THE IMPORTANCE OF COMMERCIAL BANKS ON THE DEVELOPMENT OF SMALL SCALE INDUSTRIES IN NIGERIA (EMPHASIS ON FIRST BANK OF NIGERIA PLC)
1.0 BACKGROUND TO THE STUDY
In developing countries like Nigeria, majority of the population is rural based, so there is the need to give emphasis to the development of small scale and medium scale enterprises to enable the participation of greater segment of indigenous entrepreneurs in the development process. There is evidence to substantiate the argument that the small industrial sector holds a greater capacity to abort large number of workers who have been unable to secure a wage job in the large and capital intensive industrial sector.
There is no doubt that small-scale is the backbone of business activities in Nigeria. More than 50% of business in Nigeria meets the standard of smallness if such high proportions of enterprise group, it cannot provide the desire effects.
Since the establishment of any enterprises whether large medium or small require finance, it is therefore imperative to examine the importance of small require finance, it is therefore imperative to examine the importance of financial institution especially commercial banks in financing of small scale industries in Nigeria financial institution and banks of any forms, pursue identical goals.
They contribute in no small measure to the country macro-economic objectives for the rapid transformation of the economy. Banks particularly contribute significantly to real development through savings and tending process by stimulating savings, mobilization fo funds and by the ability to ensure the most efficient transformation of the savings into real output.
The important of banks is primarily to transform the economy depends largely on the development of small scale industries in the country and realizing this, they rose up additional sources of capital ventures especially to small-scale industries to encourage and contribute to the development of small scale industries.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The focus of this study by the researcher is to identify the important of commercial bank to the growth of small scale business in Nigeria, in the course of the study; effort has been made to find solution to the following research problem.
i. What is the historical background of the development of small-scale business in Nigeria?
ii. What are the importance of small-scale business in Nigeria?
iii. What is the effect of small-scale on the Nigeria economy?
iv. What is the impact on development of small scale industries?
v. What are the problems facing the development directives to small-scale industries?
1.3 RESEARCH QUESTION
The study approach to be adopted in this work would be based primary on secondary method of data collection, most of the work in this research would be based on the primary data collected like Journals, Annual Report, Magazines, Textbooks, Financial papers, interest and other material collected in the library while the secondary data were collected through the interview.
i. What is small scale entrepreneur?
ii. What is small scale business?
iii. How can we invest in the small scale business?
iv. How can we be developed in the small scale business
v. How can we developed in the small scale business?
vi. What can be the consequence of the small scale business?
vii. How can we risk positive in the scale business?
viii. What are the business in the small scale business?
1.4 OBJECTIVES OF THE STUDY
This research mainly focuses on the importance of financial institution to the development of small-scale industries in Nigeria.
To the researcher:
i. It helps in proving an existing fact
ii. It helps them to find out fact
iii. It helps to interpret the findings of other by ways of synthesis of material to support conclusion.
To the government
i. It improves their contribution of small-scale
ii. It expatiates the meaning of small-scale to them
To the business men and women
i. It gives them an insight into their problem and how to solve them in order to achieve their aim objectives.
1.5 SIGNIFICANCE OF THE STUDY
It is believed that the information gathered from this study is of immense values to the academic community management of the banks the researcher, government and also to businessmen and women.
To the bank, it helps them to improve on their performance especially in the area of loan and advances to small-scale industries.
1.6 SCOPE AND LIMITATION OF THE STUDY
The researcher intends to carryout research on importance of commercial bank on the development of small-scale industries in Nigeria with emphasis of FIRST BANK OF NIGERIA PLC.
The research is in historical and case study research which has been contrail to insufficient finance, lack of enough time, lack of co-operative from the respondent and the case study.
However, effort has been made to ensure that the above limitation do not hinder effective completion and quality of research work.
i. To highlight reason for establishing small-scale industry in Nigeria.
ii. To expatiate the impact and import of commercial bank
iii. To enumerate the effect of small-scale industries on the Nigeria economy
iv. To mention the impact of development on the small-scale industries
v. To discuss the steps involved in the successful of small-scale industries
vi. To critically examine the likely problem of small-scale industries.
1.7 DEFINITION OF KEY TERMS
DEFINITIONOF SMALL SCLAE BUSINESS
Small scale business can be defined in terms of numbers employees, the rate of return the amount of capital, if employs or the amount of Net Profit before tax and its market share.
DEFINITION OF BANK
A bank can be defined as and “Institution for the keeping, lending and exchanging of money”.
DEFINITION OF COMMERCIAL BANK
Commercial bank may be defined as a financial institution set up for keeping and lending money to people owned by individuals” organization or government for the main purpose of making profit.
Its refers to all business organization which hold money for individuals and institutions and may borrow from them in order to give loan or make other investment.
Business organization van be defines as an enterprise set up by an individual or group of individuals, government or its agencies for the main purpose of making profit and providing goods and services for the satisfaction of human want.
The power to buy goods to be used in the production of other goods or the offering of a services.
FBN-FIRST BANK OF NIGERIA
Financial system can be defined as a family of rules and regulation and the trap of financial aggregate in institution, agents and the mechanism where they relates together or to each other within the financial sector.
Business idea can be defined as the response of a person (s) or organization to solving an identified problem or meeting perceived needs in the environment (market, community)
Firm may be defined as an independently administered business unit which is capable of carryout production construction or distribution activities.
RELATIONSHIP BETWEEN BANKER AND CUSTOER
Primarily, the relationship between the banker and customer is founded on contract when the customer deposit money into is account, such transaction meets with offer and acceptance condition of a contract.
Banker is a body of persons whether incorporated or not who carry on the business of banking.
