CHAPTER TWO: INSTITUTIONS IN MICRO AND SMALL AGRO – ALLIED PROCESSING ENTERPRISES: IMPLICATIONS FOR POVERTY ALLEVIATION IN EBONYI STATE, NIGERIA.

2.0             Literature Review and Conceptual Framework
2.1       Introduction:

That Micro/Small and Medium Enterprises (MSMEs) have become the engine room of economic growth is a fact that cannot be disputed. That MSMEs have the seemingly answers to the ailing economic situation in the third world is a fact that has been established in countries like Pakistan, Thailand, Mauritius, Philippines, Malaysia, India and Taiwan (Akinlami, 2006).


Having established the inevitable nature of small businesses to the economic growth of the third world countries, the question is, what role do institutions play in enhancing the effect of micro/small agro – allied processing enterprises on the economic empowerment and poverty alleviation in Nigeria as a whole and Ebonyi State in particular.

Infrastructural development is strongly connected to the growth of MSMEs and their ability to contribute meaningfully to the overall economic development of the nation. Access to financial services enables poor households to move from everyday struggle for survival to planning for the future, investing in better nutrition, health and their children’s education. It empowers women socially. Lending to MSMEs is not just desirable but equally profitable. Micro finance programmes provide loans, savings and other financial services to low income and poor people for use in small businesses, build assets, stabilise consumption and shield themselves against risk. Micro finance is acknowledged as one of the prime strategies to achieve the Millennium Development Goals (MDGs). Education is a necessary condition for manpower development. It has been made compulsory in primary and secondary schools in Ebonyi State and there is need for the formation of cooperatives among school leavers as entrepreneurs in micro/small agro – allied processing enterprises. They should be encouraged and assisted to invest in the food sector through easy assess to land and credit guarantees, assistance in locating national and international markets. Government and Non – Governmental Agencies (NGOs) should sensitise the people of the need to embrace modern food processing and preservation technologies as simple and viable avenues for economic empowerment and poverty alleviation.

It is in realization of the fact that MSMEs remain the most viable tool through which the required economic growth can be achieved and sustained that the Federal Government of Nigeria established Small and Medium Enterprises Development Agencies of Nigeria (SMEDAN) to serve as a vanguard agency for rural industrialization, poverty reduction, job creation and enhanced sustainable livelihood (Adelaja, 2006). For comprehensive study, literature is reviewed on issues bordering on institutions as they relate to micro/small agro – allied enterprises establishment and development and its implication on poverty alleviation.


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Literature review covers the under listed areas:
-               Concept of Micro and Small Enterprises Development.
-               Policies for revitalizing the Industrial Sector.
-               Definition of Micro, Small and Medium Enterprises.
-               Definition and Importance of Agro – Allied Enterprises.
-               Characteristics or Features of Micro/Small Enterprises.
-               Contribution/Importance/Potentials of Micro and Small Enterprises.
-               Definition and Concept of Institutions.
-               Institutions and Micro/Small Enterprises Development.
-               Problems/Constraints/Challenges confronting Micro/Small Enterprises Development.
-               Women and Micro/Small Enterprises.
-               Financial Institutions and Micro Finance for Micro/Small Enterprises Development in Nigeria.
-               Micro Finance for Micro/Small Enterprises.
-               Definition and Concept of Poverty.
-               Agro – Allied Enterprises and Income Generation.
-               Strategies for Poverty Reduction.
-               Industrialization process in Ebonyi State Food Sector.
-               Conceptual Framework.
-               Explanation of Conceptual Framework Organigram.


2.1.1   Concept of Micro and Small Enterprises Development:

Micro and small enterprises have been fully recognised by government and development experts as the main engine of economic growth and a major factor in promoting private sector development and partnership. MSMEs have been acknowledged as the springboard for sustaining economic development. They do not only contribute significantly to improved living standards, they also bring about substantial local capital formation and achieve high level of productivity and capability (Adelaja, 2004).


Udechukwu (2003) stated that MSEs are increasingly recognized as the principle means for achieving diversification and dispersal and in most countries, they account for over half of the total share of employment, sales and value added. Oyekanmi (2003) stated that it is generally accepted that micro, small and medium enterprises pay a key role in economic growth and industrialization in both developed and developing countries. The case of the – Asian Tigers is a reference point, where the Asia countries made concerted efforts to develop their micro, small and medium enterprises resulting to enhanced economic stability and poverty reduction.

Experts often draw symbiotic and important relationship between large, medium, small and micro businesses in promoting and sustaining economic growth. The interdependence of the sector provides the backward and forward linkages, which an economy needs for self-dependence and sustenance. In the advanced economies, this symbiotic relationship is so developed that the sectors extensively depend on each other for survival. In Japan for instance, about 70% of the value of exports of large firms is the products of SMEs (ADCG, 2000). Linkages are important in any economy and that is why most countries attempt to promote all the sectors for rapid economic development. A major gap in Nigeria’s industrial development process in the past years has been the absence of a strong and virile micro/small and medium enterprises sub-sector. The little progress recorded by the first generation of indigenous industrialists were almost completely wiped out by the massive dislocation and traumatic devaluation which took place under the Structural Adjustment Programme (SAP) (Federal Ministry of Industry – 1996).

With over 120 million people, productive farmland, rich variety of mineral deposits, Nigeria should be a haven for micro/small and medium industries. However, like most less developed countries, the country is witnessing a rapid population growth and this contracts with the less than average rate of development in communication, technological and social infrastructure. Instability and high turn over have impacted negatively on the performance of primary institutions responsible for policy monitoring and implementation, resulting to distortions in the macro economic structure and low productivity. These problems constitute hindrance to the development of micro/small and medium enterprises.

Udechukwu (2003) affirmed that the world has been transformed into a global village through the dismantling of trade and other barriers. Consequently, MSMEs in developing countries are struggling to survive under intense domestic and international competitive environment.

In developing country like Nigeria, it becomes imperative to provide the required enabling environment for the development of MSMEs so that they could adequately play the role expected of them in economic transformation and poverty alleviation. This could be made possible through a responsive industrial policy and government’s overall economic development strategies that will ensure the collaboration of all development partners and the effective coordination and utilization of economic resources.

2.2             Policies for revitalizing the Industrial Sector:
The Nigerian economy, at the inception of the present democratic government in May, 1999, was in a deplorable and pathetic state. The sector witnessed slow but steady “de-industrialization” of the economy with capacity utilization falling to the level of below 30% on the average, a large inventory of unsold stock and outright closures or relocation of many manufacturing plants to other countries (Jamodu, 2004).

Jamodu (2004) equally stated that the Federal Government embarked on new policy measures with pragmatic incentive schemes and institutional restructuring to revitalize the sector. The specific objectives were to improve the investment climate and reduce the costs of doing business in Nigeria, resuscitate sick and comatose industries and ultimately to enhance capacity utilization and competitiveness of Nigerian Industries.

The main elements of these policy measures include the following:
-               Adoption of liberal and market-oriented economic policies.
-               Stimulation of increased private sector participation in Nigerian economic development through privatization.
-               Resuscitation of ailing public sectors to enhance their efficiency and productivity prior to their eventual privatization.
-               Significant improvements in infrastructural facilities (roads, water, electricity and telecommunication) in order to enhance the quality of their service delivery.
-               Extension of the Natural Gas Pipeline Grid further into the land to encourage increased utilization of this vital resource which is already being processed into fertilizer in energy source and power generation in some parts of the country.
-               Tariff structure reforms in favour of local manufacturers in order to reduce the cost of doing business in the country and boost domestic production.
-               Reforms in port operations, especially through the introduction of 100% inspection of goods at the ports, which have had tremendous and positive effects as a check against the perennial problems of under-invoicing, smuggling and other forms of international trade malpractices.
-               Sanitizing of the banking sector leading to the adoption of universal banking and some decrease in interest rate.
-               Re-orientating, equipping and empowering law enforcement agents cope with the challenges of ensuring security of lives and property as well as maintenance of law and order in the country.
-               Total commitment to transparency, accountability and due process in the conduct of government and corporate business.
-               Renewal of political and economic cooperation with various countries of the world, as well as signing of Investment Promotion Agreements (IPPA) with a number of countries to assure foreign investors of the safety of their investments in Nigeria.
-               Establishment of the Bank of Industry (BOI) limited with an authorized capital N50billion to provide industrial development finance at affordable rates for;
i.              Projects that have large transformation impact through forward and backward linkages.
ii.           Projects that utilize domestic input.
iii.         Projects that generate huge employment and
iv.         Projects that produce quality products for export market.
-               Establishment of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) as an agency with the mandate to coordinate and support the development of Small and Medium Industries in the country.
-               Strengthening the capacities of the Standards Organization of Nigeria (SON) and National Agency for Food, Drug Administration and Control (NAFDAC).
-               Expansion of the standardization and quality control programme to cover Small and Medium Enterprises (SMEs) with a view to making them competitive in the globalised world economy.
-               Control and prevention of sub-standard, poor quality and fake drugs and food items.
-               Facilitating the establishment of Small and Medium Industries Equity Investment Scheme (SMIEIS) by the Bankers Committees through the setting aside of 10% of their pre – tax profit, for equity and dividends and packaging of new incentives, ranging from tax holiday to export promotion incentives.
-               Adoption of new definitions classifying Small and Medium Enterprises (SMEs) into Cottage/Micro, Small and Medium Enterprises based on capital investment and or number of labour employed. This is informed by the realization that they require varying support services and modified strategies, facilities and intervention instruments in order to effectively address their structural peculiarities and varying technical, economic and socio-cultural characteristics and constraints.
-               Upgrading and repositioning of the Industrial Development Centres (IDCs), which are specialized SME support institutions providing a combination of services involving advisory/consultancy and extension services, training for skill acquisition and entrepreneurship, technology adaptation and information services.

Jamodu (2004) noted that commitment of the present administration in Nigeria to the development of SMEs as a veritable vehicle for promoting poverty eradication, job creation, rural industrialization/development and sustainable livelihood has been recognized by the World Association for Small and Medium Enterprises (WASME) with an Award which was presented to the Federal Ministry of Industry, on behalf of the country, at the World Convention of SMEs held in China in September, 2002.

It is the policy of the Federal Government to patronize “Made – in – Nigeria” products. Local manufacturers have been geared up in support of this policy. For instance, the Federal Government has directed that all uniforms and accoutrements in use in the public sector be sourced – locally. Furthermore, Government has approved a list of locally produced items that Government Ministries and Agencies should patronize to encourage the use of “Made – in – Nigeria” products. The items include: vegetable oil, soap/detergent, biscuits, pastries, garments, printed textiles, leather sandals/belts, boots, factory/rain boots, ladies hand bags, pharmaceutical products, beverages and vehicles.

While the key elements of our new industrial policy are similar and compatible with what obtains in other emerging economies particularly the “Asian Tigers”, a closer study of these countries has shown a pattern of new initiatives in their support systems and programmes for industrial development. In these countries (India, Malaysia, Singapore, Thailand, China) each of the key elements of their industrial policies is being promoted by combinations of well focused and targeted financial packages and incentive facilities with appropriate institutional support mechanisms to ensure their effective and efficient administration.

Government therefore considers the industrial sector as one of the key sectors upon which future economic growth and sustainable development will depend. In order to encourage investments in industry, government abrogated those policies that tended to impede private investment, especially foreign investment in manufacturing. Some of the abrogated policies include import controls ban and quotas, indigenisation and excessive regulation of foreign investment.

As part of the national policy on industrial development, a number of incentives have been provided by Government to stimulate investment and encourage entrepreneurs in manufacturing activities. These include:

2.2.1   Status:            This provides 100% tax holiday for a period of five years for approved pioneer industries considered beneficial to the economy. These industries/products include the following; Cultivation, processing and preservation of food crops and fruits, mining and processing of barites, betonies and associated minerals, manufacture of cement, tools, pulp and paper, pharmaceuticals, gas, flat sheets, food and fruits concentrates; large scale inland fishing farms, minerals, oil prospecting and production.

2.2.2   Raw Materials Utilization:            A 30% tax concession for five years is granted to industries that attain the following minimum local raw material utilization level.

Industrial Sector

Minimum Level

Agriculture

80%
Agro – allied
70%
Engineering
60%
Chemical
60%
Petrol Chemical
70%

2.2.3   Infrastructure:         This incentive is granted to industries that provide facilities that ordinarily should have been provided by Government. Such facilities include: access road, pipe borne water and electricity.  Twenty percent of the costs of providing such infrastructure is tax deductible once and for all.

2.2.4   Investment in Economically Disadvantaged Areas: 100% tax holiday for 7 years and additional 5% depreciation allowance over and above the initial capital depreciation are applicable.

2.2.5   In – Plant – Training:         This involves 2% tax concession for 5 years of the cost of facilities provided for training.

2.2.6   Local Value Addition:        10% tax concession for 5 years is granted essentially to engineering industries where some finished imported products serve as inputs. The concession is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down (CKD) parts.

2.2.7   Export – Oriented Industries:                   10% tax concession for 5 years is granted to industries that export not less than 60% of their products. Additional incentives, such as duty – free importation of machinery and raw materials, are also provided for export – oriented industries located in various Export Processing Zones (EPZs) in the country.

2.2.8   Research and Development (R & D):       120% of the expenses on Research and Development (R & D) are tax deductible, provided the R & D is carried out in Nigeria. In case of R & D on local raw materials, 140% is allowed.

2.2.9   Abolition of Excise Duty:   In order to boost local industries, stimulate trade and reduce cost of doing business in Nigeria, Government abolished the payment of excise duties in the country with effect from 1st January, 1998 except alcohol, spirits and tobacco.

In line with contemporary development efforts, Jamodu (2004) asserted that the Ministry of Industry is introducing new initiatives to achieve industrialization agenda. In this regards, a framework to establish a National Credit Guarantee Scheme for SME financing is already packaged. A study for the promotion of SME clusters, Networks and Linkages (vertically and horizontally) is also in progress. The Ministry intends to re-launch Entrepreneurship Development Programme (EDP) and Rural Industrialization Programme among the main activities of SMEDAN. In recognition of the role of the Organised Private Sector (OPS) as a veritable platform for the transformation of the industrial sector, consultants with members of OPS particularly Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce Industry, Mines and Agriculture (NACCIMA) and Nigerian Association of Small Scale Industrialist (NASSI) etc have been strengthened because the cooperation, active participation and collaboration of the private sector with government is indispensable for accelerated industrialization in Nigeria.



2.3       Definitions of Micro, Small and Medium Enterprises:
There is no universal definition of micro, small and medium scale enterprises. Each country tends to derive its own definition based on the role MSMEs are expected to play in that economy and the programmes of assistance designed to achieve that goal. Varying definitions among countries may arise from differences in industrial organizations at different levels of economic development. Sule (1986) noted that a firm that can be regarded as micro or small in an economically advanced country like the United Stats of America or Japan, given their level of capital intensity and advanced technology, may be classified as medium or even large in developing countries like Nigeria and Ghana. Definitions also change over time owing to changes in price levels, advances in technology or other considerations. Even in the same country, different institutions may adopt different definitions, depending on their policy focus. The criteria that have been used in the definitions include capital investment (fixed assets) annual turnover, gross output and employment.

In 1992, the National Council on Industry streamlined the various definitions in order to remove ambiguities and agreed to revise them every four years. At the 13th council meeting of the National Council on Industry held on July 2001, Micro Small and Medium Enterprises (MSMEs) were defined by the council as follows:

·        Micro/Cottage Enterprise (Industry): An enterprise (industry) with a labour size of not more than 10 workers or total cost of not more than N1.5million, including working capital but excluding cost of land.
·        Small – Scale Enterprise:  An enterprise with a labour size of 11 – 100 workers or a total cost of not below N1.5million and not more than N50million, including working capital but excluding cost of land.
·        Medium – Scale Enterprise:  An industry with a labour size of between 101 – 300 workers or a total cost over N50million but not more than N200million, including working capital but excluding cost of land.
·        Large Scale: An industry with a labour size of over 300 workers or a total cost of over N200million, including working capital but excluding cost of land.

Based on nuanced assessment of existing national perspectives on the taxonomy of MSMEs, the National Policy on MSMEs adopts a classification based on dual criteria; Employment and asset (excluding land and Buildings) as follows:

Size Category
Employment
Asset N Million
Micro enterprises
Less than 10 persons
Less than 5 Million
Small enterprises
10 – 49 persons
5 – less than 50 Million
Medium enterprises
50 – 199 persons
50 – less than 500 Million
Large enterprises
200 and above persons
500 and above

Source:  UNDP/SMEDAN National Policy on MSMEs (2006).

2.4       Definition and importance of agro – allied (based) enterprises:
The term “agro – allied” or “based” is used to connote any industrial activity, which is related to Agriculture. They employ the use of agricultural raw materials in the course of production or supply its semi-finished products as raw materials to other industries. They therefore depend on Agriculture for their sustenance.

Olayide et al (1981) defined enterprises based on crops, livestock, forestry and fisheries as agro – based or allied industries. They either supply the means of production to Agriculture or they process the raw materials produced by agriculture. Consequently, agro – based industrialization necessitates the integration of the agricultural production, which supplies the raw materials from agriculture and the appropriate industry – skill and technology which process the same.

Agro – based industries could be grouped into forward linkage and backward linkage. The forward linkage industries are those which process agricultural raw materials into semi – finished products for consumption (e.g. alimentary, textile, sawmill, flourmill etc) while backward linkage agro – based industries are those which manufacture agricultural inputs needed for further productions (e.g. Agro – chemicals, fertilizers, fish nets, farm machinery or equipment etc.). Agro – based industries have a dual relevance, first is the additional employment they provide and secondly is their tendency to lead to an increased demand for farm products. They therefore act as stimuli to farm production. Through the establishment of agro – based industries, rural – urban migration would be reduced considerably because rural standard of living will be raised. The progress of agro – based industries depends on agricultural growth that is sustainable to supply the raw materials for processing. There is urgent need for governments intervention to ease problems posed by traditional land tenure systems, which make land acquisition for modern agriculture difficult. Ukpong (1993), suggested that state governments should assist corporate bodies or cooperatives in acquiring large parcels of agricultural land for large-scale agriculture aimed at enhancing agro – industries development in the nation.

Agro – industries are involved in the transformation of raw agricultural products into a state that is edible through processing. Modern food processing does not only permit the sale of most food items all year round but enables adequate supply of food to be made available to places far away from area of production. Processing reduces waste that is associated with glut during harvest and scarcity that is witnessed during pre- and post – harvest. The establishment of relevant agro – industries to process agricultural produce would achieve a dual purpose of food preservation and value addition for more utility and possible export.

Enwere (1998) noted that processing results in new food products that substitute for less efficient traditional food, making for better management and more efficient utilization of the food supply.

The availability of food in adequate quantity and quality all year round is the aim of National Programme on Food Security. The target focuses on enhanced food production, processing as well as storage, distribution and marketing.

Agro – allied activities as non – farm activities therefore complement agriculture providing gainful employment and increased income to the people and form economic linkages with the farm. According to Bhalla (1992) micro and small scale rural non – farm activities remain an important source of income and livelihood for a sizeable proportion of the rural population. Alimba (1995) also noted that researchers and policy makers in Nigeria have recognized the importance of stimulating rural non – farm activities due to several forward and backward linkages that exist between agriculture and non – farm activities.

Any country that therefore desires economic greatness must develop its micro and small agro – allied enterprises sub – sector because they play a vital role in stimulating production, employment and economic development thus reducing poverty.

2.5       Characteristic or features of Micro/Small Enterprises:
One of the commonest features of micro/small enterprises is that they are either in sole proprietorship or in partnership. They have simple management structure resulting from the fusion of ownership and management by one person or very few individuals. MSEs tend to strongly revolve around the owner – manager rather than as a separate corporate entity. There is often greater subjectivity in decision taking prevalence of largely informal employer–employee relationships.

According to Udechukwu (2003), partnership spirit in Nigeria is at its infancy, thus partners in many micro/small enterprises pursue individualistic goals at the expense of the overall interest of the MSEs. Consequently, mortality rate among MSEs is high as a result of mistrust that often develops among the owners.

Most MSEs have labour intensive production processes, centralized management and have limited access to investment capital. As a result, they are restricted in their ability to improve machinery or raw materials. They use essentially local raw materials with local technology.

Micro and small enterprises suffer from very poor inter and intra–sectoral linkages. They therefore lose the benefits synonymous with economics of large-scale production.

