Effect Of Bank Of Industry On Financing Small And Medium Scale Enterprises In Enugu State

Effect Of Bank Of Industry On Financing Small And Medium Scale Enterprises In Enugu State

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ABSTRACT

This research work empirically explored the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state. The purpose of which is to investigate the impact of Bank of Industry on small and medium scale enterprises (SMEs) in Nigeria. The objectives of this study were to examine the impact of credit from Bank of Industry on the performance of small and medium scale business in Enugu state, appraise the success of Bank of Industry in playing its role of pulling resources for utilization by small and medium scale businesses in Enugu state. The scope of the study is Enugu state in 2019 making use of business owners, financial growth theory was used as a framework. The research design used for this study is survey, the population targeted for this study consists of all business owners.  400 business owners were used as sample size and cluster sampling technique was applied. Instrument used for this study is the questionnaire. Data collected were collected from primary sources. From the analysis of the data, the findings shows that credit from Bank of Industry affect the performance of small and medium scale business in Enugu state, Bank of Industry plays its role of pulling resources for utilization by small and medium scale business in Enugu state. Following the findings, it was recommended that credit from Bank of Industry should be granted to small scale business at low interest rate and longer repayment period, the process it takes to acquire a loan should be shortened.

CHAPTER ONE

INTRODUCTION

 1.1. Background to the Study

Small and medium scale business enterprise are no doubt the engine room for economic growth, poverty alleviation, job creation and means of crime reduction. They constitute a large proportion of businesses worldwide and play significant role in any economy. Small and medium scale business enterprises go through series of obstacles among which are financing that inhibit their long-term survival. Researchers have shown that the rate of failure of small and medium scale business in developing countries is higher than in developed world (Marlow, 2009).

For a business to realise its objectives, it depends greatly on the ability of the enterprise to accomplish its key performance indicator in a sustainable manner (Simerly and Mingfanf, 2000; Wan and Yiu, 2009). Bank of industry is created in Nigeria to enhance access to loans and savings services for small and medium scale business enterprise. Business both large and small needs to be financed effectively to meet up with competitive advantage. The role of finance to the world at large and businesses in particular cannot be overemphasized.

Government in Nigeria has in the past initiated series of programmes and policies targeted at the small and medium scale business in order to enhance the flow of financial resources to small business enterprises (Oni and Daniya, 2012). The Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) was established in 2003, National Credit Guarantee Scheme was also established in 2003. The Microfinance Policy Regulatory and Supervisory Framework (MPRSF) was launched to address the problem of lack of access to credit by small business operators, the Small Scale Industrial Credit Schemes (SSICS), the Nigeria Industrial Development Bank (NIDB), the World Bank-Assisted SME II loan project, International Financial assistance, National Economic Reconstruction Fund (NERFUND), Bank of Industry (BOI) among others. Although several programmes and policies have been implemented in Nigeria; poverty, unemployment, stunted economic growth are still prevalent in the country (Lawson 2007; Owenubiugie and Igbinedion, 2015; Obadeyi, 2015).

Bank of Industry Limited (BOI) is one of Nigeria’s major development financing institution and has been a flag bearer in the provision of long-term financial support to various industries of the country’s economy. BOI has the mandate of providing financial assistance for the establishment of large, medium and small projects as well as expansion, diversification and modernization of existing enterprise and rehabilitation of ailing ones. Incorporated in 1964 as the Nigerian Industrial Development Bank (NIDB) Limited, Bank of Industry (BOI) is the oldest and largest financial institution in the country. In 2001, the NIDB was restructured into the present day BOI.

In spite of the major role, significance and contribution of small and medium scale business enterprises to the nation’s economy, small and medium scale business enterprises are still battling with many problems. They are faced with significant challenges that compromises their ability to function and to contribute optimally to the economy. Operations of small and medium scale business enterprises are still bedevilled by a number of problems such as difficulty in accessing credit, short loan repayment period, unwillingness of banks in financing small and medium scale business and high interest rates among others.

In Nigeria, small and medium scale business enterprise constitute about 90% of the industrial sector, they also account for 70% of national industrial employment and 10% of manufacturing output (Ajayi, 2002). Anwatu (2006) opined that 75% of the private sector in Nigeria is dominated by small and medium scale enterprises. Developing the private sector is an engine of growth and creation of wealth and employment in Nigeria.

The performance of small business enterprise in Nigeria falls below expectation (Basil, 2005 and Abiodun, 2011). Thus this study assess the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state.