CUSTOMER OF A BANK
Customer is a person who has entered into a contract with a banker for the opening an account in his name.
PUBLIC LIMITED COMPANIES PLC
Public limited companies plc is the largest forms of business organization.
1.8 ORGANIZATION PLAN OF THE STUDY
The research work has been divided into chapters for ease of presentation of the fact and figures gathered.
Chapter one contains the introduction, statement of research problem, research question, objectives of the study, research hypothesis, significant and justification of the study, scope and limitation of the study, definition of key terms organization and plan of the study.
Chapter two treats past and current literature review which include; Historical Background of the case study, sources of finance for small-scale enterprises, sources of an able funs for first bank, problems encountered in granting loan by First Bank Nigeria Plc, impact of small-scale industries in the economy financing, problem of commercial bank in financing small and medium enterprise in Nigeria Appraisal SME Financing by banks in Nigeria, conceptual issues of small-scale business in Nigeria.
Chapter three highlights research methodology and case effort of an the which include: restatement of research question and hypothesis, research design and data collection instrument, characteristics of the study population and sampling, administration of the data collected instrument procedures for processing, collecting data, limitation of the methodology.
Chapter four, focuses on the data presentation and analysis, presentation and analysis of data to test hypothesis, presentation and analysis according to research question.
Chapter five, throws light on the findings, summary, conclusion and recommendation, reference.
2.0 LITERATURE REVIEW
2.1 SOURCES OF FINANCE FOR SMALL ENTERPRISES
Adequate financing is a necessary condition for the series of any business enterprises, be it small or large in view of the important of small scale enterprises in the development of any balance industry development can afford to ignore small industry sector by staving it of necessary funds and support.
The main sources of finance open to small scale enterprises in Nigeria include:
i. Formal financial Institution such as commercial bonus, has frame time to time to be assisting small-scale enterprises through various credit guidelines directives from the Central Bank of Nigeria credit guideline for the 2001 fiscal years obliged commercial bank to extend its total loans and advances to small scale enterprises to 12%
ii. Informal financial institution such as money lenders, operative societies various types of co-operative provide reasonably soft loans and advances to their member to setup small business form and also they are informed money lenders who gives loans to small businessmen and women.
iii. Personal savings: personal or family saving are know n to be the most common sources of financing to small scale enterprises. Those saving provide the small-scale enterprises with capital with which to start the business
iv. Other financing scheme such as SMEA Apex loan schemes, HER FUND HIDB, NBCI, because of their nature and planning circumstance small industries often lack access to finance capital from other financial institutions even in the advanced countries. In recognition of the crucial nature of finance to the development of the small entrepreneurs some of the scheme and financial institution include:
a. The Nigeria Bank for Commerce and Industry (NBCI who gave loan to small businessmen and woman. The NBCI was established in 1978 to bring some prudence and financial discipline to the small scale industries scheme and hopefully to ensure a more efficient utilization of scarce financial resource of the development of viable small scale project. In addition to its regular lending operations, NBCI was also to administer he Federal Ministry of Special Fund for Small Scale Enterprises
b. The Nigeria Industry Development Bank (NIDB) like (NBCI) was established among other objectives to provide financial assistance for the development of small and medium scale industries in the country. The bank less make remarkable contributions to the development of SMES in terms of proving long term loans. (with maturity date of upward of 5years at the end of 1992 within 28years. It established the bank was granted a total of N2billion already disbursed to entrepreneurs. Other areas of managerial and consultancy, service which include projects.
c. The Central Bank of Nigeria, World Bank sponsored small and medium enterprises loans (SMESS) in order to further promote the growth of the SMES, the federal Government negotiated on additional financial assistance with the world bank of complement other source of funding for small-scale enterprises. This involves a loan of US&170million of which US&265.7million was to be made a viable for lending to small and medium scale enterprises throughout eligible participating banks.
d. The National Economics Reconstruction Fund (NERFUND) the NERFUND is primarily design to provide medium to long-term to small and medium scale enterprise for the acquisition of fixed assets and other essential items of plant & machinery. The loan are targeted at wholly Nigeria owned enterprises engaged in manufacturing. Support serves and auxiliary project.
The scheme lend only to project that can source at least 80% of their raw material locally.
e. The Federal Ministry of Commerce and Industry small scale industry credit scheme (SSICS) the federal Government launched the small-scale in Industries Credit Scheme (SSICS) under the Federal Ministry of Commerce and Industry to assisting in meeting the credit need of small-scale industrialists by providing a revaluing grant to be the credit disbursed on relatively liberal condition compared to the dispending rate of private institution such as Commercial and Merchant Banks. The second National Development plan cash state the Nigeria was supposed to establish a small-scale industry credit scheme for granting of loans to small business men and women. In this direction, the federal government provides money to the state government.
f. Nigeria export and import Bank (NEXIB) NEXIB was established on January 1990 to manage a number of credit facilities specially to boost Nigeria non-oil export sector. The essence o NEXIB was based in government conviction that the economic property of the country was not be allowed to hang permanently on the oil sector. The establishment of NEXIB was intend to support small scale exporter to have direct access to international market (ESL) the foreign Import Facility (FIF) and Refinancing and rediscounting facility (RRF). In the bid to further increasing earning from the non-oil export sector NEXIB recently introduced a packed of non product specifically design as incentive to exporter include Price Guarantee Facility (PGF) Export Guarantee Facility (EGF) in entrepreneur development and promotion of small scale industry will also be an advantage potential of SMES is believed to be the engine room for the development of any economy, because they form the bulk of business activities in a growing economy like that of Nigeria.
g. According the Nigeria Banker (2007) source of finance is seen in the following ways:.