Adebusuyi (1997), stated that many micro and small scale entrepreneurs lack the appropriate management skills and adequate capital thus resulting to low productivity, poor product quality with serious consequences on market acceptability.

Small business according to Yska (1998) is beset with failure. Large number of micro/small enterprises fail within the first 12 months. In order to be successful, the entrepreneur requires access to business, technical, marketing and financial advice, training and credit, plus on-going support from mentoring business network etc.

Adelaja (2004) summarized the characteristics of cottage/small enterprises as follows:
·        Set – up requirement not cumbersome
·        Less capital outlay
·        Non – complex technology
·        More of proficiency and not school qualification required
·        Practical application
·        Little theoretical application
·        Rapid proliferation and easy adoption
·        Low cost of production
·        Affordable pricing among others

2.6       Contributions/Importance/Potentials of micro and small enterprises:
By their nature micro and small enterprises constitute the most viable and veritable vehicle for self – sustaining industrial development. From varied experiences especially in developing countries, MSEs possess enormous capability to grow as indigenous enterprise culture more than any other strategy. It is therefore not unusual that MSEs are generally synonymous with indigenous businesses wherever they exist. Micro and small enterprises in most developing economies represent the sub – sector of special focus in any meaningful economic restructuring programme that targets employment generation, poverty alleviation, food security, rapid industrialization and reversing rural – urban migration. In essence “SMALL IS PROFITABLE IN AFRICA” as UNIDO rightly describes the immeasurable contribution of MSEs to the economics of many African countries (Udechukwu, 2003).

Olorunshola (2003) summarized the importance as follows: They provide an effective means of stimulating indigenous entrepreneurship, create greater employment opportunities per unit of capital invested and aid the development of local technology. Through their wide dispersal, they provide an effective means of mitigating rural – urban migration and resources utilization. By producing intermediate products for use in large – scale enterprises, they contribute to the strengthening of industrial inter – linkages. Small enterprises are known to adopt with greater ease under difficult and changing circumstances because their typical low capital intensity allow products lines and inputs to be changed at relatively low cost. They also retain a competitive advantage over large enterprises by serving dispersed local market and produce various goods with low scale economics for niche markets. They also serve as veritable means of mobilization and utilization of domestic savings as well as increased efficiency through cost reduction and greater flexibility.

Udechukwu (2003) asserted that contrary to the general impression, MSMEs are as much as important economic catalyst in industrialized countries as they are in the developing world. In many developed countries, more than 98% of all enterprises belong to the micro, small and medium enterprise sector. 80% in the total industrial labour force in Japan, 50% in Germany and 46% in USA are employed in smaller firms. Many studies have indicated that the revival of interest in Micro, Small and Medium Enterprises in the developed economies is due to technological as well as social reasons. The growing importance of knowledge and skill – based industry as against material and energy – intensive industry. The social reasons include the need of generation of more employment through self – employment ventures and decentralized work centers. Almost every country provides assistance to micro/small scale enterprises. The emphasis is more on facilities and supportive services than on protection and subsides.

Obiora (2004) asserted that micro/small enterprises development is a MUST for economic development of the developing third world. Their contribution to any economy includes among other, the following economic, social and political benefits.





Economic benefits:
·        Creation of employment opportunities for the citizenry.
·        Improvement in productive base of the economy through utilization of local resources.
·        Maximizing productive capacity of factors of production.
·        Exploring the full potential of the economy and wealth creation.
·        Generating raw materials for local use and possible export.
·        Expanding the export base for both locally produced raw materials and finished goods.
·        Improvement in the country’s Gross Domestic Product (GDP) and Gross National Product (GNP).
·        Stimulating domestic production efficiency.
·        Stimulating competition in the domestic market to ensure fair pricing.
·        Providing relief for productivity deficit (balancing of payment on Export and Import).

Social benefits:
·        Reduction in idle or unemployed people.
·        Reduction in social ills and crime.
·        Improvement in quality of life for the citizenry etc.



Political benefits:
·        Restoration of public confidence resulting to political stability.
·        Stimulation of foreign investment as a result of confidence from international community etc.

Adelaja (2004) summarized the roles of micro/small enterprises in the development of rural economy as follows:
·        Provision of full productive and freely chosen employment.
·        Provision of greater access to income–earning opportunity and wealth creation.
·        Provision of productive and sustainable employment.
·        Increased economic participation of disadvantaged and marginalized groups in the society.
·        Increased domestic savings and investment.
·        Enhancement of balanced regional and local development.
·        Provision of increased local production and consumption.
·        Provision of increased production of exportable products.
·        Reduction of rural – urban migration.

2.7             Definition and concept of Institutions:
Oluwasola (2004) observed that institutions are generally viewed in part as rules of organizing a society. Apart from formal rules such as constitutions, laws, regulations and contracts, it also includes informal constraints and opportunities such as conventions, norms of behaviour, social and personal values and self-imposed code of conduct, together with the enforcement characteristics of the formal rules and informal constraints.

Institutions can also be understood in terms of organizations such as banks, government agencies, community associations, trade and professional union, kinship network and association, market etc. Institutions are found along a continuum from micro or local level to the macro or national and international levels. Institutions also reinforce capacities for collective action and self – help while absence of it can contribute to immobilization and inertia. Institutions comprise a wide variety of formal and informal relationship that enhance societal productivity by making people’s interactions and cooperation more predictable and effective.

North (1994) stated that institutions included social networks, gender roles, legal system politics-administrative system and the state, all of which interact with each other. State institutions cover many aspects such as the public provision of basic education and health services, public order and safety and infrastructure. The nature of governance will determine the availability and quality of these public services.

Non state institutions are social institutions with values and norms. A key social institution is social capital, which consists of informal norms or established relationships that enable people to pursue objectives and act in concert for common benefit. Institutions affect poverty both directly and indirectly through a number of mediating factors. Institutions influence government policies, which in turn influence growth and distributional outcomes, which then affect the pace of poverty alleviation.

2.8       Institutions and Micro/Small enterprises development:
Federal Ministry of Industry (1996) stated that one of the major objectives of the 1994 – 1996 National Rolling Plan was to attain a higher level of economic recovery through a sound foundation for self – reliance and industrial development. It was to be realized through the promotion of entrepreneurship and skill training for viable micro/small enterprises development.

It was on this background that the government’s effort towards a proper implementation of the Micro, Small and Medium Enterprises sub-sector under the UNDP 4th country programme was intensified and a Multi-Sectoral Need Assessment (MSNA) exercise was carried out in 1991 to identify all development needs and constraints in the country.

Entrepreneurship Development Programmes have been facilitates by a number of institutions in Nigeria. These institutions could be classified into:

2.8.1       Government or Government Agencies:              Some of the government establishments that facilitate enterprise development include the Ministry of Industry through the Industrial Development Centres (IDCs). The Industrial Development Centres have been identified as institutions through which technological capacity can be improved by providing among others, training and extension services to potential entrepreneurs.

2.8.2        Ministry of Education:  The general policy framework for the educational system is the 6 – 3 – 3 – 4 system. This policy emphasizes education for self-reliance, employment and technological development. Course contents are geared towards acquisition of practical and applied skills as well as basic scientific knowledge with a shift from the arts and humanities. In achieving this, the focus should be on the provision of workshop; inclusion of industrial attachments as an integral part of the curricula of Universities, Polytechnics and Technical Colleges. Entrepreneurship Development Programmes within this setting will be most beneficial to directing young people towards self – employment opportunities in micro/small enterprises development.

2.8.3        National Directorate of Employment:    High rate of unemployment especially among school leavers is a major economic and social problem in Nigeria. National Directorate of Employment (NDE) was established to address and create employment for agricultural graduates and non-graduates with the right aptitude for self-employment. Nigerians with viable proposals were encourage and given assistance to set up their micro/small enterprises. The strategies employed to encourage small-scale enterprises creation assume that there are enough opportunities for self-employment and improvement of economic potentials and social status of the populace.

2.8.4        Ministry of Health:        The adage, which says that “A healthy person is a wealthy one” holds true for a nation. Some of the objectives of the Millennium Development Goals are among others to address child mortality, reduce maternal mortality and reverse the trends in HIV /AIDS, Malaria, Tuberculosis and other diseases (NPC, 2004). According to DFID (2004), HIV /AIDS prevalence rates are around 5% in Nigeria and presumably impose a major cost on business and reduce quality of work force. This also affects Micro/Small Enterprises Development. It therefore becomes important that the Ministry of Health provides the necessary conditions for improved welfare of the populace. This will enhance human development with its attendant result on productivity in micro/small enterprises in particular and poverty alleviation in general. The following Ministries influence the development of micro/small enterprises.

2.8.5       Ministry of Transport, Works and Housing:  Ensures Infrastructural Development and helps reduce the cost of providing the needed infrastructure for micro/small enterprises.


2.8.6        Public Utilities: Provision of water, electricity and telecommunication.

2.8.7        Ministry of Justice:  Provides adequate legal environment, which could guarantee property right and safety.

2.8.8       Ministry of Science and Technology:  Fabrication of tools and Equipment for micro/small scale industries. This would reduce cost of importing them and also acts as incentive to entrepreneurs as the tools are fabricated in line with the local needs.

2.8.9       Ministry of Agriculture:      Has the mandate for the production of food for the nutritional requirement of the people and provision of raw materials for the enterprises. Agricultural Development Programmes equally provide extension services for increased food production and improved processing options.

2.8.10         Democracy:          In any nation democracy helps instill good governance among the people, eliminate corruption and promote general value re-orientation for economic empowerment of the populace. Among other government Agencies that influence Micro/Small Enterprises Development are the National Poverty Eradication Programme (NAPEP) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). NAPEP has the mandate of eradicating extreme poverty in line with the Millennium Development Goal (MDG) of halving the proportion of people in poverty by the year 2015. Micro/ Small Enterprises Development are among the strategies adopted to reduce poverty. SMEDAN as an agency devoted to promoting policies and programmes for the development of micro/small and medium Enterprises in the country will go a long way in redressing a lot of impediments to their growth and assure the increase in the contribution of MSMEs to meaningful and sustainable national economic growth thereby reducing poverty (Adelaja, 2004).

2.8.11             Financial Institutions:     Financial Institutions are the sources for credit to micro/small enterprises development. Lack of adequate credit to MSMEs, traceable to the reluctance of banks to extend credit to them owing among others, to poor documentation of project proposal as wells as inadequate collateral by MSME operators. Prominent among the banks is the Bank of Industry (BOI), which was initially established by the Federal Government to promote the development of MSMEs. Others include the National Economic Reconstruction Fund (NERFUND), Apex SME Unit of the Central Bank of Nigeria, various state governments credit schemes, commercial and merchant banks, community banks. The MSME sector is being starved of funds and the current gap in the funding of MSMEs has to be filled by Development Finance Institutions (Udechukwu, 2003).

Bank funding of Micro Finance Institutions in Nigeria should be given special consideration. According to Anyanwu (2004) the response of the banking community in Nigeria is changing. He stated that the Banker’s Committee has taken a decision that 10% of the funds accruing to the Small and Medium Industries Equity Investment Scheme (SMIEIS) be channeled to micro/small enterprises through registered micro finance institutions, because the MFIs have grassroot orientation and greater expertise in financing smaller enterprises.

2.8.12             Non – Governmental Organisations (NGOs):   These are private organizations concerned with small business creation and development. They organize training workshops for enterprises development, management, skill acquisition and extension services.  According to Federal Ministry of Industry (1996) such association include Empretec, Nassi, Save and Produce (SAP), Country Women Association of Nigeria (COWAN) etc.  EMPRETEC is a sponsored international programme by United Nations Development Programme (UNDP) for purposes of training and development of local entrepreneurs in Nigeria. It started in 1989.

NASSI – Nigerian Association of Small Scale Industrialists. It is a non- governmental organization established in 1978 and has branches in all the states of the Federation including Federal Capital Territory (FCT) Abuja.

Save and Produce Ltd (SAP) is a non governmental organization specifically involved in the holistic approach of entrepreneurship development programme delivery system such as promotion, training, financing and consultancy/counselling services to its target group. SAP enlists potential entrepreneurs who are committed to contribute certain monthly savings.

Country Women Association of Nigeria (COWAN) caters for rural women in more practical ways. Women are encouraged to form cooperatives where training and financial assistance are offered. The organization is an international body and draws support from donor agencies especially International Labour Organisation (ILO).

Private Consultants:
Private consulting organizations often employed by Public or Private Institutions do run entrepreneurial training, in – house trainings on enterprise development. Among the private consultants are the Growing Businesses Foundation (GBF), Support and Training Entrepreneurship Programme (STEP). GBF and Citibank Nigeria, a group of citigroup has empowered 40 cane weavers with their workshops located under the Maryland Bridge with the sum of $60,000 grant. Obot (2003) stated that they are forging linkages and partners with public, private and informal sectors in providing credit portfolio and training programmes for micro/small enterprises in Nigeria, with the belief that poverty will be alleviated. She equally implored responsible stakeholders to get committed in providing credit and encouraged other private sectors to get involved in giving hope and sustainable employment to micro and small enterprises in Nigeria. Osagie (2005) stated that Hewlett Packard (HP) Nigeria has engaged with partners and communities to empower them to be more useful to the society.

2.8.13             Management Training Institutions: Federal Ministry of Industries (1996) listed the following institutions, which are designed to provide specialized training in management and extensions services to both government and private sector needs. There are:
i.                    Project Development Agency (PRODA)
ii.                 Centre for Management Development (CMD)
iii.               Administrative Staff College of Nigeria (ASCON)
iv.               Centre for Industrial Research and Development (CIRD)
v.                  Nigeria Employers Consultative Assembly (NECA)

They run short support courses geared towards improving the managerial, administrative skills, knowledge and attitude of entrepreneurs.

2.8.14             Market and Marketing Institutions:    According to World Development Report 2000/2001, market-supporting institutions do much to promote growth and reduce poverty. Markets work if they have rules, enforcement mechanisms and organizations promoting market transactions. For the development of micro/small enterprises, there is need for adequate market information about the purchase of input and sale of output. Adelaja (2003) stated that for micro/small enterprises to play a key role in economic growth and industrialization of both developed and developing countries, there must be detailed market study indicating size of market and trend. Market estimate’s assumptions and data sources should be clearly stated and verified. There is need for networking with trade groups and opening access to various markets through Business Support Centres (BSCs).

To encourage access to foreign markets, membership to trading association like the World Trade Organisation (WTO) becomes imperative. However, the quality of these products must meet acceptable standard through regulatory bodies like National Agency for Food, Drug Administration and Control (NAFDAC) and Standards Organisation of Nigeria (SON). Expansion of the standardization and quality control programme to cover micro and small enterprises with a view to making them competitive in the globalised world economy should be intensified. Jamodu (2004) stated that stiff control and prevention of sub – standard poor quality and fake products must be enforced by the appropriate agencies.

2.8.15       Policy Framework:      Federal Government has embarked on new policy measures with pragmatic incentives schemes and institutional restructuring to revitalize the industrial sector of the economy. According to Jamodu (2004) there are tariff structure reforms in favour of local manufacturers in order to reduce the cost of doing business in the country and boost domestic production. It is the policy of the Federal Government to patronize “Made-in-Nigeria” products. Federal Government is determined to positively respond to the charging global business environment by expanding, consolidating and strengthening the resilience and sustainability of the micro, small and medium enterprises. Therefore government is mindful of a rapidly globalising and knowledge – based world economy and cannot afford to ignore contemporary policy instruments and tested best practices to reposition the manufacturing sector for modernization and long-term competitiveness. Consequently Government is promoting policy changes to remove barriers to markets, finance, raw materials and other inputs, and provides a better operating environment for the development of micro/small and medium enterprises.

2.9       Problems/Constraints/Challenges confronting micro /small scale enterprises development:

Micro and Small Enterprises have been acknowledged as the springboard for sustainable economic development. In particular, developing countries have since the 1970s shown increase interest in the promotion of micro/small and medium scale enterprises. Despite the enormous contributions of MSMEs to economic development and poverty reduction, the sector is besieged with many problems. The problems of MSMEs in Nigeria are enormous and ranges from:


2.9.1     Inadequate and Inefficient Infrastructural Facilities:  Inadequate provision of essential services such, as telecommunications, access roads, electricity and water supply constitute some of the greatest constraint to MSME development. Okoro (2004) noted that given the financial outlay of MSMEs, it is hardly possible for them to own their power supply system. Yet the public power supply system as represented by Nigeria Power Holding Company (formerly NEPA) is below acceptable level of performance. Similarly leverages like water supply and good road network are equally not available. In some parts of the country, pipe borne water is a luxury. Sadly too, the state of our roads is deplorable that vehicles, which ply them, are at the risk of constant breakdown and accelerated depreciation. Most MSMEs resort to the private provisioning of these at huge costs.  A World Bank Study (1989) according to Udechukwu (2003) estimated that such cost accounted for 15 – 20% of the cost of establishing a manufacturing enterprise in Nigeria. Contemporary evidence has shown that the relative burden of the compensatory provision of infrastructural facilities is much heavier on MSMEs than on large enterprises. Inadequate storage facilities pose serious problem to MSMEs development in Nigeria.

2.9.2      Constrained Access to Credit:    Olorunshola (2001) noted that banking sector tends to be lukewarm in meeting the credit requirements of the MSMEs. This is because of inadequately prepared project proposals, incomplete financial documentation and inadequate collateral. Access to finance is limited by high interest rates, short loan maturities, heavy collateral requirement, inadequacies of land titles and weak judicial system. The banks also regard many MSMEs as high risk ventures because of absence of succession plan in the event of the death of the proprietor. As a result, working capital is still a major constraint on production, as most MSMEs are restricted to funds from family members and friends. They are therefore unable to respond timely to unanticipated challenges.

2.9.3       Poor Management Practices and Low Entrepreneurial Skill: Inadequate financial resources as well as desire to operate with limited openness on the part of proprietors lead many MSMEs to employ semi-skilled or unskilled labour. This of course, affects productivity, restrains expansion and hinders competitiveness. Anderson (1982) noted that many MSMEs do not keep proper accounts of transactions. This hinders effective control and planning. More ever, lack of relevant educational and technical background and thorough business exposure constrains their ability to seize business opportunities that may lead to growth and expansion. Illiterate old entrepreneurs are averse to new practice to the detriment of the growth and survival of their enterprises.

2.9.4       Financial Indiscipline:   Olorunshola (2001) stated that some MSME proprietors deliberately divert loans obtained for project support to ostentatious expenditure. Some do not divert but refuse to pay back the interest and the capital as and when due because of the misconceived notion of sharing the so – called national cake. It must be admitted, however that there are genuine cases of loan default arising from operational difficulties.

2.9.5       Poor Implementation of Policies:  Sule (1986) noted that poor implementation of policies, including administration of incentives and measures aimed at facilitating MSMEs growth and development have had unintended effects on the sub – sector. This has resulted into confusion and uncertainty in business decision and planning as well as weakened the confidence by the MSMEs on government capacity to faithfully execute its programmes. Bureaucratic bottlenecks and inefficiency in the administration of incentives discourage rather than promote MSME growth. Inconsistent policies relating to sudden obliteration of agencies or projects, too often change of chief executives of programmes and ministries are adverse to the development of MSMEs in Nigeria.

2.9.6       Restricted Market Access: Adebusuyi (1997) observed that insufficient demand for the products of MSMEs also imposes constraints on their growth. Although many MSMEs produce some inputs for the large enterprises, the non –standardization of their products, the problem of quality assurance as well as generally low purchasing power arising from consumers dwindling real incomes, effectively restrict their markets. This is compounded by the absence of knowledge about the existence of fringe markets by the MSMEs. Onokahoraye (1995) stated that market and marketing are underdeveloped and there is a general lack of purchasing power among the majority of the population. He asserted that processors face problems in procurement and storage of raw materials as well as distribution and marketing of finished products. Another problem is obtaining reliable information, on markets for both raw material and finished products in terms of volume, prices and location. Government should assist MSMEs operators to locate foreign markets and attend both national and international exhibitions to improve their products.

2.9.7       Overbearing Regulatory and Operational Environment:    Uduebo (1985) affirmed that incidence of multiplicity of taxes and regulatory agencies has always resulted in high cost of doing business. According to Eboh (2005) a survey conducted by Better Business Initiative (BBI) which was submitted to the Federal Government indicated that formalizing business registration, multiplicity of taxes and levies, low access to information and low access to business finance are the major hurdles to micro/small and medium enterprises development. He said that the challenge of formalizing businesses are currently beyond the capacity of Corporate Affairs Commission (CAC) registration to include inadequate capacity to deal with pre CAC registration, challenges like effective engagement with legal service providers.

