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THE ROLE OF MICRO FINANCE BANKS IN PROMOTING MICRO, SMALL AND MEDIUM SCALE ENTERPRISES

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

The Central Bank of Nigeria defines small and medium scale enterprises in Nigeria according to asset base and members of staff employee, the criteria are an asset base between one million (N1,000,000) and two hundred million naira and possess on workforce of between 11 and 20 employees. The relevance of micro small, and medium scale enterprises in our economy is manifested in numerous dimensions. Firstly, they aid in capacity building as they serve as enterprises for training avenues. Secondly, micro small and medium scale enterprises usually create more employment opportunities per unit of investment because they are characterized by labour intensive operations. As a matter of facts, they constitute over (95%) ninety five percent of the number of firms in almost all countries providing between fifty and eighty percent (50/80%) of employment, and forty to sixty (40/60%) of the (GDP) Gross Domestic Product. Also  micro and medium scale enterprises, provide feeder industry service or they serve as major suppliers of intermediate goods and one of the smallest component to large scale industries as well as major agents for the distribution of the final products of such industries.

In addition, they provide opportunities for the development of local skill and technology acquisition through adaption. The Aba made syndrome is a clear example or manifestation of such technology in the economy. Further more micro, small and medium scale enterprises are seen as instrument that can be used to generate sustainable development. A sustainable development is one which assures that general population can attain an acceptable level of welfare but fundamentally these enterprises in many developing countries are many, but the most  challenge is finding . In recognition of the small and medium scale enterprises sub-sector as an engine of industrial growth and material development aimed at correcting the ills that befall the sub-sector, the micro finance banks have a role to play.

The Micro Finance banks are available to  promote the development of Nigeria home products to level their ten percent (10%) profit charge on micro, small and medium scale enterprises projects (Can Mens vol. 27 ivo3). This will make the commercial banks have equity participation in small and medium enterprises project. The scheme was approved at the bank committee 24b meeting on December 2 1999. According to them, this was a response to President Obasanjo concern and policy measure for promotion of micro, small and medium scale enterprises as vehicles for rapid industrialization, sustainable economic development, poverty alleviation economic and employment generally. This scheme aims at among other things to assists the sustainable and the establishment of new, viable micro, small and medium scale enterprises project thereby stimulating economic growth and development of local technology, promoting indigenous enterprises, entrepreneurship and general employment.

1.2     Statement of the Problems

Many micro, small and medium scale enterprises have become eyesores to the people of Nigeria; this may be due to lack of funds or capital or property investment and poor planning. It may also be due to high interest on loan by commercial banks which make managers and owners of small, medium business to run away from collecting loan facilities to better the lot of the business. Some speculations are also that commercial banks are not interested in giving out loans to empower these operators. This may be due to the inability of managers and owners of small business to pay back the loan, therefore, the researcher scale to find out whether there is still much impact of financial houses, on the growth of micro, small and medium scale enterprises in Nigeria, taking Stanford Micro finance as a case study.

1.3     Objectives of the Study

. To assess the roles of micro finance banks in promoting micro small and medium scale enterprises in Nigeria.

. To explore areas of needs for micro, small and medium scale enterprises in order to obtain more financial aids from micro finance banks.

. To identify the level of success recorded by micro finance banks in promoting micro, small and medium scale enterprises.

. To highlight the need for promoting micro, small and medium scale enterprises development in Nigeria.

. To make suitable recommendation that will aid growth of micro, small and medium scale enterprises in Nigeria.

1.4     Research Questions

Are there measures adopted by micro, small and medium scale enterprises in order to enhance their performance?

Do micro finance banks promote the growth and development of micro, small and medium scale enterprises in Nigeria?

1.5    Research Hypothesis

The formulated hypotheses are;

Ho: Null hypothesis

Hi:  Alternative hypothesis

Ho: There are no measures adopted to finance a Micro, small and medium business.

Hi:  There are measures adopted to finance micro, small and medium scale business

1.6     Significance of the Study

The role of micro finance banks in promoting micro, small and medium scale enterprises in Nigeria has been seriously affected by many factors but the regular demand for more financial help by micro, small and medium scale enterprises become urgent. Thus, the study would help to motivate management of micro finance bank to take up challenges to promoting and developing the micro, small and medium scale enterprise in Nigeria. The study of this nature would also provides a critical and useful information to the management of micro, small and medium scale enterprise, government, agencies and general public to enable them in their effort to merge the micro, small and medium scale enterprises sub-sector. It will help in future.

1.7     Scope or Delimitation of the Study

Although this study concerns the micro, small and medium scale enterprises in Nigeria, the study was limited to some selected micro, small and medium scale enterprises in Akwa Ibom State.

1.8     Limitation of the study: 

This research work, “The role of Micro, finance banks in promoting micro small and medium scale enterprise was limited to Stanford micro finance bank Abak road opposite Akwa Ibom Property and Investment Company (APICO) Uyo Akwa Ibom Stat, Nigeria

1.8     Definition of Terms

Micro, small and medium scale enterprises: Refer to business organization that has a capital base between 1 million and 20 million as well as having workforce of 11 to 20 workers or employees.

The inability of small business enterprises to secure funds from conventional micro finance banks and government.

Commercial banks operating in Nigeria that usually lends short and medium term loans to micro, small and medium scale enterprises.

Capital Base: Is a term used to describe the funds that a company or firms generate as the result of an instill public offering that the cooperation make at a time.

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