ABSTRACT This project research was carried out with the sole aim of providing an insight into the effect of SMEEIS on the performance of SMEs in Lagos.

Small and medium scale enterprises arc indispensable instrument that contributes to the accelerated industrialization in developing countries as well as many countries of the world. It also serves as a source of inputs for large production concerns in big and developed economies in other to achieve the attainment of accelerated economic growth development of the nation.

Based on the significant role played by those enterprises industries, the government throughout the world favorable disposed towards the idea that helps to promote the growth.

In the course of this research, the primary and secondary sources of data were adopted in selecting the sample size in which the prepared questionnaires were administered. The data obtained were analyzed using the Chi-square method of data analysis.

After the data has been analyzed, it was found that inadequacy of funds for the implementation and growth of the SMG's was responsible for the failure of SME's development in the country.

The government should provide enabling environment and improved quality management practices are recommended for SMEs to play their roles in the sustainable development of the country.


Title page





Table of Contents


1.1       Background of the Study

1.2       Statement of the Problems

1.3       Research Questions

l.4        Objective/Purpose of the Study

1.5       Statement of Hypothesis

1.6       Significance of the Study

1.7       Research Methodology

l.8        Scope and Limitation of the Study

1.9       Definition of terms

1.10     Organization of the Study



2.0       Introduction

2.1       Definition of SMEs

2.2       Characteristic of Small and Medium Scale Enterprises

2.3       Significance of SMEs to the Development of the Economy

2.4       Problem Faced by Small and Medium Scale Enterprises in the Economy

2.5       Roles Played by SMEs in the Economy Development

2.6        Difference between Small and Large Enterprises Industry

2.7       Country Experiences in SMEs Development

2.8       Government Policy to SMEs

2.9       What is SMEEIS

2.10    The SMEEIS Definition to SMEs  

2.11    Element of the Small and Medium Enterprises Equity Scheme

2.12      Why SMEEIS was introduced

2.13    Objectives of SMEEIS

2.14    Eligible SMEs

2.15    Activities Covered by the Scheme (SMEEIS)

2.16    SMEEIS Operation Investment in Nigeria




3.0       Introduction

3.1       Restatement of Research Questions and Hypothesis

3.2       Research Design

3.3       Sampling Design and Procedures

3.4       Characteristic of Study Population

3.5       Data Collection and Instrument

3.6       Pilot Test including Validity and Reliability Test

3.7       Administration of Data Collection Instrument

3.8       Procedure for Processing and Analysis of Data

3.9       Limitation of the Methodology




4. 0      Introduction

4.1        Data Analysis

4.2       Chi-Square Method

4.3      Preliminary Analysis and Respondents Characteristic and Classification




5.1       Introduction

5.2       Summary of Findings

5.3       Conclusion

5.4       Recommendations





There is no gainsaying that small and medium enterprises play a dominant role in a nation's economy since they facilitate the achievement of social and economic policy objectives of a country.

According to the business information website Okafor (2000), small-scale enterprises generate amongst another benefit, the following: employment generation, value added production, feeding industry services, high potential for rapid industrialization, etc. However, small and medium enterprises industries are generally regarded as the engine driving the growth of any economy.

In Nigeria, small and medium enterprises industries have been confronted with the problem of obtaining finance from their continued existence, over years several schemes had been put in place to drive the development and growth of small and medium enterprise industries in Nigeria, these scheme, appear not to have achieved much due to various reasons ranging from policy disconnect and lack of conducive business environment.

However, the policy framework in Nigeria for the support of small and medium enterprises industries is in its infancy while the funding institutions are not favorably disposed to small and medium enterprises, this is adduced to the same reasons such as High risk associated with lending small and medium enterprises, low returns on small and medium enterprises due to high operating cost, etc.

Ibru 2006, the CBN launched the micro-finance institution (MFI), which is considered to be actually, and appropriately suited to small and medium .enterprises industries financing at the grass-root level.

In addition, adequate finance is the engine of growth and development for business enterprises especially the small and medium enterprises industry In Nigeria. Successive governments in Nigeria have for the past three decades had a greater interest in the financing of small and medium enterprises industries by establishing specialized banks and other credit schemes.

This study will examine the effects and challenges of small and medium enterprises' industries schemes on the performance of small and medium enterprises in the provision of micro-credit to small and medium enterprises in Lagos.


As one walks along the street in any commercial city in Nigeria today, one is greeted by numerous one-man business of different forms: barber's shop, cobblers, art studios, bakeries, soap making mini-factories, electronics· repairs shop, etc. something you stop to wonder how well-organized are these small business? What is their capital structure like? What of infrastructural support do they enjoy from the government and agencies? In co-ordination this, quite a lot of effects were made by the government and CBN to promote small and medium scale enterprises in Nigeria, one such effort was to use the credit guideline in the 70s to subtly compel commercial and merchant banks to channel credit facilities to SMEs that constitute the Nigeria economy to assist SMEs as its contribution.

However, there has been the problem of unemployment that has been rising in Nigeria, other countries contribute substantially to the development of their country e.g. the Macmillan report discovered in the United Kingdom in 1931 is yearly visible in Nigeria today whereby there is a shortage in the inflow of long-term capital to small enterprises.

