AN ASSESSMENT OF THE IMPACT OF BANK LOANS ON SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
This project work was carried out primarily to assess the role of commercial banks in financing small scale industries with particular reference to UBA Plc Awka Branch. In this exercise two vital categories of functional areas were investigated. The two groups under investigation were the staff and customers of UBA. They were considered to stand better chances of evaluating the Impact of Commercial Banks Loans in Financing Small Scale Industries. The instrument of data collection was questionnaire approach. The questionnaire items were distributed to the staff and customers whose opinions formed the basis of the analysis. The data and material collected were presented in tabular form and complemented by chi-square method. Based on the analysis from the information gathered, it was revealed that small scale industries have positive impact on the economy of the Nation because it provided employment opportunities to the youths. Based on the outcome of the projects on the basis of analysis, recommendations were offered on the best way the commercial banks could finance the small scale industries for the welfare of the people.
1.1 Background of the Study
In Nigeria, as in many other developing countries there is dearth of financial institutions which cater for long and medium term credit needs of business operations. In exception to this, they suffer a great deal for want of capital for development and expansion.
By definition, commercial bank is an institution where money and other valuable items are kept for security purposes and at the same time transact business such as giving of loans and advances.
Among the most important commercial banks in Nigeria are: The First Bank Plc formerly known as the bank of West Africa which has the largest assets and located its head office in Nigeria at 37 Marina, Lagos. The Union Bank formerly known as Barclays Bank which was established in the year 1917 in Lagos as the first branch and is the first bank to hit one billion naira customers’ deposit. The commercial banks trend made through British and French Banks now called the United Bank for Africa Limited which was established in 1949 making it the third expatriate bank of dominate the early Nigerian Commercial Banking.
The issue however remains that her pace, towards economic development has not kept record with the naturally endowed nations. While some sectors of the economy have recorded some significant growth, others continued to lag behind in spite of increased financial resource allocations.
While most of the villages still lack the basic necessities of life, potable drinking water, electricity and health facilities, many of the urban areas are becoming dotted with skyscrapers. Thus parallel growth structure between the two areas. Hence giving rise to migration from the rural to the urban areas. The ultimate effect has been the abandonment of natural resources in the rural areas to urban crimes and inflation.
Government’s efforts to check the above analyzed problems have not been fruitful rather the problems seem to be complicated in certain cases.
The straw that broke the camel’s back was the downturn of oil prices for the growth in oil production coupled with high sales in the 1970’s has turned the economy from a production oriented one to an import and distribution one. It was what the oil glut was witnessed in 1981’s that our economic planners recognized the need to reverse the trend, hence the concept of diversification. One of the militating factors of diversifying the economy is the establishment of the small scale industries.
The importance of these industries to the economic survival of the country cannot be overemphasised. They have moved from the sub-existence level of pre-indigenisation period to a position of importance in the country’s industrialisation process. In an attempt to modernise many small scale enterprises, their standard of operations have moved into the capital intensive stage. To do this, a reasonable amount of capital needed in many cases are beyond the financial capacity of the entrepreneurs who set up the business.
The major alternative for the provision of such capital is the financial institution. Among the financial institutions operating in the country, the commercial bank is one of the major sources of credit to various sectors of the economy. However, it is a common knowledge that getting the financial support from the commercial banks getting the financial support from the commercial banks has been grossly inadequate for building indigenous entrepreneurs and even for those who have been in the manufacturing business for a long time.
1.2 Statement of the Problem
In any economy, small scale industries are powers to reckon with in terms of provision of employment to the people. Small scale industries can perform their roles effectively if they are empowered economically. In Nigeria, small scale industries have not been encouraged enough by the government due to some constraints; such as lack of clear policy on the part of the government to strengthen their operations, lack of capitals, lack of facilities in the form of power, water supply, good road networks, and a host of others. The enabling environment is necessary to make them operate fully. The principle factor hindering their operations is lack of capital. The capital for such business could either come through personal savings, through pooling of resources from friends or through commercial banks as the case may be. Commercial banks have enormous roles to play to help small scale enterprises but they could not come due to several factors. In Nigeria, commercial banks do not actually play the intermediation roles due to lack of capital, lack of defined policy for lending to the public and heavy collaterals among others. Lack of defined interest rate, man-know-man syndrome and other constraints prevent small scale industries from performing their roles.
This research is essentially designed to investigate why commercial banks hesitate to offer assistance to small scale industries with a view to finding solutions to these problems.
1.3 Objectives of the Study
In view of the problems of small scale industries, the primary objective of the study is to evaluate the role of commercial banks in financing small scale industries in Nigeria.
Other secondary objectives include the following:
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BANK TRANSFER OR DEPOSIT
ACCOUNT NAME : SAMUEL CHARLES
ACCOUNT NO. : 2009884029
BANK : FIRST BANK
ACCOUNT TYPE: CURRENT ACCOUNT
ACCOUNT NAME : SAMUEL CHARLES
ACCOUNT NO. : 2078806476
BANK : UBA
ACCOUNT TYPE: SAVINGS ACCOUNT
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