have respond to the dictates of economic self reliance.
Consequently, in pursuit of self reliance in the developing world particularly in Nigeria, the central government, enacted a decree called ‘Enterprises promotion Decree, when there was need for small scale enterprises owned ad managed by Nigerians to be promoted.
The importance of small-scale enterprises in the promotion of economic development has always been at the forefront of development strategies.
However, many developing countries have failed to adopt this strategy owing to their belief that it is a relatively slow process of industrialization. But in the recent times, due to the scarcity of foreign exchange that attention began to be focused once again on development of indigenous that will be local resource based.
Without the development of small-scale industries in Nigeria, that nation’s quest for industrialization will certainly remain forever at a stake. It is the humble opinion of the researcher that future developments in our industrialization must address the basic issue of creating linkages within the economy to begin to produce real inputs to our manufacturing activities.
Priority attention must therefore be given to these industries for which domestic inputs could easily be produced. This automatically brings to mind the Agro-Allied industries like food processing and other by products objective should be to maximize the value added in their processing and manufacturing as final goods or immediate inputs.
Empirical evidence indicates that strong incentives should be given to small scale industrialist to enable them meet the food requirement and also to promote for sustained industrial growth. For instance, the market determined exchange rate through SFEM with its resultant high cost of imported inputs might serve as an impetus fro industrialist to intensify their search for local substitutes.
In 1971, the government of the then East central state statutory enacted an edict establishing on office which was hither to a sub-system of the ministry of commerce ad industry to be known as fund for small scale industry credit scheme (FUSI) to give credits for prospective investors to enable them establish their business in a bid to moving the country towards industrialization.
As at march 9th 1992, loans approved for small scale projects in Enugu State by Nigerian Bank for commerce and industry (NBCI) amounted to N13,345.40.
Similarly, in the circular on small scale and medium enterprises loan scheme released by central Bank of Nigeria in February, 1989, it was reveal that world bank has granted a loan of U.S. $270 million to the federal government for the development of small scale and medium scale enterprises in the private sector.
However, the very slow rate of growth of the industrial sector, the inability of the sector to adequately provide and satisfy the need of the economy, the over dependence of the industrial sector as well as the nation at large on foreign goods, praised a necessary cause for concern.
The means of helping small-scale industries to acquire the much-needed finance for growth and development especially form the banking industry from the background of this research study.