According to him, small business shy away from formalizing their operations not because they are afraid of tax payments or high cost of business registration but because of the huge burden of other levies that they are expected to pay particularly at sub – national levels. The same survey found out that the overall system of tax administration in Nigeria tends to be largely arbitrary, not transparent and unfavourable to small business development information available to MSMEs, coupled with the fact that most MSMEs lack the capacity to process and take advantage of available information to improve their business services.

2.9.8       Problem of Machinery and Equipment:     Makinwa (1996) noted that the major problem that impairs the growth of MSMEs in Nigeria has been the inability to get reliable processing machines despite the abundant local raw materials. Lack of technical know-how and experience in relevant technology and lack of access to appropriate equipment is also a fundamental problem. Prevalence of obsolete technology leads to poor product quality. Imported equipment is often inappropriate for our local use and the issue of supply of spare parts and maintenance becomes a hindrance. He further observed that lack of technological base to promote innovative activities and lack of access to new production technologies limit efficiency of MSMEs in Nigeria.

Research should be geared towards prototype machinery development to promote the availability of local technology, machineries and spare parts. Research institute like the National Centre for Agricultural Mechanization (NCAM), should design and develop simple and low cost equipment, which can be manufactured with local materials, skill and facilities.

2.9.9       Human Development:  Human Development Index focuses on progress or the quality of life in a community or country. The United Nations Development Programme (UNDP) in its Human Development Report (HDF) for 1996 revealed that Nigeria ranked 13th out of 174 nations with a Human Development Index of 0.400. UNDP (1996) classified countries with (HDI) value below 0.500 as having low human development, 0.500 – 0.800 medium and above 0.800 – high human development. The Human Development Report put it that Nigeria is a rich country with poor population, the poorest and most deprived in OPEC.

According to Davies (1980) poverty is reflected in very high illiteracy rate, poor health conditions, crude death rates of up to 30 per 1000, life expectancy of 42years (48 years in Nigeria) and about 125 deaths per 1000 life births. Ingawa (2001) noted that as many as 30 million able-bodied Nigerians are either unemployed or underemployed. It is these two conditions, which make it difficult or impossible for this large number of Nigerians to generate adequate income, with which to invest in productive ventures. It is equally important to observe that poverty in Nigeria has a very strong rural dimension. Micro and small enterprises are usually situated in the rural areas, in order to take advantage of the source of raw materials. However, it is hoped that with the injection of the vital factors of production the vicious cycle of poverty will be broken.

Williams (2004) stated that several surveys on business and investment climate in Nigeria have been conducted over the past five years by organization including World Bank – Regional Programme for Enterprise Development (RPED), World Business Environment Survey, UNIDO and Common – Wealth Business Council (CBC). A striking result is that inadequate infrastructure (electricity in particular) was identified as the main business constraint in all the four surveys. Access to credit was identified, as being the second must important constraint. Three of the surveys suggest that MSME are particularly concerned about uncertainty (i.e. political instability, general uncertainty and inconsistent policies) crime, inefficient administration and corruption were also highlighted as major concerns.

It is necessary that Government should pay attention to training so as to produce the right quality of human resources, because knowledge is power. These could be done by providing very good facilities in the teaching of technology and sciences in schools. Machines, tools and equipment and other workshop facilities should be provided in vocational schools and technical colleges.

2.10    Women and micro/small enterprises:
Women entrepreneurs play an important role in local economies and a large percentage of micro/small enterprises in developing countries are undertaken by women. According to Australian Agency for development (1997), increasingly, women in urban and rural areas are successful turning to self-generated employment in micro/small- scale enterprises activities in the informal sector to support their households. Rural women frequently have primary responsibility for agricultural production, in addition to domestic chores and childcare. These responsibilities place heavy demand on women’s time and micro/small enterprises activities can potentially increase the workload of women. Yska (1998) noted that International Statistics from Organisation of European Cooperation and Development (OECD) show that women are creating businesses at twice the rate of men. The share of women among the population of self-employed workers worldwide has risen from 26% in 1970 to 40% in 1990. According to the report, in some OECD Countries, female entrepreneurs are moving into high growth and high-tech industries such as health and business services.

Women like the flexibility of self-employment and its compatibility with childcare. They also have a desire for independence. Individual innovation, the ethic of work, the ability to take risks and the sense of personal pride also characterize women’s enterprises. Yska (1998) noted that women create their own ventures to ensure their ability to provide for their families but several other factors are important. In some cases, women establish a business that will ensure them an income over the long term; in other cases there are immediate requirements for such things as school fees and once there are satisfied, the need for income generation ceases and other priorities take over.

Azikiwe (1990) and Osuala (1991) affirmed that women constitute over 70% of agricultural labour force and are food producers, processors, distributors and marketers as well as keepers of livestock. The production of food for consumption is not all that it takes to have a stable agricultural system. Processing, storage and marketing of agricultural products are very necessary to prevent post-harvest losses, thereby ensuring food supply throughout the year. Women have been found to be very involved in these activities. Eboh and Ogbazi (1990) stressed that food processing is clearly reserved for women.

Women are identified as predominant in the informal sector. Although women’s economic activities have often been viewed as marginal, they have often used their skills to generate income. They usually consist of independent self- employed producers, are small or micro scale in their operations, based on simple organizational and production structures, often employ family labour or a few hired workers, are labour intensive, use low technology or skills, require low capital per worker, operate on unregulated and competitive markets, maintain few if any business records and have little access to capital (Women’s micro enterprises, 1998).

Women Entrepreneurs in SMEs (2001) stated that limited access to productive resources (particularly capital, labour, time and technologies), transport constraints, lack of market knowledge and lack of literacy and numeracy skills restrict the capacity of women to participate effectively in business activities. Women, who generally do not have ownership of land or capital goods are disadvantaged by the collateral – based lending policies of financial institutions. Inaccessibility of women to formal credit has remained a major constraint to increasing their investment potentials. The main source of initial invested capital is personal savings or gifts and from informal credit agencies. Informal credit sources, which include friends, relations, moneylenders and traders etc charge very high interest rate. According to Ojo (1985) the amount of loan given out is usually small compared to the needs of these women. This therefore authenticates the belief that the volume of loan granted to micro/small entrepreneurs from these sources is insufficient to adopt to new innovations and purchase of the needed new improved equipment/tools for processing etc. In some places, government and/or institutional regulations require that women seeking bank loan secure their spouse’s signature. Development organizations such as cooperatives, which restrict membership to one household member, also exclude women from access to resources like credit.

Social attitude concerning the value of traditional women’s work activities and their potential abilities can limit the participation rate and ultimate commercial success of female entrepreneurs. In the past, income generation projects for women have frequently been for marginal activities with limited marketing potential and poor return on labour. According to Women Entrepreneurs in SMEs (2001), loans for men are usually larger and more long – term than those provided for women. However, much evidence indicates that women are very good credit risks, with many small-scale credit projects for women reporting very high repayment rates in a range of sectors and activities. They therefore reported that there are key criteria for micro/small enterprise development schemes, aimed at poor rural women, which can both improve demand for credit and reduce the risks of indebtedness. These are modest financial investment, low investment risk, short gestation period between investment and generation of regular income and availability of local markets. Targeting women as clients of micro credit programmes has also been a very effective method of ensuring that the benefits of increased income accrue to the general welfare of the family. The Grameen Bank of Bangladesh is a case in point where about 95% of the borrowers were poor rural women, resulting to improved socio-economic potential of the beneficiaries. (Jacob, 1995).

In “Partnership for Development” magazine (1995) the United Nations Development Programme noted that of the estimated 1.3 billion people living in poverty, more than 70% are female. The feminisation of poverty is a direct consequence of women’s unequal access to economic opportunities. It is also related to the number of female – headed households ranging 20% - 24% and in most developing countries, the percentage of female-headed households is very high.

In Nigeria, the 1991 population census estimates that out of the 31 million rural women in the country, 16 million live below the national defined poverty line, lacking access to basic education, decent nutrition, adequate health and social security. This figure excludes the several million urban poor women who are in the cities. The negative impact of poverty on the advancement of women in Nigeria includes their marginalization in decision making capacity, poor appreciation of their contribution in the national economy, poor health, illiteracy and lack of education opportunities.

Yska (1998) reported that women, who borrowed from micro credit scheme lacked confidence in operating a business, had insufficient technical advise on marketing, thus there was saturated market for their products. They also had difficulty in separating their business, family needs and community obligations. It is therefore important that skills and capacity building support are available. Particularly important is business development and business skills training in helping the borrowers to identify a viable income generating activity and how best to run the enterprise. More reliable linkages between credit schemes and other business, development services are considered important in ensuring the sustainability and relevance of micro – lending schemes to the women. United Nations Industrial Development Organisation (UNIDO) has devised training programmes specifically geared at women and their specific needs in order to increase their options and potentials. With the rural – urban drift of able – bodied males, rural development depends heavily on women. In order to fight poverty and promote integrated rural development, it is necessary to encourage the production of women – specific tools and women – friendly technologies (machines) that can easily be manipulated by women.

According to United Nation (1986) micro – financing for women’s small and micro – scale enterprise has been seen as effective way to promote and support women’s self – employment and access to credit. The promotion, financing and strengthening of micro/small enterprises are important ways of increasing the productive capacity of women and breaking the vicious cycle of poverty.

2.11    Financial Institutions and micro finance for micro/small enterprises development in Nigeria:
One of the roles of the Central Bank of Nigeria as the apex financial institution in the country is to facilitate the flow of finance to the needy areas of the economy. Capital is needed for the establishment of new businesses as well as the expansion, modernization and diversification of existing ones. While finance is obviously not the only problem militating against the development of micro/small and medium enterprises, it is certainly the most formidable. The MSMEs have had limited access to institutionalized credit facilities, owing to various factors. Some of the major factors include the fact that they are considered very risky in view of their vulnerability in the market as well as their high mortality rate. Banks and other financial institutions are in favour of lending to large corporate borrowers where there is assurance of security, high profitability and faster rates of returns. Owing to their nature, MSMEs seeking loans are usually or unwilling to provide accounting records and other documentation required by banks. Many of them are equally unable to provide acceptable collateral for their loans. According to Anyanwu (2003), in recognition of these constraints, and in order to ensure the realization of the potential benefits of virile MSMEs in the economy, the CBN has remained committed to the growth and development of the MSMEs in Nigeria. Financial support programmes for promoting MSMEs in Nigeria have been many and include the following:

2.11.1             Central Bank Credit Guideline; which required banks to allocate varying percentage of stipulated credit to some sectors of the economy including small-scale enterprises was instituted in 1970.

2.11.2             Small Scale Industries Credit Guarantee Scheme; which was established in 1971 as a matching grant arrangement between Federal Government and State Government.

2.11.3             Establishment of Agricultural Credit Guarantee Scheme 1979:  The scheme has made some impact on the extension of credit to the agricultural sector.

2.11.4             The Nigerian Bank for Commerce and Industry (NBCI) 1973:  The bank was set up to provide among other things financial services to the indigenous business community particularly MSMEs. The NBCI operated as an apex financial body for the SME and also administered the SME I World Bank Loan Scheme. The NBCI suffered from operational problems, culminating in a state of insolvency from 1989. It is now part of the newly established Bank of Industry (BOI).

2.11.5             The Nigeria Industrial Development Bank Ltd (NIDB): The bank was established in 1962 with the primary mandate of providing medium to long term loans for investments in industrial activities. Although its loan portfolio covers mainly large-scale industries, the bank had special requirements. It was also responsible for the bulk of credit delivery to the SME under SME II loans scheme. Arising from financial and other constraints, NIDB has been merged with similar institution under the newly established Bank of Industry.

2.11.6             The National Economic Reconstruction Fund (NERFUND):  With the introduction of Structural Adjustment Programme (SAP) in 1986, and the resultant major devaluation of the Naira, many small scale enterprises were finding it difficult to secure finance for their working capital, and investments purposes. In order to bridge the observed widening resource gap among this class of enterprises, the Federal Government set up the National Economic Reconstruction Fund (NERFUND) effective 9th Jan. 1990 with the CBN and other facilitating institutions. It was aimed at providing relatively long term loans (5-10 years) to small and medium enterprises at concessionary rates of interest, thereby removing the most formidable handicap to SME development. NERFUND credit extension activities have been seriously constrained mainly by the significant impact of devaluation of the Naira and its effects on loan servicing by beneficiaries. NERFUND was merged with two other DFIs (NIDB and NBCI) to form the Bank of Industry in 2001.

2.11.7             World Bank – Assisted SME II Loan Project:  In order to further expand credit delivery to SMEs, the Federal Government negotiated some financial assistance in 1989 with the World Bank to complement other sources of finding the SMEs. Altogether, this facility involved a loan of US$270 million, which was made available for on lending to SMEs through eligible participating banks. The credit components and other related activities of the World Bank loan were administered by the CBN, which established an SME Apex Unit in 1990 in order to facilitate its proper implementation. Total disbursement of US$107.1 million as at June 1996 resulted in the establishment and modernization of 102 projects.

2.11.8             Rural Banking Scheme:  The Rural Scheme started in 1977 and was basically designed to solve the problems of rural underdevelopment and inadequacy of credit to the agricultural sector and rural based small-scale industries. The scheme mandated the commercial banks in Nigeria to establish branches in the rural areas. By 1989, a total of 756 new rural bank branches had been opened with a total deposits in all the rural branches amounting to about N5.7 billion. There are indication that the activities of the rural branches have had some beneficial effects on the development of the rural areas and promotion of banking habit.

2.11.9             People’s Bank of Nigeria (PBN): The bank was formally commissioned in October, 1989 with the objective of meeting the credit needs of the very small (micro) enterprises. By 1993, the activities of the bank have extended to all the states of the federation in the bid to achieve a target of 170 branches. The banks loans were administered to groups of entrepreneurs rather than individuals on a deliberate policy based on the “Peer Pressure” concept. In its recent years of operation, the bank had achieved successes, judging by the number of small enterprises that benefited from the scheme. However, the main problem of the bank was its inadequate financial resources, which came mainly from the Federal Government as grants.

2.11.10           Community Banks: The CBN facilitated the establishment and development of the community banks scheme, which took off in 1991. The objectives of the community banks include the promotion of rural development by providing financial and banking services to communities inadequately supplied with such services.

2.11.11           The National Directorate of Employment (NDE):  The NDE is another channel through which government has promoted the development of SMEs. Established in 1986, NDE launched a number of programmes or schemes complemented by an entrepreneur development programme to assist SMEs. Facilities under the two schemes are repaid over a five-year period at a concessionary interest rate with varying period of moratorium. Salami (2003) stated that though these schemes and programmes which were put in place to find solutions to the problems of credit delivery to the SME, have considerable successes, there still exists a huge gap to be filled. He further indicated that the Central Bank of Nigeria has evolved new initiatives, which are geared towards accessibility and availability of credit to the SME through the following:

1.         The Small and Medium Industries Equity Investment Scheme (SMIEIS):  In 2000, the Central Bank of Nigeria successfully persuaded the Bankers’ Committee to set aside 10 percent of its annual pre-tax profit for equity investment in small and medium scale enterprises. The activities targeted under the scheme include agro-allied, information technology, telecommunications, manufacturing, educational establishments, services, tourism and leisure, solid minerals and construction. The scheme was launched in August, 2001. With the introduction of the scheme, it is expected that improved funding of the SMEs will facilitate the achievement of higher economic growth.

2.         Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB):  The Nigeria Agricultural Cooperative and Rural Development Bank Limited is an amalgam of the former Peoples Bank of Nigeria (PBN), Nigerian Agricultural and Cooperative Bank (NACB) and the Family Economic Advancement Programme (FEAP). It was set up in October, 2000, primarily to finance agriculture as well as small and medium enterprises. The NACRDB is structured to accept deposits and offer loans/advances in which the interest rates are graduated according to the purpose for the loan. The bank also offers a number of financial products including target savings, start-up as well as smallholder loan schemes.

3.         The Bank of Industry: This is an amalgam of the former Nigerian Industrial Development Bank, the Nigerian Bank for Commerce and Industry and the National Economic Reconstruction Fund (NERFUND). It was set up in 2000 with the principal objective of providing credit to the industrial sector, including the small and medium scale enterprises.

Oyekanmi (2003) affirmed that the various measures taken to ensure the growth and development of the small and medium scale enterprises have witnessed limited success as a result of myriad of reasons. These include inadequate infrastructural facilities, continued restricted access to credit as well as abuse of the various programmes by both the beneficiaries and the operators arising from insincerity of purpose, among others. Consequently efforts towards a sustainable growth of the sub-sector should be intensified. He suggested that the various current initiatives (SMIEIS, BOI, NACRDB) etc should be strengthened and refocused in order to obviate the problems associated with past initiatives. He equally advocated that government should also assist by establishing a well-funded national Credit Guarantee Fund that will act as buffer for credit facilities from banks and other financial institutions over and above the equity provided under SMIEIS.

2.12         Micro Finance for Micro/Small enterprises:
Micro finance institutions consist of agents and organizations that engage in relatively small transactions using specialized, character based methodologies to serve low – income households, micro enterprises, small farmers and others that lack access to the banking system. They may be informal, semi formal (i.e. legally registered but not under Central Bank Regulation) or formal financial intermediaries.

Anyanwu (2004) noted that the unwillingness or inability of the formal financial institutions to provide financial services to the urban and rural poor, coupled with the unsustainability of government sponsored development financial schemes contributed to the growth of private sector – led micro finance in Nigeria. Before the emergence of formal micro finance institutions, informal micro finance activities flourished all over the country. Informal micro finance is provided by traditional groups that work together for the mutual benefits of their members. These groups provide savings and credit services to their members. Anyanwu (2004) equally stated that the informal micro finance arrangement operate under different names: “Esusu” among the Yorubas of Western Nigeria, “Etoto” for the Igbos in the East and “Adashi” in the North for the Hausas. The key features of these informal schemes are savings and credit components, informality of operations and higher interest rates in relation to the formal banking sector. The non – traditional, formalized Micro Finance Institutions (MFIs), are operating side by side with the informal services.

Anyanwu (2004) stated that the Development Finance Department of the Central Bank of Nigeria in 2001 carried a survey on ten major Micro Finance Institutions. These were:
1.         Farmer’s Development Union (FADU) Ibadan.
2.         Community Women and Development (COWAD) Ibadan.
3.         Country Women Association of Nigeria (COWAN) Akure.
4.         Life Above Poverty (LPO) Benin.
5.         Justice Development and Peace Commission (JDPC) Ijebu – Ode.
6.         Women Development Initiative (WDI) Kano.
7.         Development Education Centre (DEC) Enugu.
8.         Development Exchange Centre (DEC BAUCHI) Bauchi.
9.         Outreach Foundation (OF) Lagos.
10.       Nsukka Area Leaders of Thought United Self-Help Organization (NLTNUSHO) Nsukka.

The financial services provided by the MFI in Nigeria include savings, credit and insurance facilities. The stated objectives of the MFIs as obtained through the survey exercise are summarized as:
a.         To improve the socio – economic conditions of women, especially those in the rural areas through the provision of loan assistance, skills acquisition, reproductive health care service, adult literacy and girl child education.
b.         To build community capacities for wealth creation among enterprising poor people and to promote sustainable livelihood by strengthening rural responsive banking methodology; and
c.         To eradicate poverty through the provision of micro finance and skill acquisition development for income generation.

Salami (2003) indicated that the operations of formal micro finance institutions in Nigeria are relatively new as most were registered after 1981. The ten micro finance institutions analysed in the study according to Anyanwu (2004) were also registered from 1982 as non-governmental organizations (NGOs). They operate in both urban and rural areas except for three institutions that operate exclusively in the rural areas.

Unlike in the banks, asset based collateral is de-emphasized by the MFIs. Lending is done on group basis and a group is made of between 5 to 10 clients. The collateral is the collective pledge of the group to repay, based on community recognition. In addition, the MFIs concentrate on short term financing, owing to the large demand for loans and their limited assets. All the clients were low-income individuals, operating micro/small enterprises. The principal sources of funds for the organized MFIs in Nigeria is aid and grants, which come mainly from abroad. The major donor organizations of the ten-surveyed MFI were United Nations Development Programme (UNDP). The Ford Foundation, the African Development Foundation, Community Development Foundation, Development and Peace of Canada, EZE of Germany and the Catholic Agency for International Development of the Netherlands (Anyanwu, 2004).