 

1.2. Statement of the Research Problem

The survival of small and medium scale business enterprise is considered crucial in any economy in solving the problem of poverty, unemployment, crime and ensuring economic growth. There is inadequacy in the performance of small and medium scale business enterprise in performing its role of economic growth, employment creation, poverty alleviation, thus there exist difficulty of small businesses achieving its desired goals.

Most business enterprise fail to consider proper financing that affect their chances of long-term survival as a result experience a progressive decline in its ability. Shortage of finance is one of the major problems facing small and medium scale business enterprise. A situation whereby funds/credit are readily available, there exist the problem of high interest rate, short repayment period. Also, most banks are unwilling to lend to small and medium scale business enterprise. All these among others are situated in Nigeria and thus affect the performance of small and medium scale business enterprises.

It is disheartening to note that government of Nigeria over the years have not been able to adequately help the poor grow small and medium scale business. In Nigeria, the ability of small and medium scale business enterprises to achieve and sustain competitive advantage lies within the availability of suitable strategies that would preserve its operations. It is against this backdrop that the researcher considered the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state.

1.3. Objectives of the study

The aim of this study was the assessment of the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state. The specific objectives are to:

  1. examine the impact of credit from Bank of Industry on the performance of small and medium scale business in Enugu state.
  2. appraise the success of Bank of Industry in playing its role of pulling resources for utilization by small and medium scale businesses in Enugu state. 

1.4. Research Questions

This study will be guided by the following research questions:

  1. What is the impact of credit from Bank of Industry on the performance of small and medium scale business in Enugu state?
  2. To what extent does Bank of Industry play its role of pulling resources for utilization by small and medium scale businesses in Enugu state?

1.5 Research Hypotheses

The study is guided by the following hypotheses:

  1. H0: credit from Bank of Industry do not affect the performance of small

and medium scale business in Enugu state.

  1. H0: Bank of Industry have failed in playing its role of pulling resources for utilization by small and medium scale businesses in Enugu state.

 

1.6. Significance of the Study

The critical nature of small and medium scale business to the success or growth of any country is given. This is because availability of finance affect the ability of small and medium scale business in achieving its desired goals. As lack of finance affect the level of productivity thereby preventing the attainment of such significant goals small and medium scale business play in an economy.

Empirically, this study is carried out to assess the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state so as to ameliorate the problem of low productivity faced by small and medium scale businesses.

This study will be important to small and medium scale business as it will help guide it on how it should operate. It will teach it the importance of finance from Bank of Industry and the necessary guide of attaining finance for business. It will also help owners of small and medium scale businesses get maximum value from the business.

This study will be of utmost importance to investors, government and the researchers because it will provide policy recommendations to the various Nigeria stakeholders taking adequate measures in small and medium scale enterprise for rapid capacity investment.  It is hoped that the exploration of small and medium scale business in Enugu state will provide a broad view of the operations of small and medium scale businesses to investors and government. It will contribute to existing literature on the subject matter by investigating empirically the role Bank of Industry play in small and medium scale business enterprises of the country.

This study will be of benefit to;

The Academia: members of the academia will find the study relevant as it will also form basis for further research and a reference tool for academic works.

Government: this study will reveal to the government happenings in small and medium scale business enterprises as well as the Bank of Industry. Formulation and implementation of policies based on this findings would ensure development in the area.

Investors: this study shall also be valuable to the investors especially those who may have research interest as it shall guide their private investment decisions.

1.7. Scope of the Study

This study is intended to assess the effect of Bank of Industry on financing small and medium scale enterprises in Enugu state in 2019 using owners of small and medium scale businesses in Enugu state, Nigeria.

1.8. Operational Definition of Terms

The following terms have been defined operationally.

  • Small and medium-sized business enterprise: small and medium-sized business enterprise is an enterprise marked by limited number of employees and a limited flow of finances and materials.
  • Business performance: efficiency and effectiveness of an organization reflected in the business objectives set by management.
  • Financing: financing is the process of providing funds for business activities, making purchases or investing.

1.9. Organization of the Study

This study is divided into five chapters. Chapter one is introduction which consists of the background to the study, statement of problem, research questions, research  hypotheses,  objectives  of  the study, the  significance  of  the  study,   the scope  and  limitations  of  the  study  and  finally the  organization of the study. Chapter two deals with the literature review which consists of the conceptual literature, theoretical literature, empirical literature, theoretical framework. Chapter three gives the research methodology including research design, population of study, sample size, sampling technique, method of data collection, instrument of data analysis, method of data analysis, validity/reliability of instrument.  Chapter four is presentation and analysis of data, discussion of findings. Chapter five gives the summary, conclusion and recommendations.

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Research Information

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    ₦3,000.00

  • Released
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    April 6, 2020

  • Last Updated
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    April 6, 2020

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