The SMEs played an important role in employment generation mobilization of local saving, investment, and utilization of raw materials. They faced a whole lot of problems, which is why they do not contribute much to the country's economy.

The fact that has emerged from the appraisal of the various past policy initiatives of the government to promotion of SMEs is that despite all assistance, the major problem is still inadequate financing constraint to the development and effective performance of SMEs in Nigeria. Previous efforts by the government to finance SMEs through institutions of a scheme like the National Economic Reconstruction Fund (NERFUND), Nigeria export and SMEs loans scheme administered by CBN were not particularly successful.

The CBN with the introduction of SMEs is by bankers committee top support and fund SMEs programs, the CBN also orders commercial banks to give out ten percent (10%) of its profit before tax to set aside to fund SMEs because SMEs need finance and they get from various sources, the most important is the personal savings money from family members.

This project will now assess the performance of access to SMEs ' contribution to SMEs.


i.       What are the critical factors in small and medium enterprises' development?

ii.       What are the major challenges or problems to SME financing?

iii.      Have SMEs scheme and its institution achieved their objectives in providing micro-credit to SMEs industry?

iv.      What can be done to incorporate such factors for the growth and survival of this sector?

v.       Do SMEs comply with the loan requirement of SMEs?

vi.      Does lack of adequate financing constitute the major problem of SMEs in the country?

vii.     Is the cost of administering micro-credit high in Lagos State?


The primary objectives of this study are to examine the economic and problem faced by small and medium scale enterprises in Lagos. It will investigate what has hindered the small .and medium enterprises from excessive micro-credit under the various specialized funding scheme and proffer strategies to overcome such barriers.

However, the specific objectives are to:

i.       Examine operation of small and medium enterprises equity investment scheme (SMEEIS) over small and medium enterprises (SMEs)

ii.      Determine the contribution of SMEEIS on employment generation on SMEs in Lagos-State

iii.     Determine the contribution of SMEEIS on SMEs production

iv.      Examine the strategies SMEs adopted in overcoming the financial barrier they faced.

v.      Examined the various problem faced by SMEEIS, hindering it on effectively fund SMEs in Nigeria.


The following are the hypothesis to be tested in the course of this study:


Ho:     There is no significant relationship between the high-risk Profile of SMEs and the amount of micro-credit provided to them

H1:     There is a significant relationship between the high-risk Profile of SMEs and the amount of micro-credit provided to them


Ho:     There is no significant relationship between the costs of handling small loans by SMEEIS and the amount of Microcredit provided to SMEs.

H1:     There is a significant relationship between the costs of handling small loans by SMEEIS and the amount of Microcredit provided to SMEs.


This study is to look at the effect of SMEs on the performance of SMEs, its importance and how it is being operated, funding of SMEs, how the loan is being granted to them, and the procedure that is being followed, more light will also be thrown on the strategies employed in granting SMEs application for a loan and the problem or challenges faced by SMEs in Lagos State.


This research will adopt an across a sectional survey of SMEs in Lagos and also focus on the adoption of both primary and secondary of data collection that will lead to possible solutions to the research problem. The primary source of data collection can be said as administering self-questionnaire while secondary is through the means of telephone calls, interviews, e-mail, etc, and through the analysis of some published reports on SMEs. The analysis will be done by the use of the chi-square method.


This study will be limited to address the contribution of SMEEIS on SMEs and the problem they encountered by SMEEIS in providing loans, helping to established and start their business because not less than 70% in Nigeria population basically engaged in Agriculture, and SMEs remain excluded from access to financial services. The study will also be localized within Lagos state and put into consideration how they are being assisted by SMEEIS.


SMEEIS: - It is an acronym for small and medium enterprises equity investment scheme, the CBN and the banker's committee 24th Annual meeting introduced it, to help in funding and supporting of SMEs program by assisting them to establish their business.

SMEs:-It is an acronym for small and medium enterprises, it is a small business that is being established with the little capital to start up with and help in promoting self-employment.

Micro-Finance Institutions:- These are banks that are established to finance and grant loans to small and medium enterprises.

Profit after tax:- This can be said as money set aside as gain made by a company or banks to fund small-scale business after paying of tax, the banks would have removed such amount of money out of their total profit left.

NIDB:- Nigeria Industrial Development Bank, they are industrial banks established to support and fund business that is just coming up it merged with Nigeria bank of commerce and industry to form a bank of industry.

Adoption: - This can be said as the means employed or taken in regulating business.


The organization of this is to critically address the problems and challenges of the effect of SMEEIs on the performance of SMEs Lagos state will serve as a case study for the purpose of this research and the project will be structured in five chapters.

The topic is introduced in chapter one given details on the value and performance of SMEEIS on SMEs and also pointing out objectives for which this study is to attain, at the end of chapter one are the definition of terms used in the study. Chapter two deals with the literature review of the topic, discussing the very important aspect of the topic itself, the effect, impact, usefulness, and contribution of SMEEIS on SMEs.

Subsequently, the method of data collection, identifying the population, and hence determining its sample size shall be discussed in chapter three. The general appraisal will be conducted with the use of the chi-square statistical tool.

In chapter four, the hypothesis shall be tested, data will be presented using the chi-square statistical tool. The concluding part is chapter five which will contain a summary of each of the chapters, conclusion, and findings based on the research topic.




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