Large volumes of financial transactions are carried out by micro finance institutions, with little or no publicity around them. Their operations are not explicitly captured in official financial statistics and their activities are hardly reported on by the mass media. However, their transactions impact directly on a large section of the population, especially the poor. According to Anyanwu (2004), two major criteria – Outreach and sustainability, have been selected for evaluating the performance of MFIs. Outreach is defined as the ability of an MFI to provide high quality financial services to a large number of clients. The indicators of outreach performance include changes in number of clients, the percentage of female clients total value of assets, amount of savings on deposit, value of outstanding loan portfolio, average savings deposit size, average credit size, number of branches etc. Sustainability on the other hand requires MFIs to meet all transaction costs including loan losses, financial costs, administrative costs etc with some return on equity, which will ensure renewal and self-sustenance.

The MFI operations are expanding but face enormous challenges. The first challenge is outreach. The 2001 CBN survey indicated that their client base was about 600,000 in 2001, and there are indications that they may not be above 1.5million in 2003 (Anyanwu, 2004). This is too small for a country that has over 60 million people that require micro finance services. The Government and its institutions including the Central Bank should work in concert to promote the sector, as a means of mobilizing domestic savings, widening the financial system, promoting enterprises, creating employment and income and reducing poverty. The MFIs can take advantage of the banks’ Small and Medium Industries Equity Investment Scheme (SMIEIS) fund, ten percent of which has been reserved for micro enterprises. This will integrate the MFIs and micro enterprises into the formal sector and widen the financial system.

The MFIs can also access funding from the Developing Finance Institutions on on-lending basis because they have greater capacity to reach micro – enterprises than the DFI.

There is urgent need to put in place a policy framework that will regulate the establishment, operations and activities of MFI in Nigeria. This is very important for those MFIs that accept deposits from the public for which there is need for confidence building, efficiency of operations and safety of deposits. The lack of a policy framework encourages multiple standards and lack of uniformity in financial transactions. A draft policy document, which was prepared by the Development Finance Department of the CBN was ready after the international validation summit held in March, 2004. The management of the Central Bank of Nigeria should take urgent measures to accept and operationalise the policy.

The issue of sustainability is crucial to the continuous operation of the MFIs. There are indications that the level of financial self-sufficiency is low. The level of grants as a source of funding is very high while the contribution of commercial sources, such as savings is low. There is need to reverse the trend, to emphasize savings mobilization, source long – term bank funding, negotiate funding arrangement with the DFIs and reduce dependence on grants. Thus commercial banks in Nigeria should begin to play a larger role in the provision of micro – credit funding. The experience in Bangladesh, Egypt and Kenya are very good examples, in which banks have done much to fund MFIs and micro enterprises, (Anyanwu, 2004).

2.13    Definition and concept of Poverty:
Poverty has been defined in many ways. Aluko (1975) refers to poverty as a lack of command over basic consumption needs, which means that there is an inadequate level of consumption giving rise to insufficient food, clothing and/or shelter and more over lack of certain capacities such as being able to participate with dignity in the society. Onibokun et al (1992) defined poverty as a deprivation of entitlement through lack of access to economic and social resources and also political participation and consultation. The basic definition of poverty is a lack of access to or command over the basic requirements for an acceptable standard of living. A person is poor if he/she has insufficient food, or a lack of access to some combinations of basic education, adequate health services, clean water and safe sanitation system, basic infrastructure and even a safe area in which to live (IDB and Poverty Reduction, 1997).

Accordingly, people are counted poor when their measured standard of living in terms of income or consumption is below the poverty line. Okoye (2004) states that poverty line is a measure that separates the poor from the “non – poor”. However, poverty has both income and non – income dimension usually intertwined.

Scholars have described the poor as those who are unable to obtain an adequate income, find stable job, own property or maintain healthy conditions. They also lack adequate level of education and cannot satisfy their basic health needs. Thus the poor are often illiterate, in poor health and may have short life span. They have no (or limited) access to basic necessities of life, are unable to meet social and economic obligations, lack skill, gainful employment and self-esteem (Sancho, 1996).

Generally the poor are disappropriately located in rural areas and slums in urban area. World Bank Report, (1990) affirmed that the inability to satisfy the basic needs perpetuates poor health, gender inequality and rapid population growth. Human poverty is more than income poverty – It is the denial of choices and opportunities for living a tolerable life (Sancho, 1996).

2.14    Agro-allied enterprises and income generation:
Agricultural growth is one of the indices of national greatness and development. No nation can be proud in the midst of International Community if she cannot feed her citizens. Food is so strategic that no nation can afford to ignore its availability and affordability by the citizenry. The availability of food in adequate quantity and quality all year round within the purchasing power of the citizens is the aim of the National Programme on Food Security. The target focuses on enhanced food production, processing as well as storage, distribution and marketing.

Agro – allied enterprises depend on agriculture for their sustenance either as raw materials in the course of production or semi – finished products which become raw materials for other industries. Agro – allied activities therefore complement farm activities in providing gainful employment and increased income to the people. They also form economic linkages with the farm and other industries, which use agricultural products as their raw materials.

It is in recognition of this fact that the Family Support Programme (FSP) was initiated by the Federal Government (Blue Print on FSP, 1994). The agro processing/packaging centers were established and the project involved the procurement and installation of low – cost agro – processing and packaging equipment, which were managed by family units and cooperatives. Such equipment include the following: - milling machines, cassava graters/fryers, oil extractors and threshers, fruit juicers, milk charmers, smoking kilns, packaging kits, grinders, drivers etc. These activities therefore enhanced the economic status of the populace due to income generated from the projects. It equally emphasized and encouraged family units towards self – reliance and self – sufficiency (Aliyu, 1998).

Agriculture is a major industry in Ebonyi State. An estimated 85% of the state’s population earn their livelihood from it. The major crops include Rice, Yam, Cocoyam, Cassava, Maize, Vegetables, Groundnuts, Beans, Pepper, Tomatoes, Sugarcane, Pineapple, Banana and Plantain. The tree crops include Oil Palm, Coconuts, Pears, Kola etc (Ministry of Commerce, Industry and Tourism Ebonyi State, 2000).

As an agrarian state, two major food types are predominantly grown and processed. These are the Root and Tuber crops and the grain crops. The production and processing of rice in Ebonyi State have undergone some appreciable technologies that are well adopted by the farmers. The Rice Mill Industry in Abakaliki records appreciable number of buyers on daily basis. The income from rice production and processing would have made a tremendous impact on the standard of living but for the importation of rice (Ezike, 2003). The mandate of Root and Tuber Expansion Programme is to link farmers to a wider market for increased income to rural farmers through processing of the Root and Tuber crops (Olomo, 2002). The provision of early maturing, a high yielding cassava variety has increased the output of cassava in Ebonyi State. However, these crops (Yam, Cassava, Potatoes, etc) have not undergone appreciable processing stages in the state, resulting to glut in the market with attendant low price and poor income to farmers.

Nigeria has been the world’s leading producer of cassava since 1993. The benefits of this achievement have however not yielded significant impact due to cyclical incidences of gluts and poor producer prices. These constraints can however be overcome by harnessing the possible uses of cassava in food and non-food applications (Olomo, 2003).

Ahmadu (2005) stated that the import substitution drive and the new trade policies on cassava which include: inclusion of Garri in National Food Strategic Reserve, inclusion of 10 percent cassava flour for bakers, the Presidential Cassava Initiative target of $5 billion through new growth in domestic and export market and the inclusion of chips in livestock feed have made cassava gain popularity among the low and high, small and large scale farmers, processors as well as end-users of cassava products.

Oil processing is another means of empowering Ebonyi farmers and micro/small scale entrepreneurs. Efforts are being made by state government to rehabilitate old palm tress and new nurseries are raised for distribution to the local government areas.

Siting of agro-allied industries close to area of production is one means of reducing post-harvest food losses and operational running costs, thereby benefiting from comparative advantage of the area. Besides eliminating local and seasonal gluts and shortages, the technologies provide sound bases for the establishment and successful operation of food processing industries of diverse capacities and complexity (Makinwa, 1996). Establishment of micro/ small-scale enterprises helps absorb some of the unemployed. This helps engage idle hands, stem migration to urban areas and very importantly serve as a means of sustaining livelihood for family members (Blue Prints on the FSP 1994).

Obanu (1990) noted that the establishment of agro-based industries with locally available raw materials encourage entrepreneurship, ingenuity, mass employment and upliftment of the social and economic status of the populace. It also aids in the real output of goods and services, improvement in literacy, health services, housing condition and government services, improvements in the level of social and political consciousness of the people and greater ability to draw on local resources to meet local needs (Akpakpan, 1987). The processing of food like Cassava, Maize, Oil Palm, Rice, Soyabean etc through mechanized methods implies that physical efforts by women is reduced or eliminated leading to economic use of time while employment is generated in associated activities.

Ibe-Enwo (1997) suggested that more research should be channeled into the production of locally fabricated equipment for all the garri processing operations. Universities, Colleges of Technology and Research Institutes were advised to manufacture improved/mechanized processing equipment (machines) that are female friendly at affordable prices to alleviate the problems associated with local methods of processing. As people learn to operate service and repair the machines, there is improvement in the technical knowledge of the technicians. Other subsidiary/cottage industries and related businesses such as mechanic workshop spare parts shop; petrol/diesel/engine oil selling depots are established, thus creating additional employment for the masses and market for industrial products.

2.15         Strategies for Poverty reduction:
Ezike (2003) stated that strategies for poverty reduction in Ebonyi State should be targeted at either raising income level or raising the level of basic needs of the people or increasing the capacities of individuals in the society. This could be achieved through reduced cost of raw materials, processing farm inputs. The farm inputs can be made available through the establishment of farm shops. In the case of micro/small enterprises, processing machines can be acquired through formation of cooperatives. This is in line with Ibe-Enwo (1997) who recommended that women farmers and processors form viable cooperative societies for adequate capital mobilization and realization of necessary benefits that accrue to such organizations. There is need for the provision of cheap credit for processing. According to Uduma (2005) N16 million was extended to Ebonyi Farmers and Processors as loan under the NAPEP Farmers Empowerment Programme. This obviously has impacted positively on the socio-economic status of the people. There is equally the need to provide cheap and available processing technologies. Loan have been given to local fabricators for prompt manufacture and delivery of cassava processing machines under the Root and Tuber Expansion Programme (RTEP). Most importantly, there should be better prices for agro-processed products. Favourable market should be created to stimulate micro/small agro processors in order to eliminate glut. Federal Agro Processing and Market Expansion Groups (FAMEG) and their State Counterpart (SAMEG) are groups under Root and Tuber Expansion Programme (RTEP) responsible to link processors with big industries that use root and tuber products as their raw materials.

In broad terms, a people-centered approach to growth and development is desired for significant reduction of poverty in Nigeria. People should be seen as the means and end to growth and development. Both the public and private sector should develop a positive attitude for people’s welfare (Ibrahim, 2005).

A second general strategy for poverty reduction is the community approach. The community should be the center piece of poverty alleviation efforts by drawing on the potentials of the community-based organizations so that they participate in the design, prioritization, implementation, monitoring and evaluation of projects that directly affect them. In other words, a Bottom-Up” as opposed to “Top – Down” approach. Also implicit in the community strategy is the fact that most projects are to be demand-driven (World Bank, 2000). In line with this, Ebonyi State government has signed a Poverty Reduction Strategy Agreement with the Federal Government, World Bank and African Development Bank (ADB) for Ebonyi Community Poverty Reduction Programme.

EB-CPRA (2005) stated that Ebonyi Community Poverty Reduction Programme is meant for community poor but productive groups, disabled and disadvantaged groups, viable income generating groups, women and youth groups and community/town union groups. Sectoral micro-projects that are supported include education, health, water supply, feeder road construction, rural electrification, market development, skill development/acquisition, sanitation, agricultural and social/civic center development. Poverty reduction needs to be tackled with holistic approach. Therefore poverty alleviation in Ebonyi State can be achieved by increasing the level of basic necessities of life. These include the provision of infrastructural facilities like good road network, water and electricity, adequate health care system, access to functional education for human development, adequate transportation and communication system.

2.16         Industrialization process in Ebonyi State food sector:
Rural Industrialization especially through agro-based enterprises is one of the practical ways of reducing rural poverty as most of the technologies are either indigenous or modernized traditional technologies with products that are acceptable to the rural people (Onokerhoraye, 1995). Government as a matter of policy regard industrialization as the most important factor towards achievement of self-reliance and economic empowerment, without which no nation can have the stability necessary for internal peace and command international respect.

Idriss (1992) suggested that poverty is best reduced by directly supporting the productive activities of the poor thereby creating a fairer economic environment to enable them perform better.

For a systematic and speedy employment creation and economic empowerment of the people of Ebonyi State through implementation of Industrialization Programme in the food sector, the committee on strategies for Food Processing, storage, Preservation, Marketing and Distribution in Ebonyi State (EBSG, 2004) proposed that Government’s major roles should be in the sensitization of investors and the people on the investment opportunity that exist in the food industrial sector of the state. To perform these roles effectively, the committee recommended that Government sets up an Agency for Food Processing Distribution and Marketing (EBFODIMA) in the state. It is also envisaged that industrialization process be facilitated if cooperative association or potential entrepreneurs have easy access to credit. It is thus suggested that government sets aside five percent (5%) of its annual budget for the next five years as “Special Fund” for the development of Small and Medium Scale Industries. Government should equally provide the needed infrastructure and enabling environment for rapid industrialization. The committee also urged Government to intensify efforts in opening up and rehabilitating rural roads, providing water and electricity for desired impact in rural areas. Government is equally urged to explore the use of less expensive solar energy for provision of electricity in the rural communities. The committee noted that the current level of agricultural production in the state is far below estimated potential, thus the proposed processing industries when established would exert substantial pressure on the food supply situation in the state. Government was thus urged to set up a committee to develop a blue print for agricultural development in Ebonyi State with a view to setting out strategies and targets for massive production of food and raw materials in the state. Presently, there is a committee on increased food production in the state with the mandate of ensuring massive production of those crops, which have potentials for industrial use as raw materials. These include groundnuts, cassava, rice, palm oil, maize etc.

Micro/small enterprises are the engine room for development of any economy and institutions that favour their growth and development need to be encouraged. Economic growth can be accelerated if attention is focused on issues of integrated rural development with respect to farm production, agro-industries, facilitating services and marketing of inputs and outputs. Government is therefore urged to play its role in delivering Democracy Dividend to the people. Through active participation in agro-business, the economic empowerment and social status of the populace would be elevated, thus breaking the vicious cycle of poverty, with its resultant multiplier effect on the overall development of the state in particular and Nigeria as a whole.

Through the literature that have been reviewed, some researchers have done some studies on micro, small and medium enterprises and poverty reduction in general. Ebonyi state is relatively young and agrarian in nature. Presently, not much has been done on the effects of institutions on the development and growth of agro allied processing enterprises due to the young status of the state.

The research therefore is intended to identify institutions that influenced the growth of micro/small agro-allied processing enterprises for industrialization of the food sector of the state. This in no small measure will empower the micro and small agro-allied processing entrepreneurs to become financially stable resulting in enhanced socio-economic status, political emancipation of women and general well being of the citizens. It is the opinion of the researcher that the result will be in line with the Millennium Development Goals (MDGs) of reducing by half the number of people living in poverty by 2015.

Relationship between Institutions, Micro/Small Agro -allied processing enterprises and poverty alleviation.


2.17         Conceptual Framework:
The conceptual framework as presented illustrates the relationship or linkages, which exist between institutions, micro/small agro – allied processing enterprises and poverty alleviation.

 

Figure 1: Relationship between Institutions, Micro/Small Agro -allied processing enterprises and poverty alleviation.

Explanation of Conceptual Framework Organigram

Institutions play important role in promoting the establishment and development of micro/small agro – allied processing enterprises, which ultimately leads to enhanced socio-economic status of the populace.

A.           Government Ministries, Parastatals and Agencies are represented by the following institutions;
        i.            Federal/State Ministry of Education for manpower development through improvement of human resources (capacity building) and skill acquisition through formal education in schools, colleges and tertiary institutions.
     ii.            Ministry of Agriculture – Production of food, raw materials and provision of extension services, access to agricultural input.
   iii.            Ministry Justice – Provision of adequate legal environment that guarantee quick dispensation of cases relating to land dispute, property right and safety, general security of citizens.
   iv.            Ministry of Works and Transport – Ensures good road network and adequate transportation system.
      v.            Ministry of Lands and Housing – Facilitates acquisition of certificate of occupancy (C of O) for construction of MSME building (factories).
   vi.            Ministry of Commerce and Industry – develop product development and networking with trade groups, opening access to various markets through business support centers.
 vii.            Public Utility – Provision of potable water, constant electric supply and reliable telecommunication system.
viii.            Ministry of Science and Technology – Improvement on research for fabrication of tools and equipment for MSME development.
   ix.            Ministry of Health – For improved health care delivery system (Primary, Secondary and Tertiary Healthcare) Most importantly establishment of primary health centres in the rural areas. Improved nutrition and sanitation for the populace.
      x.            Ministry of Finance – Governments Financial contribution for MSMEs counterpart funding. Linkages to special credit schemes, foreign financing and fund.

B.            Some government agencies that are promoting MSMEs include:
        i.            National Poverty Eradication Programme (NAPEP), which has the mandate of eradicating extreme poverty in line with the Millennium Development Goals (MDGs). Micro and Small Enterprises development is a strategy of reducing poverty.
     ii.            Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is devoted to promoting policies and programmes for the establishment and sustenance of small and medium enterprises.
   iii.            National Directorate of Employment (NDE) was established to address unemployment. NDE creates opportunity for self – reliance and economic empowerment through skill acquisition and entrepreneurship development for income generation.
   iv.            Industrial Development Centres (IDCs) provide enhanced technological capacity through training and extension services to potential entrepreneurs. Aids development of industrial parks, facilitates the formation of products clusters for complementary MSMEs.
      v.            National Orientation Agency (NOA) promote value and attitudinal re-orientation, awareness campaign for “Made – In – Nigeria – Goods” and good investment habits. Advocate Transparency, Accountability, Due Process and Good Governance.
   vi.            Government Economic Policies: Government reviews and updates existing policies and legislation as they relate to MSME development for example tariff structure reform (Tax relief) in favour of local manufacturers to boost local production, low and predicable interest rates.

C.            Other institutions comprise financial institutions, which are Central Bank of Nigeria (CBN), Commercial Banks, Community Banks, Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB), Micro Finance Institutions, semi formal and informal credit organizations. They provide favourable credit support services to the development and growth of MSMEs.
D.           Community based organizations include: Town Unions Age Grade Groups, Traditional Councils, Social Clubs and Churches who mobilize themselves and participate in MSME development.
E.            Non – Governmental Organisations (NGOs) e.g. Trade and Professional Groups like Nigerian Associations of Small Scale Industrialists (NASSI), Nigerian Association of Small and Medium Enterprises (NASME). All Farmers Association of Nigeria (AFAN), Country Women Association of Nigeria (COWAN) etc. They provide fora for interaction and adoption of issues of importance to MSME development.
F.             International Donor Agencies such as:
       United Nations Development Programme (UNDP)
       United Nations International Children Education Fund (UNICEF)
       International Fund for Agricultural Development (IFAD)
       Food and Agricultural Organisation (FAO)
       United States Agency for International Development (USAID)
       Department for International Development (DFID) etc

They have contributed through various interventions such as capacity building, micro finance in MSME development and poverty reduction in Nigeria.

Private consultants run entrepreneurial training, in – house short course towards improving skills, knowledge and attitudes of entrepreneurs.

The above institutions contribute immensely in the establishment and development of MSMEs, which could be Farm or Non – Farm based. Agro – allied enterprises are strictly dependent on agriculture for their sustainability (Production of food and raw materials). Non – farm enterprises however are indirectly and directly related to agro – allied business through some forward and backward linkages. These include processing of farm products, fabrication of tools and equipment for enterprise development of food.  These enterprises create jobs for the populace through production of food and raw materials, utilization of raw materials in industries, fabrication and repairs of tools and equipment. Market network is established for the acquisition of input and sale of output.

The above activities lead to poverty alleviation because of enhanced income, improvement in housing, education, asset ownership, household expenditure, nutrition, increased savings and investment. Consequently an enabling environment is built for the growth of political participation and democracy. Essentially, women become politically emancipated because they are economically viable and socially acceptable. This leads to enhanced socio – economic empowerment of the populace and satisfactory standard of living thereby alleviating poverty. 




