AN APPRAISAL OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT; EVIDENCE FROM ANAMBRA SOUTH SENATORIAL ZONE, ANAMBRA STATE
This study examines an appraisal of performance of small scale enterprises in community development; evidence from Anambra south senatorial zone, Anambra state. Specifically the study provides the reasons for going into SMEs; sources of financing SMEs; role of SMEs in community development and factors militating against SMEs in community development. The researchers distributed 143 questionnaires to the respondents that make up the sample size. The research questions were answered using mean rating under the modified four-point likert scale.Result of the investigation reveals that SMEs play the following role in community development: Generation of employment; Service provision; Improve living standards and poverty alleviation. Consequently this study therefore recommends that: government should re-introduce the small business credit scheme so that beneficiaries can use them to run the micro, small and medium enterprises; government, chamber of commerce and other non-governmental organization should regularly organize seminars for potential and actual small and medium enterprise operators where they should be educated on how to plan, organize, direct and control their businesses there should also be a re-introduction of soft loans for small and medium business by the government and financial institution to enhance the performance of SMEs in community development.
1.1 Background Of The Study
SMEs have been discovered to be a key driver for a country’s economic growth (Schmiemann, 2009) hence, SMEs cannot be overlooked in the economic development of any country. Okongwu (2001) argues that SMEs are recognized as the main source of economic growth and a major factor in promoting private sector development and partnership, in developed and developing countries. SMEs help to create employment and are often seen as very important for the growth and innovation of dynamic economies (Mutula and Brakel, 2006). Therefore, economic growth and development in Africa can be achieved through the emergence of strong SMEs, which will later grow to become major players in the developing economy. SMEs help to diversify economic activities that have significant contributions to imports and exports, they are flexible and can adapt quickly to changing market demands (Ongori, 2009). Thus, SMEs contribute more and more to the national and international economies of the world.
According to Wattanapruttipaisan (2003), the significance of SMEs for growth, productivity and competitiveness of the economies in both developed and developing countries is acknowledged universally, since SMEs bring about substantial local capital formation, contribute to improved living standards and achieve high levels of productivity. SMEs are identified as a major means of achieving equitable and sustainable industrial diversification.
The contributions of SMEs to Nigeria’s economy are not contestable as about 10% of the total manufacturing output and 70% of the industrial employment are by SMEs (Aina, 2007). Through the utilization of local resources, SMEs promote industrial and economic development and are responsible for the production of intermediate goods and the transformation of rural technology (Aina, 2007). Nigerian SMEs not only provide employment and income for majority of its citizens but are also recognized as the breeding ground for domestic entrepreneurial capabilities, technical skills, technological innovativeness and managerial competencies for private sector development (SMEDAN, 2005, Aina, 2007).
The assistance of SMEs to any economy are obvious, as SMEs are known to contribute to the development of several economies in terms of output of goods and services and creation of jobs at relatively low capital cost (Apulu and Latham, 2010). SMEs also improve forward and backward linkages between economically, socially and geographically diverse sectors of many economies (SMEDAN, 2005). Thus, the development of SMEs is an essential element in the growth strategy of many economies including Nigeria.
1.2 Statement of The Problem
The key problem facing most small scale enterprises is lack of finance whether for the establishment of new industries or to carry out expansion plans. The inability to attract financial credit or resources has hindered or stifled the growth of small scale enterprise. The reasons for the lack of fund include the followings:
- High rate of inflation that led to the vast depreciation of Naira exchange rate, thus making it difficult for most Small Scale enterprise to obtain required inputs for expansion.
- Low level of savings in the economy, which leads to low capital formation.
- High rate of interest charged on loans, which scares off potential Small Scale enterprise.
- The unwillingness of retail banks to grant credit to Small Scale enterprise because of the low creditworthiness of these enterprises has also hampered their growth over the years.
- Bothered by the persistent decline in the performance of the industrial sector and with the realization of the fact that the small and medium scale enterprises hold the key to the revival of the manufacturing sector and the economy, the Central Bank of Nigeria successfully persuaded the Bankers’ Committee in 2000 to agree that each bank should set aside 10 percent of its annual pre-tax profit for equity investment in small and medium scale enterprises. To ensure the effectiveness of the programme, banks were expected to identify, guide and nurture enterprises to be financed by the scheme. The activities targeted under the scheme included agro-allied, information technology, telecommunications, manufacturing, educational establishments, services, tourism and leisure, solid minerals and construction. The scheme was formally launched in August 2001. As at end-December 2009, the cumulative sum set aside by banks was N42.2 billion. The sum of N28.2 billion or 67.1 per cent of the sum set aside had been invested (CBN, 2009). But the fact still remains that with these provisions made are in most cases not accessible to the Small Scale Industries.
