1.1
BACKGROUND OF THE STUDY
Government
are often seen making so many efforts in developing the small and medium scale
enterprises(SMSE), this enormous effort stem from the fact that the activities
of the SMSE contribute enormously to the gross domestic product, employment
generation and manpower development of the country.
It should be noted that there is no consensus
or acceptable definition of small-scale enterprise, as each author defines it
on his own perspective of what is “small” or “big” what is consider “small” to
Mr. “A” may be “big” to Mr. “B” vice versa some people would undoubtedly consider
all businesses that had not more than a specified number of employees (5 to 10)
to be small, others would believe that a small business is one that operates
only in the local area, and still others would classify business as small by
the kind of firm such as the local drug store, dress shop, neighborhood store
or shoe-makers at the street (Ile, 2001; Nwuzor,2012).
However,
small-scale enterprise is an enterprise that has relatively little capital
investment that produce in small quantities and as a result control a small
share of the market that employ not more than fifty (50) workers and in which
management, marketing and entrepreneurial functions are vested in the
proprietor small-scale enterprise is characterized by independent management,
no much specialization because the proprietors handles or supervises the
financing, production and personnel issues of the enterprise.
Unfortunately, despite the numerous
roles small-scale enterprises play in the economic growth and development of a
nation, the effectiveness of small-scale enterprises is still being undermined
by many factors, which have adverse effect on their roles to economic growth
and development. Some of these factors (problems) include: under-capitalization
(problem of finance), poor record keeping, poor business accountability, poor
or wrong location, poor planning, lack of experience, poor management,
inadequate credit control, poor inventory control, disaster, inadequate
infrastructural facilities, lack of skilled manpower among others.
Among the above identified problems,
the problem of finance seems to be the greatest problem. Many of the
small-scale enterprises are under-capitalized. They have limited resources of
finance and this creates the problem of not buying merchandize independently at
best price, in adequate quality and quantity. The inability to attract
financial credit has stifled the growth of small-scale enterprise. Commercial
banks which were expected to be the launch-pad for the development of
small-scale enterprise through the provision of loans have failed to give
adequate support to them. Stiff collateral security demanded by banks offer
means that small-scale industrialist is unable to meet these provisions,
consequently losing the chance to obtain loan. In addition, high interest rates
charged on loans have scared off potential small-scale entrepreneurs. The
problem of financing small-scale business, calls for urgent state and federal
(national) attention.
1.2 STATEMENT
OF PROBLEMS
Small-scale
enterprise plays very important roles in the economic growth and development of
a nation. It provides employment opportunities, encourages and sustains
self-reliance, provides technical inventions and innovations promotes
competition in the market which acts as a check in the activities of
monopolists, utilize waste product from big firm for further production.
It is quite unfortunate that despite
the numerous roles which small-scale enterprise plays in the economy, its
operation have not been effective owing to problem of finance. The problem of
finance facing small-scale enterprise is in three dimensions, namely; the need
for start-up capital, the need for working capital, and the need for expansion
capital.
Thus,
in the course of carrying out the research work, the following research
questions ware addressed to include;
1.
How
does lack of finance affect the effectiveness of small-scale enterprise?
2.
Does
lack of accountability affect the effective operations of small-scale
enterprise?
3.
Is
poor financial management a problem to small-scale enterprise?
4.
Does
incompetence of management undermine the effectiveness of small-scale
enterprise?
5.
Is
there any hope of adequate finance for small-scale enterprise?
1.3 OBJECTIVES
OF THE STUDY
The main purpose of the study is to examine the
problems and prospects of financing small-scale enterprise. Specially, the
study is designed to:
1. Examine
the problems of financing small-scale enterprise.
2. Find-out
the sources of finance available to small-scale enterprise.
3. Ascertain
the prospects of financing small-scale
4. Examine
the strategies for improving the effectiveness of small-scale enterprise.
1.4 HYPOTHESIS
OF THE STUDY
In
the course of this research, the following research questions will guide the
researcher in carrying out the research work.
1.
H1:
lack of finance is a problem to small-scale enterprise.
Ho: lack of
finance is not a problem to small-scale enterprise.
2.
H1:
High interest rate charged on loans by banks is a problem of financing
small-scale enterprise.
Ho : high
interest rates charged on loans by banks is not a problem of financing
small-scale enterprise.
1.5 SIGNIFICANCE
OF THE STUDY
Enterprise
is one of the features of economic development and growth. The role of
small-scale enterprises in Nigeria cannot be overlooked, in the sense that
small-scale enterprise has played a vital role in the development of our
economy, in the developing countries like ours (Nigeria).
This research work would form an
avenue for providing information for both present and potential small-scale
enterprises because of the variius avenues available to them for developing
their human and material resources for the over the well-being of the national
economy. Finally, this research work would serve a useful guide to students
also that are in economics, business management and other related courses to
use it as a reference material. And also it will encourage entrepreneurs to
keep proper accounting records to ascertain the financial position of their
enterprises.
1.6 SCOPE
AND LIMITATION OF STUDY
This
research work is restricted to ascertain the problems and prospects of
financing small-scale enterprises in Nigeria using Bida local government area
of Niger state as a case study. It should also be noted that this research work
is not only limited to identifying the problems but also aimed at suggesting
possible solutions were necessary. This research work is undertaken to examine
the problems of financing small-scale enterprise, to ascertain the prospects of
financing small-scale enterprises, as well as examining the strategies for
improving the effectiveness of small scale enterprise. A number of constraints
were encountered in the quest of this research work.
These
limitations include:
1. TIME CONSTRAINT: The time required for this study is just not enough.
This is because the research work is being done at the same time when serious
academic work goes on in the school.
2. FINANCIAL CONSTRAINT: Limited funds posed a serious problem to this study,
it manifested in the form of high transportation cost, high cost of typing and
photocopying and other expenses.
3. DATE CONSTRAINT: Data collection imposed serious problems due to delay
encountered on most of the institution on data publication needed for this
research work.