CHAPTER TWO

2.0             Literature Review and Conceptual Framework

2.1       Introduction:

That Micro/Small and Medium Enterprises (MSMEs) have become the engine room of economic growth is a fact that cannot be disputed. That MSMEs have the seemingly answers to the ailing economic situation in the third world is a fact that has been established in countries like Pakistan, Thailand, Mauritius, Philippines, Malaysia, India and Taiwan (Akinlami, 2006).


Having established the inevitable nature of small businesses to the economic growth of the third world countries, the question is, what role do institutions play in enhancing the effect of micro/small agro – allied processing enterprises on the economic empowerment and poverty alleviation in Nigeria as a whole and Ebonyi State in particular.

Infrastructural development is strongly connected to the growth of MSMEs and their ability to contribute meaningfully to the overall economic development of the nation. Access to financial services enables poor households to move from everyday struggle for survival to planning for the future, investing in better nutrition, health and their children’s education. It empowers women socially. Lending to MSMEs is not just desirable but equally profitable. Micro finance programmes provide loans, savings and other financial services to low income and poor people for use in small businesses, build assets, stabilise consumption and shield themselves against risk. Micro finance is acknowledged as one of the prime strategies to achieve the Millennium Development Goals (MDGs). Education is a necessary condition for manpower development. It has been made compulsory in primary and secondary schools in Ebonyi State and there is need for the formation of cooperatives among school leavers as entrepreneurs in micro/small agro – allied processing enterprises. They should be encouraged and assisted to invest in the food sector through easy assess to land and credit guarantees, assistance in locating national and international markets. Government and Non – Governmental Agencies (NGOs) should sensitise the people of the need to embrace modern food processing and preservation technologies as simple and viable avenues for economic empowerment and poverty alleviation.

It is in realization of the fact that MSMEs remain the most viable tool through which the required economic growth can be achieved and sustained that the Federal Government of Nigeria established Small and Medium Enterprises Development Agencies of Nigeria (SMEDAN) to serve as a vanguard agency for rural industrialization, poverty reduction, job creation and enhanced sustainable livelihood (Adelaja, 2006). For comprehensive study, literature is reviewed on issues bordering on institutions as they relate to micro/small agro – allied enterprises establishment and development and its implication on poverty alleviation.

Literature review covers the under listed areas:
-               Concept of Micro and Small Enterprises Development.
-               Policies for revitalizing the Industrial Sector.
-               Definition of Micro, Small and Medium Enterprises.
-               Definition and Importance of Agro – Allied Enterprises.
-               Characteristics or Features of Micro/Small Enterprises.
-               Contribution/Importance/Potentials of Micro and Small Enterprises.
-               Definition and Concept of Institutions.
-               Institutions and Micro/Small Enterprises Development.
-               Problems/Constraints/Challenges confronting Micro/Small Enterprises Development.
-               Women and Micro/Small Enterprises.
-               Financial Institutions and Micro Finance for Micro/Small Enterprises Development in Nigeria.
-               Micro Finance for Micro/Small Enterprises.
-               Definition and Concept of Poverty.
-               Agro – Allied Enterprises and Income Generation.
-               Strategies for Poverty Reduction.
-               Industrialization process in Ebonyi State Food Sector.
-               Conceptual Framework.
-               Explanation of Conceptual Framework Organigram.


2.1.1   Concept of Micro and Small Enterprises Development:

Micro and small enterprises have been fully recognised by government and development experts as the main engine of economic growth and a major factor in promoting private sector development and partnership. MSMEs have been acknowledged as the springboard for sustaining economic development. They do not only contribute significantly to improved living standards, they also bring about substantial local capital formation and achieve high level of productivity and capability (Adelaja, 2004).


Udechukwu (2003) stated that MSEs are increasingly recognized as the principle means for achieving diversification and dispersal and in most countries, they account for over half of the total share of employment, sales and value added. Oyekanmi (2003) stated that it is generally accepted that micro, small and medium enterprises pay a key role in economic growth and industrialization in both developed and developing countries. The case of the – Asian Tigers is a reference point, where the Asia countries made concerted efforts to develop their micro, small and medium enterprises resulting to enhanced economic stability and poverty reduction.

Experts often draw symbiotic and important relationship between large, medium, small and micro businesses in promoting and sustaining economic growth. The interdependence of the sector provides the backward and forward linkages, which an economy needs for self-dependence and sustenance. In the advanced economies, this symbiotic relationship is so developed that the sectors extensively depend on each other for survival. In Japan for instance, about 70% of the value of exports of large firms is the products of SMEs (ADCG, 2000). Linkages are important in any economy and that is why most countries attempt to promote all the sectors for rapid economic development. A major gap in Nigeria’s industrial development process in the past years has been the absence of a strong and virile micro/small and medium enterprises sub-sector. The little progress recorded by the first generation of indigenous industrialists were almost completely wiped out by the massive dislocation and traumatic devaluation which took place under the Structural Adjustment Programme (SAP) (Federal Ministry of Industry – 1996).

With over 120 million people, productive farmland, rich variety of mineral deposits, Nigeria should be a haven for micro/small and medium industries. However, like most less developed countries, the country is witnessing a rapid population growth and this contracts with the less than average rate of development in communication, technological and social infrastructure. Instability and high turn over have impacted negatively on the performance of primary institutions responsible for policy monitoring and implementation, resulting to distortions in the macro economic structure and low productivity. These problems constitute hindrance to the development of micro/small and medium enterprises.

Udechukwu (2003) affirmed that the world has been transformed into a global village through the dismantling of trade and other barriers. Consequently, MSMEs in developing countries are struggling to survive under intense domestic and international competitive environment.

In developing country like Nigeria, it becomes imperative to provide the required enabling environment for the development of MSMEs so that they could adequately play the role expected of them in economic transformation and poverty alleviation. This could be made possible through a responsive industrial policy and government’s overall economic development strategies that will ensure the collaboration of all development partners and the effective coordination and utilization of economic resources.

2.2             Policies for revitalizing the Industrial Sector:
The Nigerian economy, at the inception of the present democratic government in May, 1999, was in a deplorable and pathetic state. The sector witnessed slow but steady “de-industrialization” of the economy with capacity utilization falling to the level of below 30% on the average, a large inventory of unsold stock and outright closures or relocation of many manufacturing plants to other countries (Jamodu, 2004).

Jamodu (2004) equally stated that the Federal Government embarked on new policy measures with pragmatic incentive schemes and institutional restructuring to revitalize the sector. The specific objectives were to improve the investment climate and reduce the costs of doing business in Nigeria, resuscitate sick and comatose industries and ultimately to enhance capacity utilization and competitiveness of Nigerian Industries.

The main elements of these policy measures include the following:
-               Adoption of liberal and market-oriented economic policies.
-               Stimulation of increased private sector participation in Nigerian economic development through privatization.
-               Resuscitation of ailing public sectors to enhance their efficiency and productivity prior to their eventual privatization.
-               Significant improvements in infrastructural facilities (roads, water, electricity and telecommunication) in order to enhance the quality of their service delivery.
-               Extension of the Natural Gas Pipeline Grid further into the land to encourage increased utilization of this vital resource which is already being processed into fertilizer in energy source and power generation in some parts of the country.
-               Tariff structure reforms in favour of local manufacturers in order to reduce the cost of doing business in the country and boost domestic production.
-               Reforms in port operations, especially through the introduction of 100% inspection of goods at the ports, which have had tremendous and positive effects as a check against the perennial problems of under-invoicing, smuggling and other forms of international trade malpractices.
-               Sanitizing of the banking sector leading to the adoption of universal banking and some decrease in interest rate.
-               Re-orientating, equipping and empowering law enforcement agents cope with the challenges of ensuring security of lives and property as well as maintenance of law and order in the country.
-               Total commitment to transparency, accountability and due process in the conduct of government and corporate business.
-               Renewal of political and economic cooperation with various countries of the world, as well as signing of Investment Promotion Agreements (IPPA) with a number of countries to assure foreign investors of the safety of their investments in Nigeria.
-               Establishment of the Bank of Industry (BOI) limited with an authorized capital N50billion to provide industrial development finance at affordable rates for;
i.              Projects that have large transformation impact through forward and backward linkages.
ii.           Projects that utilize domestic input.
iii.         Projects that generate huge employment and
iv.         Projects that produce quality products for export market.
-               Establishment of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) as an agency with the mandate to coordinate and support the development of Small and Medium Industries in the country.
-               Strengthening the capacities of the Standards Organization of Nigeria (SON) and National Agency for Food, Drug Administration and Control (NAFDAC).
-               Expansion of the standardization and quality control programme to cover Small and Medium Enterprises (SMEs) with a view to making them competitive in the globalised world economy.
-               Control and prevention of sub-standard, poor quality and fake drugs and food items.
-               Facilitating the establishment of Small and Medium Industries Equity Investment Scheme (SMIEIS) by the Bankers Committees through the setting aside of 10% of their pre – tax profit, for equity and dividends and packaging of new incentives, ranging from tax holiday to export promotion incentives.
-               Adoption of new definitions classifying Small and Medium Enterprises (SMEs) into Cottage/Micro, Small and Medium Enterprises based on capital investment and or number of labour employed. This is informed by the realization that they require varying support services and modified strategies, facilities and intervention instruments in order to effectively address their structural peculiarities and varying technical, economic and socio-cultural characteristics and constraints.
-               Upgrading and repositioning of the Industrial Development Centres (IDCs), which are specialized SME support institutions providing a combination of services involving advisory/consultancy and extension services, training for skill acquisition and entrepreneurship, technology adaptation and information services.

Jamodu (2004) noted that commitment of the present administration in Nigeria to the development of SMEs as a veritable vehicle for promoting poverty eradication, job creation, rural industrialization/development and sustainable livelihood has been recognized by the World Association for Small and Medium Enterprises (WASME) with an Award which was presented to the Federal Ministry of Industry, on behalf of the country, at the World Convention of SMEs held in China in September, 2002.

It is the policy of the Federal Government to patronize “Made – in – Nigeria” products. Local manufacturers have been geared up in support of this policy. For instance, the Federal Government has directed that all uniforms and accoutrements in use in the public sector be sourced – locally. Furthermore, Government has approved a list of locally produced items that Government Ministries and Agencies should patronize to encourage the use of “Made – in – Nigeria” products. The items include: vegetable oil, soap/detergent, biscuits, pastries, garments, printed textiles, leather sandals/belts, boots, factory/rain boots, ladies hand bags, pharmaceutical products, beverages and vehicles.

While the key elements of our new industrial policy are similar and compatible with what obtains in other emerging economies particularly the “Asian Tigers”, a closer study of these countries has shown a pattern of new initiatives in their support systems and programmes for industrial development. In these countries (India, Malaysia, Singapore, Thailand, China) each of the key elements of their industrial policies is being promoted by combinations of well focused and targeted financial packages and incentive facilities with appropriate institutional support mechanisms to ensure their effective and efficient administration.

Government therefore considers the industrial sector as one of the key sectors upon which future economic growth and sustainable development will depend. In order to encourage investments in industry, government abrogated those policies that tended to impede private investment, especially foreign investment in manufacturing. Some of the abrogated policies include import controls ban and quotas, indigenisation and excessive regulation of foreign investment.

As part of the national policy on industrial development, a number of incentives have been provided by Government to stimulate investment and encourage entrepreneurs in manufacturing activities. These include:

2.2.1   Status:            This provides 100% tax holiday for a period of five years for approved pioneer industries considered beneficial to the economy. These industries/products include the following; Cultivation, processing and preservation of food crops and fruits, mining and processing of barites, betonies and associated minerals, manufacture of cement, tools, pulp and paper, pharmaceuticals, gas, flat sheets, food and fruits concentrates; large scale inland fishing farms, minerals, oil prospecting and production.

2.2.2   Raw Materials Utilization:            A 30% tax concession for five years is granted to industries that attain the following minimum local raw material utilization level.

Industrial Sector

Minimum Level

Agriculture

80%
Agro – allied
70%
Engineering
60%
Chemical
60%
Petrol Chemical
70%

2.2.3   Infrastructure:         This incentive is granted to industries that provide facilities that ordinarily should have been provided by Government. Such facilities include: access road, pipe borne water and electricity.  Twenty percent of the costs of providing such infrastructure is tax deductible once and for all.

2.2.4   Investment in Economically Disadvantaged Areas: 100% tax holiday for 7 years and additional 5% depreciation allowance over and above the initial capital depreciation are applicable.

2.2.5   In – Plant – Training:         This involves 2% tax concession for 5 years of the cost of facilities provided for training.

2.2.6   Local Value Addition:        10% tax concession for 5 years is granted essentially to engineering industries where some finished imported products serve as inputs. The concession is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down (CKD) parts.

2.2.7   Export – Oriented Industries:                   10% tax concession for 5 years is granted to industries that export not less than 60% of their products. Additional incentives, such as duty – free importation of machinery and raw materials, are also provided for export – oriented industries located in various Export Processing Zones (EPZs) in the country.

2.2.8   Research and Development (R & D):       120% of the expenses on Research and Development (R & D) are tax deductible, provided the R & D is carried out in Nigeria. In case of R & D on local raw materials, 140% is allowed.

2.2.9   Abolition of Excise Duty:   In order to boost local industries, stimulate trade and reduce cost of doing business in Nigeria, Government abolished the payment of excise duties in the country with effect from 1st January, 1998 except alcohol, spirits and tobacco.

In line with contemporary development efforts, Jamodu (2004) asserted that the Ministry of Industry is introducing new initiatives to achieve industrialization agenda. In this regards, a framework to establish a National Credit Guarantee Scheme for SME financing is already packaged. A study for the promotion of SME clusters, Networks and Linkages (vertically and horizontally) is also in progress. The Ministry intends to re-launch Entrepreneurship Development Programme (EDP) and Rural Industrialization Programme among the main activities of SMEDAN. In recognition of the role of the Organised Private Sector (OPS) as a veritable platform for the transformation of the industrial sector, consultants with members of OPS particularly Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce Industry, Mines and Agriculture (NACCIMA) and Nigerian Association of Small Scale Industrialist (NASSI) etc have been strengthened because the cooperation, active participation and collaboration of the private sector with government is indispensable for accelerated industrialization in Nigeria.



2.3       Definitions of Micro, Small and Medium Enterprises:
There is no universal definition of micro, small and medium scale enterprises. Each country tends to derive its own definition based on the role MSMEs are expected to play in that economy and the programmes of assistance designed to achieve that goal. Varying definitions among countries may arise from differences in industrial organizations at different levels of economic development. Sule (1986) noted that a firm that can be regarded as micro or small in an economically advanced country like the United Stats of America or Japan, given their level of capital intensity and advanced technology, may be classified as medium or even large in developing countries like Nigeria and Ghana. Definitions also change over time owing to changes in price levels, advances in technology or other considerations. Even in the same country, different institutions may adopt different definitions, depending on their policy focus. The criteria that have been used in the definitions include capital investment (fixed assets) annual turnover, gross output and employment.

In 1992, the National Council on Industry streamlined the various definitions in order to remove ambiguities and agreed to revise them every four years. At the 13th council meeting of the National Council on Industry held on July 2001, Micro Small and Medium Enterprises (MSMEs) were defined by the council as follows:

·        Micro/Cottage Enterprise (Industry): An enterprise (industry) with a labour size of not more than 10 workers or total cost of not more than N1.5million, including working capital but excluding cost of land.
·        Small – Scale Enterprise:  An enterprise with a labour size of 11 – 100 workers or a total cost of not below N1.5million and not more than N50million, including working capital but excluding cost of land.
·        Medium – Scale Enterprise:  An industry with a labour size of between 101 – 300 workers or a total cost over N50million but not more than N200million, including working capital but excluding cost of land.
·        Large Scale: An industry with a labour size of over 300 workers or a total cost of over N200million, including working capital but excluding cost of land.

Based on nuanced assessment of existing national perspectives on the taxonomy of MSMEs, the National Policy on MSMEs adopts a classification based on dual criteria; Employment and asset (excluding land and Buildings) as follows:

Size Category
Employment
Asset N Million
Micro enterprises
Less than 10 persons
Less than 5 Million
Small enterprises
10 – 49 persons
5 – less than 50 Million
Medium enterprises
50 – 199 persons
50 – less than 500 Million
Large enterprises
200 and above persons
500 and above

Source:  UNDP/SMEDAN National Policy on MSMEs (2006).

2.4       Definition and importance of agro – allied (based) enterprises:
The term “agro – allied” or “based” is used to connote any industrial activity, which is related to Agriculture. They employ the use of agricultural raw materials in the course of production or supply its semi-finished products as raw materials to other industries. They therefore depend on Agriculture for their sustenance.

Olayide et al (1981) defined enterprises based on crops, livestock, forestry and fisheries as agro – based or allied industries. They either supply the means of production to Agriculture or they process the raw materials produced by agriculture. Consequently, agro – based industrialization necessitates the integration of the agricultural production, which supplies the raw materials from agriculture and the appropriate industry – skill and technology which process the same.

Agro – based industries could be grouped into forward linkage and backward linkage. The forward linkage industries are those which process agricultural raw materials into semi – finished products for consumption (e.g. alimentary, textile, sawmill, flourmill etc) while backward linkage agro – based industries are those which manufacture agricultural inputs needed for further productions (e.g. Agro – chemicals, fertilizers, fish nets, farm machinery or equipment etc.). Agro – based industries have a dual relevance, first is the additional employment they provide and secondly is their tendency to lead to an increased demand for farm products. They therefore act as stimuli to farm production. Through the establishment of agro – based industries, rural – urban migration would be reduced considerably because rural standard of living will be raised. The progress of agro – based industries depends on agricultural growth that is sustainable to supply the raw materials for processing. There is urgent need for governments intervention to ease problems posed by traditional land tenure systems, which make land acquisition for modern agriculture difficult. Ukpong (1993), suggested that state governments should assist corporate bodies or cooperatives in acquiring large parcels of agricultural land for large-scale agriculture aimed at enhancing agro – industries development in the nation.

Agro – industries are involved in the transformation of raw agricultural products into a state that is edible through processing. Modern food processing does not only permit the sale of most food items all year round but enables adequate supply of food to be made available to places far away from area of production. Processing reduces waste that is associated with glut during harvest and scarcity that is witnessed during pre- and post – harvest. The establishment of relevant agro – industries to process agricultural produce would achieve a dual purpose of food preservation and value addition for more utility and possible export.

Enwere (1998) noted that processing results in new food products that substitute for less efficient traditional food, making for better management and more efficient utilization of the food supply.

The availability of food in adequate quantity and quality all year round is the aim of National Programme on Food Security. The target focuses on enhanced food production, processing as well as storage, distribution and marketing.

Agro – allied activities as non – farm activities therefore complement agriculture providing gainful employment and increased income to the people and form economic linkages with the farm. According to Bhalla (1992) micro and small scale rural non – farm activities remain an important source of income and livelihood for a sizeable proportion of the rural population. Alimba (1995) also noted that researchers and policy makers in Nigeria have recognized the importance of stimulating rural non – farm activities due to several forward and backward linkages that exist between agriculture and non – farm activities.

Any country that therefore desires economic greatness must develop its micro and small agro – allied enterprises sub – sector because they play a vital role in stimulating production, employment and economic development thus reducing poverty.

2.5       Characteristic or features of Micro/Small Enterprises:
One of the commonest features of micro/small enterprises is that they are either in sole proprietorship or in partnership. They have simple management structure resulting from the fusion of ownership and management by one person or very few individuals. MSEs tend to strongly revolve around the owner – manager rather than as a separate corporate entity. There is often greater subjectivity in decision taking prevalence of largely informal employer–employee relationships.

According to Udechukwu (2003), partnership spirit in Nigeria is at its infancy, thus partners in many micro/small enterprises pursue individualistic goals at the expense of the overall interest of the MSEs. Consequently, mortality rate among MSEs is high as a result of mistrust that often develops among the owners.

Most MSEs have labour intensive production processes, centralized management and have limited access to investment capital. As a result, they are restricted in their ability to improve machinery or raw materials. They use essentially local raw materials with local technology.

Micro and small enterprises suffer from very poor inter and intra–sectoral linkages. They therefore lose the benefits synonymous with economics of large-scale production.

Adebusuyi (1997), stated that many micro and small scale entrepreneurs lack the appropriate management skills and adequate capital thus resulting to low productivity, poor product quality with serious consequences on market acceptability.

Small business according to Yska (1998) is beset with failure. Large number of micro/small enterprises fail within the first 12 months. In order to be successful, the entrepreneur requires access to business, technical, marketing and financial advice, training and credit, plus on-going support from mentoring business network etc.

Adelaja (2004) summarized the characteristics of cottage/small enterprises as follows:
·        Set – up requirement not cumbersome
·        Less capital outlay
·        Non – complex technology
·        More of proficiency and not school qualification required
·        Practical application
·        Little theoretical application
·        Rapid proliferation and easy adoption
·        Low cost of production
·        Affordable pricing among others

2.6       Contributions/Importance/Potentials of micro and small enterprises:
By their nature micro and small enterprises constitute the most viable and veritable vehicle for self – sustaining industrial development. From varied experiences especially in developing countries, MSEs possess enormous capability to grow as indigenous enterprise culture more than any other strategy. It is therefore not unusual that MSEs are generally synonymous with indigenous businesses wherever they exist. Micro and small enterprises in most developing economies represent the sub – sector of special focus in any meaningful economic restructuring programme that targets employment generation, poverty alleviation, food security, rapid industrialization and reversing rural – urban migration. In essence “SMALL IS PROFITABLE IN AFRICA” as UNIDO rightly describes the immeasurable contribution of MSEs to the economics of many African countries (Udechukwu, 2003).

Olorunshola (2003) summarized the importance as follows: They provide an effective means of stimulating indigenous entrepreneurship, create greater employment opportunities per unit of capital invested and aid the development of local technology. Through their wide dispersal, they provide an effective means of mitigating rural – urban migration and resources utilization. By producing intermediate products for use in large – scale enterprises, they contribute to the strengthening of industrial inter – linkages. Small enterprises are known to adopt with greater ease under difficult and changing circumstances because their typical low capital intensity allow products lines and inputs to be changed at relatively low cost. They also retain a competitive advantage over large enterprises by serving dispersed local market and produce various goods with low scale economics for niche markets. They also serve as veritable means of mobilization and utilization of domestic savings as well as increased efficiency through cost reduction and greater flexibility.

Udechukwu (2003) asserted that contrary to the general impression, MSMEs are as much as important economic catalyst in industrialized countries as they are in the developing world. In many developed countries, more than 98% of all enterprises belong to the micro, small and medium enterprise sector. 80% in the total industrial labour force in Japan, 50% in Germany and 46% in USA are employed in smaller firms. Many studies have indicated that the revival of interest in Micro, Small and Medium Enterprises in the developed economies is due to technological as well as social reasons. The growing importance of knowledge and skill – based industry as against material and energy – intensive industry. The social reasons include the need of generation of more employment through self – employment ventures and decentralized work centers. Almost every country provides assistance to micro/small scale enterprises. The emphasis is more on facilities and supportive services than on protection and subsides.

Obiora (2004) asserted that micro/small enterprises development is a MUST for economic development of the developing third world. Their contribution to any economy includes among other, the following economic, social and political benefits.





Economic benefits:
·        Creation of employment opportunities for the citizenry.
·        Improvement in productive base of the economy through utilization of local resources.
·        Maximizing productive capacity of factors of production.
·        Exploring the full potential of the economy and wealth creation.
·        Generating raw materials for local use and possible export.
·        Expanding the export base for both locally produced raw materials and finished goods.
·        Improvement in the country’s Gross Domestic Product (GDP) and Gross National Product (GNP).
·        Stimulating domestic production efficiency.
·        Stimulating competition in the domestic market to ensure fair pricing.
·        Providing relief for productivity deficit (balancing of payment on Export and Import).

Social benefits:
·        Reduction in idle or unemployed people.
·        Reduction in social ills and crime.
·        Improvement in quality of life for the citizenry etc.



Political benefits:
·        Restoration of public confidence resulting to political stability.
·        Stimulation of foreign investment as a result of confidence from international community etc.

Adelaja (2004) summarized the roles of micro/small enterprises in the development of rural economy as follows:
·        Provision of full productive and freely chosen employment.
·        Provision of greater access to income–earning opportunity and wealth creation.
·        Provision of productive and sustainable employment.
·        Increased economic participation of disadvantaged and marginalized groups in the society.
·        Increased domestic savings and investment.
·        Enhancement of balanced regional and local development.
·        Provision of increased local production and consumption.
·        Provision of increased production of exportable products.
·        Reduction of rural – urban migration.

2.7             Definition and concept of Institutions:
Oluwasola (2004) observed that institutions are generally viewed in part as rules of organizing a society. Apart from formal rules such as constitutions, laws, regulations and contracts, it also includes informal constraints and opportunities such as conventions, norms of behaviour, social and personal values and self-imposed code of conduct, together with the enforcement characteristics of the formal rules and informal constraints.

Institutions can also be understood in terms of organizations such as banks, government agencies, community associations, trade and professional union, kinship network and association, market etc. Institutions are found along a continuum from micro or local level to the macro or national and international levels. Institutions also reinforce capacities for collective action and self – help while absence of it can contribute to immobilization and inertia. Institutions comprise a wide variety of formal and informal relationship that enhance societal productivity by making people’s interactions and cooperation more predictable and effective.

North (1994) stated that institutions included social networks, gender roles, legal system politics-administrative system and the state, all of which interact with each other. State institutions cover many aspects such as the public provision of basic education and health services, public order and safety and infrastructure. The nature of governance will determine the availability and quality of these public services.

Non state institutions are social institutions with values and norms. A key social institution is social capital, which consists of informal norms or established relationships that enable people to pursue objectives and act in concert for common benefit. Institutions affect poverty both directly and indirectly through a number of mediating factors. Institutions influence government policies, which in turn influence growth and distributional outcomes, which then affect the pace of poverty alleviation.

2.8       Institutions and Micro/Small enterprises development:
Federal Ministry of Industry (1996) stated that one of the major objectives of the 1994 – 1996 National Rolling Plan was to attain a higher level of economic recovery through a sound foundation for self – reliance and industrial development. It was to be realized through the promotion of entrepreneurship and skill training for viable micro/small enterprises development.

It was on this background that the government’s effort towards a proper implementation of the Micro, Small and Medium Enterprises sub-sector under the UNDP 4th country programme was intensified and a Multi-Sectoral Need Assessment (MSNA) exercise was carried out in 1991 to identify all development needs and constraints in the country.

Entrepreneurship Development Programmes have been facilitates by a number of institutions in Nigeria. These institutions could be classified into:

2.8.1       Government or Government Agencies:              Some of the government establishments that facilitate enterprise development include the Ministry of Industry through the Industrial Development Centres (IDCs). The Industrial Development Centres have been identified as institutions through which technological capacity can be improved by providing among others, training and extension services to potential entrepreneurs.

2.8.2        Ministry of Education:  The general policy framework for the educational system is the 6 – 3 – 3 – 4 system. This policy emphasizes education for self-reliance, employment and technological development. Course contents are geared towards acquisition of practical and applied skills as well as basic scientific knowledge with a shift from the arts and humanities. In achieving this, the focus should be on the provision of workshop; inclusion of industrial attachments as an integral part of the curricula of Universities, Polytechnics and Technical Colleges. Entrepreneurship Development Programmes within this setting will be most beneficial to directing young people towards self – employment opportunities in micro/small enterprises development.

2.8.3        National Directorate of Employment:    High rate of unemployment especially among school leavers is a major economic and social problem in Nigeria. National Directorate of Employment (NDE) was established to address and create employment for agricultural graduates and non-graduates with the right aptitude for self-employment. Nigerians with viable proposals were encourage and given assistance to set up their micro/small enterprises. The strategies employed to encourage small-scale enterprises creation assume that there are enough opportunities for self-employment and improvement of economic potentials and social status of the populace.

2.8.4        Ministry of Health:        The adage, which says that “A healthy person is a wealthy one” holds true for a nation. Some of the objectives of the Millennium Development Goals are among others to address child mortality, reduce maternal mortality and reverse the trends in HIV /AIDS, Malaria, Tuberculosis and other diseases (NPC, 2004). According to DFID (2004), HIV /AIDS prevalence rates are around 5% in Nigeria and presumably impose a major cost on business and reduce quality of work force. This also affects Micro/Small Enterprises Development. It therefore becomes important that the Ministry of Health provides the necessary conditions for improved welfare of the populace. This will enhance human development with its attendant result on productivity in micro/small enterprises in particular and poverty alleviation in general. The following Ministries influence the development of micro/small enterprises.

2.8.5       Ministry of Transport, Works and Housing:  Ensures Infrastructural Development and helps reduce the cost of providing the needed infrastructure for micro/small enterprises.


2.8.6        Public Utilities: Provision of water, electricity and telecommunication.

2.8.7        Ministry of Justice:  Provides adequate legal environment, which could guarantee property right and safety.

2.8.8       Ministry of Science and Technology:  Fabrication of tools and Equipment for micro/small scale industries. This would reduce cost of importing them and also acts as incentive to entrepreneurs as the tools are fabricated in line with the local needs.

2.8.9       Ministry of Agriculture:      Has the mandate for the production of food for the nutritional requirement of the people and provision of raw materials for the enterprises. Agricultural Development Programmes equally provide extension services for increased food production and improved processing options.

2.8.10         Democracy:          In any nation democracy helps instill good governance among the people, eliminate corruption and promote general value re-orientation for economic empowerment of the populace. Among other government Agencies that influence Micro/Small Enterprises Development are the National Poverty Eradication Programme (NAPEP) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). NAPEP has the mandate of eradicating extreme poverty in line with the Millennium Development Goal (MDG) of halving the proportion of people in poverty by the year 2015. Micro/ Small Enterprises Development are among the strategies adopted to reduce poverty. SMEDAN as an agency devoted to promoting policies and programmes for the development of micro/small and medium Enterprises in the country will go a long way in redressing a lot of impediments to their growth and assure the increase in the contribution of MSMEs to meaningful and sustainable national economic growth thereby reducing poverty (Adelaja, 2004).

2.8.11             Financial Institutions:     Financial Institutions are the sources for credit to micro/small enterprises development. Lack of adequate credit to MSMEs, traceable to the reluctance of banks to extend credit to them owing among others, to poor documentation of project proposal as wells as inadequate collateral by MSME operators. Prominent among the banks is the Bank of Industry (BOI), which was initially established by the Federal Government to promote the development of MSMEs. Others include the National Economic Reconstruction Fund (NERFUND), Apex SME Unit of the Central Bank of Nigeria, various state governments credit schemes, commercial and merchant banks, community banks. The MSME sector is being starved of funds and the current gap in the funding of MSMEs has to be filled by Development Finance Institutions (Udechukwu, 2003).

Bank funding of Micro Finance Institutions in Nigeria should be given special consideration. According to Anyanwu (2004) the response of the banking community in Nigeria is changing. He stated that the Banker’s Committee has taken a decision that 10% of the funds accruing to the Small and Medium Industries Equity Investment Scheme (SMIEIS) be channeled to micro/small enterprises through registered micro finance institutions, because the MFIs have grassroot orientation and greater expertise in financing smaller enterprises.

2.8.12             Non – Governmental Organisations (NGOs):   These are private organizations concerned with small business creation and development. They organize training workshops for enterprises development, management, skill acquisition and extension services.  According to Federal Ministry of Industry (1996) such association include Empretec, Nassi, Save and Produce (SAP), Country Women Association of Nigeria (COWAN) etc.  EMPRETEC is a sponsored international programme by United Nations Development Programme (UNDP) for purposes of training and development of local entrepreneurs in Nigeria. It started in 1989.

NASSI – Nigerian Association of Small Scale Industrialists. It is a non- governmental organization established in 1978 and has branches in all the states of the Federation including Federal Capital Territory (FCT) Abuja.

Save and Produce Ltd (SAP) is a non governmental organization specifically involved in the holistic approach of entrepreneurship development programme delivery system such as promotion, training, financing and consultancy/counselling services to its target group. SAP enlists potential entrepreneurs who are committed to contribute certain monthly savings.

Country Women Association of Nigeria (COWAN) caters for rural women in more practical ways. Women are encouraged to form cooperatives where training and financial assistance are offered. The organization is an international body and draws support from donor agencies especially International Labour Organisation (ILO).

Private Consultants:
Private consulting organizations often employed by Public or Private Institutions do run entrepreneurial training, in – house trainings on enterprise development. Among the private consultants are the Growing Businesses Foundation (GBF), Support and Training Entrepreneurship Programme (STEP). GBF and Citibank Nigeria, a group of citigroup has empowered 40 cane weavers with their workshops located under the Maryland Bridge with the sum of $60,000 grant. Obot (2003) stated that they are forging linkages and partners with public, private and informal sectors in providing credit portfolio and training programmes for micro/small enterprises in Nigeria, with the belief that poverty will be alleviated. She equally implored responsible stakeholders to get committed in providing credit and encouraged other private sectors to get involved in giving hope and sustainable employment to micro and small enterprises in Nigeria. Osagie (2005) stated that Hewlett Packard (HP) Nigeria has engaged with partners and communities to empower them to be more useful to the society.

2.8.13             Management Training Institutions: Federal Ministry of Industries (1996) listed the following institutions, which are designed to provide specialized training in management and extensions services to both government and private sector needs. There are:
i.                    Project Development Agency (PRODA)
ii.                 Centre for Management Development (CMD)
iii.               Administrative Staff College of Nigeria (ASCON)
iv.               Centre for Industrial Research and Development (CIRD)
v.                  Nigeria Employers Consultative Assembly (NECA)

They run short support courses geared towards improving the managerial, administrative skills, knowledge and attitude of entrepreneurs.

2.8.14             Market and Marketing Institutions:    According to World Development Report 2000/2001, market-supporting institutions do much to promote growth and reduce poverty. Markets work if they have rules, enforcement mechanisms and organizations promoting market transactions. For the development of micro/small enterprises, there is need for adequate market information about the purchase of input and sale of output. Adelaja (2003) stated that for micro/small enterprises to play a key role in economic growth and industrialization of both developed and developing countries, there must be detailed market study indicating size of market and trend. Market estimate’s assumptions and data sources should be clearly stated and verified. There is need for networking with trade groups and opening access to various markets through Business Support Centres (BSCs).

To encourage access to foreign markets, membership to trading association like the World Trade Organisation (WTO) becomes imperative. However, the quality of these products must meet acceptable standard through regulatory bodies like National Agency for Food, Drug Administration and Control (NAFDAC) and Standards Organisation of Nigeria (SON). Expansion of the standardization and quality control programme to cover micro and small enterprises with a view to making them competitive in the globalised world economy should be intensified. Jamodu (2004) stated that stiff control and prevention of sub – standard poor quality and fake products must be enforced by the appropriate agencies.

2.8.15       Policy Framework:      Federal Government has embarked on new policy measures with pragmatic incentives schemes and institutional restructuring to revitalize the industrial sector of the economy. According to Jamodu (2004) there are tariff structure reforms in favour of local manufacturers in order to reduce the cost of doing business in the country and boost domestic production. It is the policy of the Federal Government to patronize “Made-in-Nigeria” products. Federal Government is determined to positively respond to the charging global business environment by expanding, consolidating and strengthening the resilience and sustainability of the micro, small and medium enterprises. Therefore government is mindful of a rapidly globalising and knowledge – based world economy and cannot afford to ignore contemporary policy instruments and tested best practices to reposition the manufacturing sector for modernization and long-term competitiveness. Consequently Government is promoting policy changes to remove barriers to markets, finance, raw materials and other inputs, and provides a better operating environment for the development of micro/small and medium enterprises.

2.9       Problems/Constraints/Challenges confronting micro /small scale enterprises development:

Micro and Small Enterprises have been acknowledged as the springboard for sustainable economic development. In particular, developing countries have since the 1970s shown increase interest in the promotion of micro/small and medium scale enterprises. Despite the enormous contributions of MSMEs to economic development and poverty reduction, the sector is besieged with many problems. The problems of MSMEs in Nigeria are enormous and ranges from:


2.9.1     Inadequate and Inefficient Infrastructural Facilities:  Inadequate provision of essential services such, as telecommunications, access roads, electricity and water supply constitute some of the greatest constraint to MSME development. Okoro (2004) noted that given the financial outlay of MSMEs, it is hardly possible for them to own their power supply system. Yet the public power supply system as represented by Nigeria Power Holding Company (formerly NEPA) is below acceptable level of performance. Similarly leverages like water supply and good road network are equally not available. In some parts of the country, pipe borne water is a luxury. Sadly too, the state of our roads is deplorable that vehicles, which ply them, are at the risk of constant breakdown and accelerated depreciation. Most MSMEs resort to the private provisioning of these at huge costs.  A World Bank Study (1989) according to Udechukwu (2003) estimated that such cost accounted for 15 – 20% of the cost of establishing a manufacturing enterprise in Nigeria. Contemporary evidence has shown that the relative burden of the compensatory provision of infrastructural facilities is much heavier on MSMEs than on large enterprises. Inadequate storage facilities pose serious problem to MSMEs development in Nigeria.

2.9.2      Constrained Access to Credit:    Olorunshola (2001) noted that banking sector tends to be lukewarm in meeting the credit requirements of the MSMEs. This is because of inadequately prepared project proposals, incomplete financial documentation and inadequate collateral. Access to finance is limited by high interest rates, short loan maturities, heavy collateral requirement, inadequacies of land titles and weak judicial system. The banks also regard many MSMEs as high risk ventures because of absence of succession plan in the event of the death of the proprietor. As a result, working capital is still a major constraint on production, as most MSMEs are restricted to funds from family members and friends. They are therefore unable to respond timely to unanticipated challenges.

2.9.3       Poor Management Practices and Low Entrepreneurial Skill: Inadequate financial resources as well as desire to operate with limited openness on the part of proprietors lead many MSMEs to employ semi-skilled or unskilled labour. This of course, affects productivity, restrains expansion and hinders competitiveness. Anderson (1982) noted that many MSMEs do not keep proper accounts of transactions. This hinders effective control and planning. More ever, lack of relevant educational and technical background and thorough business exposure constrains their ability to seize business opportunities that may lead to growth and expansion. Illiterate old entrepreneurs are averse to new practice to the detriment of the growth and survival of their enterprises.

2.9.4       Financial Indiscipline:   Olorunshola (2001) stated that some MSME proprietors deliberately divert loans obtained for project support to ostentatious expenditure. Some do not divert but refuse to pay back the interest and the capital as and when due because of the misconceived notion of sharing the so – called national cake. It must be admitted, however that there are genuine cases of loan default arising from operational difficulties.

2.9.5       Poor Implementation of Policies:  Sule (1986) noted that poor implementation of policies, including administration of incentives and measures aimed at facilitating MSMEs growth and development have had unintended effects on the sub – sector. This has resulted into confusion and uncertainty in business decision and planning as well as weakened the confidence by the MSMEs on government capacity to faithfully execute its programmes. Bureaucratic bottlenecks and inefficiency in the administration of incentives discourage rather than promote MSME growth. Inconsistent policies relating to sudden obliteration of agencies or projects, too often change of chief executives of programmes and ministries are adverse to the development of MSMEs in Nigeria.

2.9.6       Restricted Market Access: Adebusuyi (1997) observed that insufficient demand for the products of MSMEs also imposes constraints on their growth. Although many MSMEs produce some inputs for the large enterprises, the non –standardization of their products, the problem of quality assurance as well as generally low purchasing power arising from consumers dwindling real incomes, effectively restrict their markets. This is compounded by the absence of knowledge about the existence of fringe markets by the MSMEs. Onokahoraye (1995) stated that market and marketing are underdeveloped and there is a general lack of purchasing power among the majority of the population. He asserted that processors face problems in procurement and storage of raw materials as well as distribution and marketing of finished products. Another problem is obtaining reliable information, on markets for both raw material and finished products in terms of volume, prices and location. Government should assist MSMEs operators to locate foreign markets and attend both national and international exhibitions to improve their products.

2.9.7       Overbearing Regulatory and Operational Environment:    Uduebo (1985) affirmed that incidence of multiplicity of taxes and regulatory agencies has always resulted in high cost of doing business. According to Eboh (2005) a survey conducted by Better Business Initiative (BBI) which was submitted to the Federal Government indicated that formalizing business registration, multiplicity of taxes and levies, low access to information and low access to business finance are the major hurdles to micro/small and medium enterprises development. He said that the challenge of formalizing businesses are currently beyond the capacity of Corporate Affairs Commission (CAC) registration to include inadequate capacity to deal with pre CAC registration, challenges like effective engagement with legal service providers.

According to him, small business shy away from formalizing their operations not because they are afraid of tax payments or high cost of business registration but because of the huge burden of other levies that they are expected to pay particularly at sub – national levels. The same survey found out that the overall system of tax administration in Nigeria tends to be largely arbitrary, not transparent and unfavourable to small business development information available to MSMEs, coupled with the fact that most MSMEs lack the capacity to process and take advantage of available information to improve their business services.

2.9.8       Problem of Machinery and Equipment:     Makinwa (1996) noted that the major problem that impairs the growth of MSMEs in Nigeria has been the inability to get reliable processing machines despite the abundant local raw materials. Lack of technical know-how and experience in relevant technology and lack of access to appropriate equipment is also a fundamental problem. Prevalence of obsolete technology leads to poor product quality. Imported equipment is often inappropriate for our local use and the issue of supply of spare parts and maintenance becomes a hindrance. He further observed that lack of technological base to promote innovative activities and lack of access to new production technologies limit efficiency of MSMEs in Nigeria.

Research should be geared towards prototype machinery development to promote the availability of local technology, machineries and spare parts. Research institute like the National Centre for Agricultural Mechanization (NCAM), should design and develop simple and low cost equipment, which can be manufactured with local materials, skill and facilities.

2.9.9       Human Development:  Human Development Index focuses on progress or the quality of life in a community or country. The United Nations Development Programme (UNDP) in its Human Development Report (HDF) for 1996 revealed that Nigeria ranked 13th out of 174 nations with a Human Development Index of 0.400. UNDP (1996) classified countries with (HDI) value below 0.500 as having low human development, 0.500 – 0.800 medium and above 0.800 – high human development. The Human Development Report put it that Nigeria is a rich country with poor population, the poorest and most deprived in OPEC.

According to Davies (1980) poverty is reflected in very high illiteracy rate, poor health conditions, crude death rates of up to 30 per 1000, life expectancy of 42years (48 years in Nigeria) and about 125 deaths per 1000 life births. Ingawa (2001) noted that as many as 30 million able-bodied Nigerians are either unemployed or underemployed. It is these two conditions, which make it difficult or impossible for this large number of Nigerians to generate adequate income, with which to invest in productive ventures. It is equally important to observe that poverty in Nigeria has a very strong rural dimension. Micro and small enterprises are usually situated in the rural areas, in order to take advantage of the source of raw materials. However, it is hoped that with the injection of the vital factors of production the vicious cycle of poverty will be broken.

Williams (2004) stated that several surveys on business and investment climate in Nigeria have been conducted over the past five years by organization including World Bank – Regional Programme for Enterprise Development (RPED), World Business Environment Survey, UNIDO and Common – Wealth Business Council (CBC). A striking result is that inadequate infrastructure (electricity in particular) was identified as the main business constraint in all the four surveys. Access to credit was identified, as being the second must important constraint. Three of the surveys suggest that MSME are particularly concerned about uncertainty (i.e. political instability, general uncertainty and inconsistent policies) crime, inefficient administration and corruption were also highlighted as major concerns.

It is necessary that Government should pay attention to training so as to produce the right quality of human resources, because knowledge is power. These could be done by providing very good facilities in the teaching of technology and sciences in schools. Machines, tools and equipment and other workshop facilities should be provided in vocational schools and technical colleges.

2.10    Women and micro/small enterprises:
Women entrepreneurs play an important role in local economies and a large percentage of micro/small enterprises in developing countries are undertaken by women. According to Australian Agency for development (1997), increasingly, women in urban and rural areas are successful turning to self-generated employment in micro/small- scale enterprises activities in the informal sector to support their households. Rural women frequently have primary responsibility for agricultural production, in addition to domestic chores and childcare. These responsibilities place heavy demand on women’s time and micro/small enterprises activities can potentially increase the workload of women. Yska (1998) noted that International Statistics from Organisation of European Cooperation and Development (OECD) show that women are creating businesses at twice the rate of men. The share of women among the population of self-employed workers worldwide has risen from 26% in 1970 to 40% in 1990. According to the report, in some OECD Countries, female entrepreneurs are moving into high growth and high-tech industries such as health and business services.

Women like the flexibility of self-employment and its compatibility with childcare. They also have a desire for independence. Individual innovation, the ethic of work, the ability to take risks and the sense of personal pride also characterize women’s enterprises. Yska (1998) noted that women create their own ventures to ensure their ability to provide for their families but several other factors are important. In some cases, women establish a business that will ensure them an income over the long term; in other cases there are immediate requirements for such things as school fees and once there are satisfied, the need for income generation ceases and other priorities take over.

Azikiwe (1990) and Osuala (1991) affirmed that women constitute over 70% of agricultural labour force and are food producers, processors, distributors and marketers as well as keepers of livestock. The production of food for consumption is not all that it takes to have a stable agricultural system. Processing, storage and marketing of agricultural products are very necessary to prevent post-harvest losses, thereby ensuring food supply throughout the year. Women have been found to be very involved in these activities. Eboh and Ogbazi (1990) stressed that food processing is clearly reserved for women.

Women are identified as predominant in the informal sector. Although women’s economic activities have often been viewed as marginal, they have often used their skills to generate income. They usually consist of independent self- employed producers, are small or micro scale in their operations, based on simple organizational and production structures, often employ family labour or a few hired workers, are labour intensive, use low technology or skills, require low capital per worker, operate on unregulated and competitive markets, maintain few if any business records and have little access to capital (Women’s micro enterprises, 1998).

Women Entrepreneurs in SMEs (2001) stated that limited access to productive resources (particularly capital, labour, time and technologies), transport constraints, lack of market knowledge and lack of literacy and numeracy skills restrict the capacity of women to participate effectively in business activities. Women, who generally do not have ownership of land or capital goods are disadvantaged by the collateral – based lending policies of financial institutions. Inaccessibility of women to formal credit has remained a major constraint to increasing their investment potentials. The main source of initial invested capital is personal savings or gifts and from informal credit agencies. Informal credit sources, which include friends, relations, moneylenders and traders etc charge very high interest rate. According to Ojo (1985) the amount of loan given out is usually small compared to the needs of these women. This therefore authenticates the belief that the volume of loan granted to micro/small entrepreneurs from these sources is insufficient to adopt to new innovations and purchase of the needed new improved equipment/tools for processing etc. In some places, government and/or institutional regulations require that women seeking bank loan secure their spouse’s signature. Development organizations such as cooperatives, which restrict membership to one household member, also exclude women from access to resources like credit.

Social attitude concerning the value of traditional women’s work activities and their potential abilities can limit the participation rate and ultimate commercial success of female entrepreneurs. In the past, income generation projects for women have frequently been for marginal activities with limited marketing potential and poor return on labour. According to Women Entrepreneurs in SMEs (2001), loans for men are usually larger and more long – term than those provided for women. However, much evidence indicates that women are very good credit risks, with many small-scale credit projects for women reporting very high repayment rates in a range of sectors and activities. They therefore reported that there are key criteria for micro/small enterprise development schemes, aimed at poor rural women, which can both improve demand for credit and reduce the risks of indebtedness. These are modest financial investment, low investment risk, short gestation period between investment and generation of regular income and availability of local markets. Targeting women as clients of micro credit programmes has also been a very effective method of ensuring that the benefits of increased income accrue to the general welfare of the family. The Grameen Bank of Bangladesh is a case in point where about 95% of the borrowers were poor rural women, resulting to improved socio-economic potential of the beneficiaries. (Jacob, 1995).

In “Partnership for Development” magazine (1995) the United Nations Development Programme noted that of the estimated 1.3 billion people living in poverty, more than 70% are female. The feminisation of poverty is a direct consequence of women’s unequal access to economic opportunities. It is also related to the number of female – headed households ranging 20% - 24% and in most developing countries, the percentage of female-headed households is very high.

In Nigeria, the 1991 population census estimates that out of the 31 million rural women in the country, 16 million live below the national defined poverty line, lacking access to basic education, decent nutrition, adequate health and social security. This figure excludes the several million urban poor women who are in the cities. The negative impact of poverty on the advancement of women in Nigeria includes their marginalization in decision making capacity, poor appreciation of their contribution in the national economy, poor health, illiteracy and lack of education opportunities.

Yska (1998) reported that women, who borrowed from micro credit scheme lacked confidence in operating a business, had insufficient technical advise on marketing, thus there was saturated market for their products. They also had difficulty in separating their business, family needs and community obligations. It is therefore important that skills and capacity building support are available. Particularly important is business development and business skills training in helping the borrowers to identify a viable income generating activity and how best to run the enterprise. More reliable linkages between credit schemes and other business, development services are considered important in ensuring the sustainability and relevance of micro – lending schemes to the women. United Nations Industrial Development Organisation (UNIDO) has devised training programmes specifically geared at women and their specific needs in order to increase their options and potentials. With the rural – urban drift of able – bodied males, rural development depends heavily on women. In order to fight poverty and promote integrated rural development, it is necessary to encourage the production of women – specific tools and women – friendly technologies (machines) that can easily be manipulated by women.

According to United Nation (1986) micro – financing for women’s small and micro – scale enterprise has been seen as effective way to promote and support women’s self – employment and access to credit. The promotion, financing and strengthening of micro/small enterprises are important ways of increasing the productive capacity of women and breaking the vicious cycle of poverty.

2.11    Financial Institutions and micro finance for micro/small enterprises development in Nigeria:
One of the roles of the Central Bank of Nigeria as the apex financial institution in the country is to facilitate the flow of finance to the needy areas of the economy. Capital is needed for the establishment of new businesses as well as the expansion, modernization and diversification of existing ones. While finance is obviously not the only problem militating against the development of micro/small and medium enterprises, it is certainly the most formidable. The MSMEs have had limited access to institutionalized credit facilities, owing to various factors. Some of the major factors include the fact that they are considered very risky in view of their vulnerability in the market as well as their high mortality rate. Banks and other financial institutions are in favour of lending to large corporate borrowers where there is assurance of security, high profitability and faster rates of returns. Owing to their nature, MSMEs seeking loans are usually or unwilling to provide accounting records and other documentation required by banks. Many of them are equally unable to provide acceptable collateral for their loans. According to Anyanwu (2003), in recognition of these constraints, and in order to ensure the realization of the potential benefits of virile MSMEs in the economy, the CBN has remained committed to the growth and development of the MSMEs in Nigeria. Financial support programmes for promoting MSMEs in Nigeria have been many and include the following:

2.11.1             Central Bank Credit Guideline; which required banks to allocate varying percentage of stipulated credit to some sectors of the economy including small-scale enterprises was instituted in 1970.

2.11.2             Small Scale Industries Credit Guarantee Scheme; which was established in 1971 as a matching grant arrangement between Federal Government and State Government.

2.11.3             Establishment of Agricultural Credit Guarantee Scheme 1979:  The scheme has made some impact on the extension of credit to the agricultural sector.

2.11.4             The Nigerian Bank for Commerce and Industry (NBCI) 1973:  The bank was set up to provide among other things financial services to the indigenous business community particularly MSMEs. The NBCI operated as an apex financial body for the SME and also administered the SME I World Bank Loan Scheme. The NBCI suffered from operational problems, culminating in a state of insolvency from 1989. It is now part of the newly established Bank of Industry (BOI).

2.11.5             The Nigeria Industrial Development Bank Ltd (NIDB): The bank was established in 1962 with the primary mandate of providing medium to long term loans for investments in industrial activities. Although its loan portfolio covers mainly large-scale industries, the bank had special requirements. It was also responsible for the bulk of credit delivery to the SME under SME II loans scheme. Arising from financial and other constraints, NIDB has been merged with similar institution under the newly established Bank of Industry.

2.11.6             The National Economic Reconstruction Fund (NERFUND):  With the introduction of Structural Adjustment Programme (SAP) in 1986, and the resultant major devaluation of the Naira, many small scale enterprises were finding it difficult to secure finance for their working capital, and investments purposes. In order to bridge the observed widening resource gap among this class of enterprises, the Federal Government set up the National Economic Reconstruction Fund (NERFUND) effective 9th Jan. 1990 with the CBN and other facilitating institutions. It was aimed at providing relatively long term loans (5-10 years) to small and medium enterprises at concessionary rates of interest, thereby removing the most formidable handicap to SME development. NERFUND credit extension activities have been seriously constrained mainly by the significant impact of devaluation of the Naira and its effects on loan servicing by beneficiaries. NERFUND was merged with two other DFIs (NIDB and NBCI) to form the Bank of Industry in 2001.

2.11.7             World Bank – Assisted SME II Loan Project:  In order to further expand credit delivery to SMEs, the Federal Government negotiated some financial assistance in 1989 with the World Bank to complement other sources of finding the SMEs. Altogether, this facility involved a loan of US$270 million, which was made available for on lending to SMEs through eligible participating banks. The credit components and other related activities of the World Bank loan were administered by the CBN, which established an SME Apex Unit in 1990 in order to facilitate its proper implementation. Total disbursement of US$107.1 million as at June 1996 resulted in the establishment and modernization of 102 projects.

2.11.8             Rural Banking Scheme:  The Rural Scheme started in 1977 and was basically designed to solve the problems of rural underdevelopment and inadequacy of credit to the agricultural sector and rural based small-scale industries. The scheme mandated the commercial banks in Nigeria to establish branches in the rural areas. By 1989, a total of 756 new rural bank branches had been opened with a total deposits in all the rural branches amounting to about N5.7 billion. There are indication that the activities of the rural branches have had some beneficial effects on the development of the rural areas and promotion of banking habit.

2.11.9             People’s Bank of Nigeria (PBN): The bank was formally commissioned in October, 1989 with the objective of meeting the credit needs of the very small (micro) enterprises. By 1993, the activities of the bank have extended to all the states of the federation in the bid to achieve a target of 170 branches. The banks loans were administered to groups of entrepreneurs rather than individuals on a deliberate policy based on the “Peer Pressure” concept. In its recent years of operation, the bank had achieved successes, judging by the number of small enterprises that benefited from the scheme. However, the main problem of the bank was its inadequate financial resources, which came mainly from the Federal Government as grants.

2.11.10           Community Banks: The CBN facilitated the establishment and development of the community banks scheme, which took off in 1991. The objectives of the community banks include the promotion of rural development by providing financial and banking services to communities inadequately supplied with such services.

2.11.11           The National Directorate of Employment (NDE):  The NDE is another channel through which government has promoted the development of SMEs. Established in 1986, NDE launched a number of programmes or schemes complemented by an entrepreneur development programme to assist SMEs. Facilities under the two schemes are repaid over a five-year period at a concessionary interest rate with varying period of moratorium. Salami (2003) stated that though these schemes and programmes which were put in place to find solutions to the problems of credit delivery to the SME, have considerable successes, there still exists a huge gap to be filled. He further indicated that the Central Bank of Nigeria has evolved new initiatives, which are geared towards accessibility and availability of credit to the SME through the following:

1.         The Small and Medium Industries Equity Investment Scheme (SMIEIS):  In 2000, the Central Bank of Nigeria successfully persuaded the Bankers’ Committee to set aside 10 percent of its annual pre-tax profit for equity investment in small and medium scale enterprises. The activities targeted under the scheme include agro-allied, information technology, telecommunications, manufacturing, educational establishments, services, tourism and leisure, solid minerals and construction. The scheme was launched in August, 2001. With the introduction of the scheme, it is expected that improved funding of the SMEs will facilitate the achievement of higher economic growth.

2.         Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB):  The Nigeria Agricultural Cooperative and Rural Development Bank Limited is an amalgam of the former Peoples Bank of Nigeria (PBN), Nigerian Agricultural and Cooperative Bank (NACB) and the Family Economic Advancement Programme (FEAP). It was set up in October, 2000, primarily to finance agriculture as well as small and medium enterprises. The NACRDB is structured to accept deposits and offer loans/advances in which the interest rates are graduated according to the purpose for the loan. The bank also offers a number of financial products including target savings, start-up as well as smallholder loan schemes.

3.         The Bank of Industry: This is an amalgam of the former Nigerian Industrial Development Bank, the Nigerian Bank for Commerce and Industry and the National Economic Reconstruction Fund (NERFUND). It was set up in 2000 with the principal objective of providing credit to the industrial sector, including the small and medium scale enterprises.

Oyekanmi (2003) affirmed that the various measures taken to ensure the growth and development of the small and medium scale enterprises have witnessed limited success as a result of myriad of reasons. These include inadequate infrastructural facilities, continued restricted access to credit as well as abuse of the various programmes by both the beneficiaries and the operators arising from insincerity of purpose, among others. Consequently efforts towards a sustainable growth of the sub-sector should be intensified. He suggested that the various current initiatives (SMIEIS, BOI, NACRDB) etc should be strengthened and refocused in order to obviate the problems associated with past initiatives. He equally advocated that government should also assist by establishing a well-funded national Credit Guarantee Fund that will act as buffer for credit facilities from banks and other financial institutions over and above the equity provided under SMIEIS.

2.12         Micro Finance for Micro/Small enterprises:
Micro finance institutions consist of agents and organizations that engage in relatively small transactions using specialized, character based methodologies to serve low – income households, micro enterprises, small farmers and others that lack access to the banking system. They may be informal, semi formal (i.e. legally registered but not under Central Bank Regulation) or formal financial intermediaries.

Anyanwu (2004) noted that the unwillingness or inability of the formal financial institutions to provide financial services to the urban and rural poor, coupled with the unsustainability of government sponsored development financial schemes contributed to the growth of private sector – led micro finance in Nigeria. Before the emergence of formal micro finance institutions, informal micro finance activities flourished all over the country. Informal micro finance is provided by traditional groups that work together for the mutual benefits of their members. These groups provide savings and credit services to their members. Anyanwu (2004) equally stated that the informal micro finance arrangement operate under different names: “Esusu” among the Yorubas of Western Nigeria, “Etoto” for the Igbos in the East and “Adashi” in the North for the Hausas. The key features of these informal schemes are savings and credit components, informality of operations and higher interest rates in relation to the formal banking sector. The non – traditional, formalized Micro Finance Institutions (MFIs), are operating side by side with the informal services.

Anyanwu (2004) stated that the Development Finance Department of the Central Bank of Nigeria in 2001 carried a survey on ten major Micro Finance Institutions. These were:
1.         Farmer’s Development Union (FADU) Ibadan.
2.         Community Women and Development (COWAD) Ibadan.
3.         Country Women Association of Nigeria (COWAN) Akure.
4.         Life Above Poverty (LPO) Benin.
5.         Justice Development and Peace Commission (JDPC) Ijebu – Ode.
6.         Women Development Initiative (WDI) Kano.
7.         Development Education Centre (DEC) Enugu.
8.         Development Exchange Centre (DEC BAUCHI) Bauchi.
9.         Outreach Foundation (OF) Lagos.
10.       Nsukka Area Leaders of Thought United Self-Help Organization (NLTNUSHO) Nsukka.

The financial services provided by the MFI in Nigeria include savings, credit and insurance facilities. The stated objectives of the MFIs as obtained through the survey exercise are summarized as:
a.         To improve the socio – economic conditions of women, especially those in the rural areas through the provision of loan assistance, skills acquisition, reproductive health care service, adult literacy and girl child education.
b.         To build community capacities for wealth creation among enterprising poor people and to promote sustainable livelihood by strengthening rural responsive banking methodology; and
c.         To eradicate poverty through the provision of micro finance and skill acquisition development for income generation.

Salami (2003) indicated that the operations of formal micro finance institutions in Nigeria are relatively new as most were registered after 1981. The ten micro finance institutions analysed in the study according to Anyanwu (2004) were also registered from 1982 as non-governmental organizations (NGOs). They operate in both urban and rural areas except for three institutions that operate exclusively in the rural areas.

Unlike in the banks, asset based collateral is de-emphasized by the MFIs. Lending is done on group basis and a group is made of between 5 to 10 clients. The collateral is the collective pledge of the group to repay, based on community recognition. In addition, the MFIs concentrate on short term financing, owing to the large demand for loans and their limited assets. All the clients were low-income individuals, operating micro/small enterprises. The principal sources of funds for the organized MFIs in Nigeria is aid and grants, which come mainly from abroad. The major donor organizations of the ten-surveyed MFI were United Nations Development Programme (UNDP). The Ford Foundation, the African Development Foundation, Community Development Foundation, Development and Peace of Canada, EZE of Germany and the Catholic Agency for International Development of the Netherlands (Anyanwu, 2004).

Large volumes of financial transactions are carried out by micro finance institutions, with little or no publicity around them. Their operations are not explicitly captured in official financial statistics and their activities are hardly reported on by the mass media. However, their transactions impact directly on a large section of the population, especially the poor. According to Anyanwu (2004), two major criteria – Outreach and sustainability, have been selected for evaluating the performance of MFIs. Outreach is defined as the ability of an MFI to provide high quality financial services to a large number of clients. The indicators of outreach performance include changes in number of clients, the percentage of female clients total value of assets, amount of savings on deposit, value of outstanding loan portfolio, average savings deposit size, average credit size, number of branches etc. Sustainability on the other hand requires MFIs to meet all transaction costs including loan losses, financial costs, administrative costs etc with some return on equity, which will ensure renewal and self-sustenance.

The MFI operations are expanding but face enormous challenges. The first challenge is outreach. The 2001 CBN survey indicated that their client base was about 600,000 in 2001, and there are indications that they may not be above 1.5million in 2003 (Anyanwu, 2004). This is too small for a country that has over 60 million people that require micro finance services. The Government and its institutions including the Central Bank should work in concert to promote the sector, as a means of mobilizing domestic savings, widening the financial system, promoting enterprises, creating employment and income and reducing poverty. The MFIs can take advantage of the banks’ Small and Medium Industries Equity Investment Scheme (SMIEIS) fund, ten percent of which has been reserved for micro enterprises. This will integrate the MFIs and micro enterprises into the formal sector and widen the financial system.

The MFIs can also access funding from the Developing Finance Institutions on on-lending basis because they have greater capacity to reach micro – enterprises than the DFI.

There is urgent need to put in place a policy framework that will regulate the establishment, operations and activities of MFI in Nigeria. This is very important for those MFIs that accept deposits from the public for which there is need for confidence building, efficiency of operations and safety of deposits. The lack of a policy framework encourages multiple standards and lack of uniformity in financial transactions. A draft policy document, which was prepared by the Development Finance Department of the CBN was ready after the international validation summit held in March, 2004. The management of the Central Bank of Nigeria should take urgent measures to accept and operationalise the policy.

The issue of sustainability is crucial to the continuous operation of the MFIs. There are indications that the level of financial self-sufficiency is low. The level of grants as a source of funding is very high while the contribution of commercial sources, such as savings is low. There is need to reverse the trend, to emphasize savings mobilization, source long – term bank funding, negotiate funding arrangement with the DFIs and reduce dependence on grants. Thus commercial banks in Nigeria should begin to play a larger role in the provision of micro – credit funding. The experience in Bangladesh, Egypt and Kenya are very good examples, in which banks have done much to fund MFIs and micro enterprises, (Anyanwu, 2004).

2.13    Definition and concept of Poverty:
Poverty has been defined in many ways. Aluko (1975) refers to poverty as a lack of command over basic consumption needs, which means that there is an inadequate level of consumption giving rise to insufficient food, clothing and/or shelter and more over lack of certain capacities such as being able to participate with dignity in the society. Onibokun et al (1992) defined poverty as a deprivation of entitlement through lack of access to economic and social resources and also political participation and consultation. The basic definition of poverty is a lack of access to or command over the basic requirements for an acceptable standard of living. A person is poor if he/she has insufficient food, or a lack of access to some combinations of basic education, adequate health services, clean water and safe sanitation system, basic infrastructure and even a safe area in which to live (IDB and Poverty Reduction, 1997).

Accordingly, people are counted poor when their measured standard of living in terms of income or consumption is below the poverty line. Okoye (2004) states that poverty line is a measure that separates the poor from the “non – poor”. However, poverty has both income and non – income dimension usually intertwined.

Scholars have described the poor as those who are unable to obtain an adequate income, find stable job, own property or maintain healthy conditions. They also lack adequate level of education and cannot satisfy their basic health needs. Thus the poor are often illiterate, in poor health and may have short life span. They have no (or limited) access to basic necessities of life, are unable to meet social and economic obligations, lack skill, gainful employment and self-esteem (Sancho, 1996).

Generally the poor are disappropriately located in rural areas and slums in urban area. World Bank Report, (1990) affirmed that the inability to satisfy the basic needs perpetuates poor health, gender inequality and rapid population growth. Human poverty is more than income poverty – It is the denial of choices and opportunities for living a tolerable life (Sancho, 1996).

2.14    Agro-allied enterprises and income generation:
Agricultural growth is one of the indices of national greatness and development. No nation can be proud in the midst of International Community if she cannot feed her citizens. Food is so strategic that no nation can afford to ignore its availability and affordability by the citizenry. The availability of food in adequate quantity and quality all year round within the purchasing power of the citizens is the aim of the National Programme on Food Security. The target focuses on enhanced food production, processing as well as storage, distribution and marketing.

Agro – allied enterprises depend on agriculture for their sustenance either as raw materials in the course of production or semi – finished products which become raw materials for other industries. Agro – allied activities therefore complement farm activities in providing gainful employment and increased income to the people. They also form economic linkages with the farm and other industries, which use agricultural products as their raw materials.

It is in recognition of this fact that the Family Support Programme (FSP) was initiated by the Federal Government (Blue Print on FSP, 1994). The agro processing/packaging centers were established and the project involved the procurement and installation of low – cost agro – processing and packaging equipment, which were managed by family units and cooperatives. Such equipment include the following: - milling machines, cassava graters/fryers, oil extractors and threshers, fruit juicers, milk charmers, smoking kilns, packaging kits, grinders, drivers etc. These activities therefore enhanced the economic status of the populace due to income generated from the projects. It equally emphasized and encouraged family units towards self – reliance and self – sufficiency (Aliyu, 1998).

Agriculture is a major industry in Ebonyi State. An estimated 85% of the state’s population earn their livelihood from it. The major crops include Rice, Yam, Cocoyam, Cassava, Maize, Vegetables, Groundnuts, Beans, Pepper, Tomatoes, Sugarcane, Pineapple, Banana and Plantain. The tree crops include Oil Palm, Coconuts, Pears, Kola etc (Ministry of Commerce, Industry and Tourism Ebonyi State, 2000).

As an agrarian state, two major food types are predominantly grown and processed. These are the Root and Tuber crops and the grain crops. The production and processing of rice in Ebonyi State have undergone some appreciable technologies that are well adopted by the farmers. The Rice Mill Industry in Abakaliki records appreciable number of buyers on daily basis. The income from rice production and processing would have made a tremendous impact on the standard of living but for the importation of rice (Ezike, 2003). The mandate of Root and Tuber Expansion Programme is to link farmers to a wider market for increased income to rural farmers through processing of the Root and Tuber crops (Olomo, 2002). The provision of early maturing, a high yielding cassava variety has increased the output of cassava in Ebonyi State. However, these crops (Yam, Cassava, Potatoes, etc) have not undergone appreciable processing stages in the state, resulting to glut in the market with attendant low price and poor income to farmers.

Nigeria has been the world’s leading producer of cassava since 1993. The benefits of this achievement have however not yielded significant impact due to cyclical incidences of gluts and poor producer prices. These constraints can however be overcome by harnessing the possible uses of cassava in food and non-food applications (Olomo, 2003).

Ahmadu (2005) stated that the import substitution drive and the new trade policies on cassava which include: inclusion of Garri in National Food Strategic Reserve, inclusion of 10 percent cassava flour for bakers, the Presidential Cassava Initiative target of $5 billion through new growth in domestic and export market and the inclusion of chips in livestock feed have made cassava gain popularity among the low and high, small and large scale farmers, processors as well as end-users of cassava products.

Oil processing is another means of empowering Ebonyi farmers and micro/small scale entrepreneurs. Efforts are being made by state government to rehabilitate old palm tress and new nurseries are raised for distribution to the local government areas.

Siting of agro-allied industries close to area of production is one means of reducing post-harvest food losses and operational running costs, thereby benefiting from comparative advantage of the area. Besides eliminating local and seasonal gluts and shortages, the technologies provide sound bases for the establishment and successful operation of food processing industries of diverse capacities and complexity (Makinwa, 1996). Establishment of micro/ small-scale enterprises helps absorb some of the unemployed. This helps engage idle hands, stem migration to urban areas and very importantly serve as a means of sustaining livelihood for family members (Blue Prints on the FSP 1994).

Obanu (1990) noted that the establishment of agro-based industries with locally available raw materials encourage entrepreneurship, ingenuity, mass employment and upliftment of the social and economic status of the populace. It also aids in the real output of goods and services, improvement in literacy, health services, housing condition and government services, improvements in the level of social and political consciousness of the people and greater ability to draw on local resources to meet local needs (Akpakpan, 1987). The processing of food like Cassava, Maize, Oil Palm, Rice, Soyabean etc through mechanized methods implies that physical efforts by women is reduced or eliminated leading to economic use of time while employment is generated in associated activities.

Ibe-Enwo (1997) suggested that more research should be channeled into the production of locally fabricated equipment for all the garri processing operations. Universities, Colleges of Technology and Research Institutes were advised to manufacture improved/mechanized processing equipment (machines) that are female friendly at affordable prices to alleviate the problems associated with local methods of processing. As people learn to operate service and repair the machines, there is improvement in the technical knowledge of the technicians. Other subsidiary/cottage industries and related businesses such as mechanic workshop spare parts shop; petrol/diesel/engine oil selling depots are established, thus creating additional employment for the masses and market for industrial products.

2.15         Strategies for Poverty reduction:
Ezike (2003) stated that strategies for poverty reduction in Ebonyi State should be targeted at either raising income level or raising the level of basic needs of the people or increasing the capacities of individuals in the society. This could be achieved through reduced cost of raw materials, processing farm inputs. The farm inputs can be made available through the establishment of farm shops. In the case of micro/small enterprises, processing machines can be acquired through formation of cooperatives. This is in line with Ibe-Enwo (1997) who recommended that women farmers and processors form viable cooperative societies for adequate capital mobilization and realization of necessary benefits that accrue to such organizations. There is need for the provision of cheap credit for processing. According to Uduma (2005) N16 million was extended to Ebonyi Farmers and Processors as loan under the NAPEP Farmers Empowerment Programme. This obviously has impacted positively on the socio-economic status of the people. There is equally the need to provide cheap and available processing technologies. Loan have been given to local fabricators for prompt manufacture and delivery of cassava processing machines under the Root and Tuber Expansion Programme (RTEP). Most importantly, there should be better prices for agro-processed products. Favourable market should be created to stimulate micro/small agro processors in order to eliminate glut. Federal Agro Processing and Market Expansion Groups (FAMEG) and their State Counterpart (SAMEG) are groups under Root and Tuber Expansion Programme (RTEP) responsible to link processors with big industries that use root and tuber products as their raw materials.

In broad terms, a people-centered approach to growth and development is desired for significant reduction of poverty in Nigeria. People should be seen as the means and end to growth and development. Both the public and private sector should develop a positive attitude for people’s welfare (Ibrahim, 2005).

A second general strategy for poverty reduction is the community approach. The community should be the center piece of poverty alleviation efforts by drawing on the potentials of the community-based organizations so that they participate in the design, prioritization, implementation, monitoring and evaluation of projects that directly affect them. In other words, a Bottom-Up” as opposed to “Top – Down” approach. Also implicit in the community strategy is the fact that most projects are to be demand-driven (World Bank, 2000). In line with this, Ebonyi State government has signed a Poverty Reduction Strategy Agreement with the Federal Government, World Bank and African Development Bank (ADB) for Ebonyi Community Poverty Reduction Programme.

EB-CPRA (2005) stated that Ebonyi Community Poverty Reduction Programme is meant for community poor but productive groups, disabled and disadvantaged groups, viable income generating groups, women and youth groups and community/town union groups. Sectoral micro-projects that are supported include education, health, water supply, feeder road construction, rural electrification, market development, skill development/acquisition, sanitation, agricultural and social/civic center development. Poverty reduction needs to be tackled with holistic approach. Therefore poverty alleviation in Ebonyi State can be achieved by increasing the level of basic necessities of life. These include the provision of infrastructural facilities like good road network, water and electricity, adequate health care system, access to functional education for human development, adequate transportation and communication system.

2.16         Industrialization process in Ebonyi State food sector:
Rural Industrialization especially through agro-based enterprises is one of the practical ways of reducing rural poverty as most of the technologies are either indigenous or modernized traditional technologies with products that are acceptable to the rural people (Onokerhoraye, 1995). Government as a matter of policy regard industrialization as the most important factor towards achievement of self-reliance and economic empowerment, without which no nation can have the stability necessary for internal peace and command international respect.

Idriss (1992) suggested that poverty is best reduced by directly supporting the productive activities of the poor thereby creating a fairer economic environment to enable them perform better.

For a systematic and speedy employment creation and economic empowerment of the people of Ebonyi State through implementation of Industrialization Programme in the food sector, the committee on strategies for Food Processing, storage, Preservation, Marketing and Distribution in Ebonyi State (EBSG, 2004) proposed that Government’s major roles should be in the sensitization of investors and the people on the investment opportunity that exist in the food industrial sector of the state. To perform these roles effectively, the committee recommended that Government sets up an Agency for Food Processing Distribution and Marketing (EBFODIMA) in the state. It is also envisaged that industrialization process be facilitated if cooperative association or potential entrepreneurs have easy access to credit. It is thus suggested that government sets aside five percent (5%) of its annual budget for the next five years as “Special Fund” for the development of Small and Medium Scale Industries. Government should equally provide the needed infrastructure and enabling environment for rapid industrialization. The committee also urged Government to intensify efforts in opening up and rehabilitating rural roads, providing water and electricity for desired impact in rural areas. Government is equally urged to explore the use of less expensive solar energy for provision of electricity in the rural communities. The committee noted that the current level of agricultural production in the state is far below estimated potential, thus the proposed processing industries when established would exert substantial pressure on the food supply situation in the state. Government was thus urged to set up a committee to develop a blue print for agricultural development in Ebonyi State with a view to setting out strategies and targets for massive production of food and raw materials in the state. Presently, there is a committee on increased food production in the state with the mandate of ensuring massive production of those crops, which have potentials for industrial use as raw materials. These include groundnuts, cassava, rice, palm oil, maize etc.

Micro/small enterprises are the engine room for development of any economy and institutions that favour their growth and development need to be encouraged. Economic growth can be accelerated if attention is focused on issues of integrated rural development with respect to farm production, agro-industries, facilitating services and marketing of inputs and outputs. Government is therefore urged to play its role in delivering Democracy Dividend to the people. Through active participation in agro-business, the economic empowerment and social status of the populace would be elevated, thus breaking the vicious cycle of poverty, with its resultant multiplier effect on the overall development of the state in particular and Nigeria as a whole.

Through the literature that have been reviewed, some researchers have done some studies on micro, small and medium enterprises and poverty reduction in general. Ebonyi state is relatively young and agrarian in nature. Presently, not much has been done on the effects of institutions on the development and growth of agro allied processing enterprises due to the young status of the state.

The research therefore is intended to identify institutions that influenced the growth of micro/small agro-allied processing enterprises for industrialization of the food sector of the state. This in no small measure will empower the micro and small agro-allied processing entrepreneurs to become financially stable resulting in enhanced socio-economic status, political emancipation of women and general well being of the citizens. It is the opinion of the researcher that the result will be in line with the Millennium Development Goals (MDGs) of reducing by half the number of people living in poverty by 2015.

Relationship between Institutions, Micro/Small Agro -allied processing enterprises and poverty alleviation.


2.17         Conceptual Framework:
The conceptual framework as presented illustrates the relationship or linkages, which exist between institutions, micro/small agro – allied processing enterprises and poverty alleviation.

 

Figure 1: Relationship between Institutions, Micro/Small Agro -allied processing enterprises and poverty alleviation.

Explanation of Conceptual Framework Organigram

Institutions play important role in promoting the establishment and development of micro/small agro – allied processing enterprises, which ultimately leads to enhanced socio-economic status of the populace.

A.           Government Ministries, Parastatals and Agencies are represented by the following institutions;
        i.            Federal/State Ministry of Education for manpower development through improvement of human resources (capacity building) and skill acquisition through formal education in schools, colleges and tertiary institutions.
     ii.            Ministry of Agriculture – Production of food, raw materials and provision of extension services, access to agricultural input.
   iii.            Ministry Justice – Provision of adequate legal environment that guarantee quick dispensation of cases relating to land dispute, property right and safety, general security of citizens.
   iv.            Ministry of Works and Transport – Ensures good road network and adequate transportation system.
      v.            Ministry of Lands and Housing – Facilitates acquisition of certificate of occupancy (C of O) for construction of MSME building (factories).
   vi.            Ministry of Commerce and Industry – develop product development and networking with trade groups, opening access to various markets through business support centers.
 vii.            Public Utility – Provision of potable water, constant electric supply and reliable telecommunication system.
viii.            Ministry of Science and Technology – Improvement on research for fabrication of tools and equipment for MSME development.
   ix.            Ministry of Health – For improved health care delivery system (Primary, Secondary and Tertiary Healthcare) Most importantly establishment of primary health centres in the rural areas. Improved nutrition and sanitation for the populace.
      x.            Ministry of Finance – Governments Financial contribution for MSMEs counterpart funding. Linkages to special credit schemes, foreign financing and fund.

B.            Some government agencies that are promoting MSMEs include:
        i.            National Poverty Eradication Programme (NAPEP), which has the mandate of eradicating extreme poverty in line with the Millennium Development Goals (MDGs). Micro and Small Enterprises development is a strategy of reducing poverty.
     ii.            Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is devoted to promoting policies and programmes for the establishment and sustenance of small and medium enterprises.
   iii.            National Directorate of Employment (NDE) was established to address unemployment. NDE creates opportunity for self – reliance and economic empowerment through skill acquisition and entrepreneurship development for income generation.
   iv.            Industrial Development Centres (IDCs) provide enhanced technological capacity through training and extension services to potential entrepreneurs. Aids development of industrial parks, facilitates the formation of products clusters for complementary MSMEs.
      v.            National Orientation Agency (NOA) promote value and attitudinal re-orientation, awareness campaign for “Made – In – Nigeria – Goods” and good investment habits. Advocate Transparency, Accountability, Due Process and Good Governance.
   vi.            Government Economic Policies: Government reviews and updates existing policies and legislation as they relate to MSME development for example tariff structure reform (Tax relief) in favour of local manufacturers to boost local production, low and predicable interest rates.

C.            Other institutions comprise financial institutions, which are Central Bank of Nigeria (CBN), Commercial Banks, Community Banks, Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB), Micro Finance Institutions, semi formal and informal credit organizations. They provide favourable credit support services to the development and growth of MSMEs.
D.           Community based organizations include: Town Unions Age Grade Groups, Traditional Councils, Social Clubs and Churches who mobilize themselves and participate in MSME development.
E.            Non – Governmental Organisations (NGOs) e.g. Trade and Professional Groups like Nigerian Associations of Small Scale Industrialists (NASSI), Nigerian Association of Small and Medium Enterprises (NASME). All Farmers Association of Nigeria (AFAN), Country Women Association of Nigeria (COWAN) etc. They provide fora for interaction and adoption of issues of importance to MSME development.
F.             International Donor Agencies such as:
       United Nations Development Programme (UNDP)
       United Nations International Children Education Fund (UNICEF)
       International Fund for Agricultural Development (IFAD)
       Food and Agricultural Organisation (FAO)
       United States Agency for International Development (USAID)
       Department for International Development (DFID) etc

They have contributed through various interventions such as capacity building, micro finance in MSME development and poverty reduction in Nigeria.

Private consultants run entrepreneurial training, in – house short course towards improving skills, knowledge and attitudes of entrepreneurs.

The above institutions contribute immensely in the establishment and development of MSMEs, which could be Farm or Non – Farm based. Agro – allied enterprises are strictly dependent on agriculture for their sustainability (Production of food and raw materials). Non – farm enterprises however are indirectly and directly related to agro – allied business through some forward and backward linkages. These include processing of farm products, fabrication of tools and equipment for enterprise development of food.  These enterprises create jobs for the populace through production of food and raw materials, utilization of raw materials in industries, fabrication and repairs of tools and equipment. Market network is established for the acquisition of input and sale of output.

The above activities lead to poverty alleviation because of enhanced income, improvement in housing, education, asset ownership, household expenditure, nutrition, increased savings and investment. Consequently an enabling environment is built for the growth of political participation and democracy. Essentially, women become politically emancipated because they are economically viable and socially acceptable. This leads to enhanced socio – economic empowerment of the populace and satisfactory standard of living thereby alleviating poverty. 


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