- The main thrust of this study is to evaluate the performance of small and medium scale enterprises in community development with specific attention from Anambra South Senatorial zone, Anambra State.
1.3 Objective of The Study
The specific objectives of this study is
1 To determine the sources of financing SMEs from the respondents;
2 To ascertain the role of SMEs in community development; and
3 To identify factors militating against SMEs in community development.
1.4 Research Questions
This study was guided by the following research questions:
1 To what extent do small scale enterprise contribute to towards economic development of a community ?
2 What are the problems encountered by the small scale enterprise in sourcing for funds?
1.5 Research Hypothesis
The following null hypothesis was given for this study
i Ho: Small Scale enterprise do not contributes immensely towards economic development of a community.
Hi: Small Scale enterprise contributes immensely towards economic development of a community.
ii Ho: Small scale enterprises do not encountered problems in source for funds.
Hi : Small scale enterprises encountered problems in source for funds.
1.6 Organization Of The Study
This paper is divided into five sections. Following the background, section II reviews related literature on the topic. Section III set out the research methodology, while Section IV presents and analyses the empirical results. Section V rounds it up with the conclusion and recommendations.
1.7 Significance of the Study
Small-Scale Enterprises in Africa rely largely on own savings, not only to grow but also to innovate, firms often need real services support and formal finance assistance. This study will be of benefit to the operators of the Small and Medium Enterprise, the government, and the general public on the possible financing options and survival strategies available to the Small and Medium Scale enterprise and give the possible means of accessing them.
Agbonifor, B. A (1998). The Business Enterprises in Nigeria. Lagos: Longman.
Ariyo, D. (2008). Small firms are the backbone of the Nigerian economy.Africa Economic analysis. Academy of Management Journal, Vol 1. No 1, pp. 109-124.
Abiola M. K. O. (1989). ‘Role of Small Scale Industries” Business Concord, 9th December, 1988 Pg. 11 (Concord Press Nigeria Limited, Lagos)
Adebusuyi, B. S. (1997). Performance Evaluation of Small-Medium Enterprises (SMEs) in Nigeria.Bullion Vol.21 No.4, Central Bank of Nigeria.
Adeyemi S. L. (2003). Entrepreneurship and Small Business A Case of a Developing Country.Department of Business Administration University of Ilorin, Ilorin.
AkalonuCanice (1989) “Lack of Marketing Skill Hinders Small Scale Business”, Guardian Financial Weekly, Guardian Newspapers Limited, Lagos.
Allal M. (1999). “Business Development Services for MSEs in Thailand” In MSE Development and Poverty Alleviation in Thailand, Finnega Gerry (ed.), ILO/UNDP Working paper.
Aluko S. O, Oguntoye A. O, &Afonga Y. A. (ed) (1992). Small Scale Industries in Western Nigeria. Ile Ife (Industrial Research Unit, ObafemiAwolowo University, Ife.
Anderson, D. (1982). “Some Industry in Developing Countries: Some Issues” Staff Working Papers No.518, The World Bank, Washington D.C. U.S.A.
Aruwa S. A. S (2004). “The Business Entrepreneur: A Guide to Entrepreneurial Development”, Scopy Press, Kaduna.
Ayesha, B. (2007). “Entrepreneurship Development for competitive Small and Medium Enterprises”.Tokyo: Asian Productivity Organization.
Ayozie, D. O. &Latinwo, H. K. (2010). “Entrepreneurial Developments and Small Scale Industry Contribution to Nigerian National Development”- A marketing interface. Information Management and Business Review. Vol. 1, No. 2, pp. 51-68.
Biggs and Shah (1998). Appraising the Institutional Framework for Poverty Alleviation Programmes in Nigeria. International Research Journal of Finance and Economics, 3, 66-77.
Brown, D (1990). Global Perspective Perceptions of SME Growth Constraints in Nigeria. Journal of Small Business Management, Blackwell 40(1); 58-65.
Berger, A. N. and Udell, G. F. (2004).A More Complete Conceptual Framework for SME Finance. A Paper presented at the World Bank Conference on Small and Medium Enterprises: Overcoming Growth Constraints World Bank, MC 13-121, October 14-15.
Beyene, A. (1999). “Policy, Legal and Regulatory Constraint to Small Scale Enterprise Development”.Modus International Law and Business Quarterly, Vol. 4:4, Pp.46-52.
Binks, M .R. &Ennew, C. T. (1996). “Growing Firm and Credit Constraint, Small – Scale Business Economics”. Pp17 – 25.
Boswell Jonathan (2009). “The Rise and Decline of Small Firms”.George Allen and Unwin Limited London
Central Bank of Nigeria (2011) Statistical Bulletin.Abuja: Central Bank of Nigeria (CBN).
Essien, O. E. (2001), “The Role of Development Finance Institutions in the Financing of Small Scale Industries” CBNBullion.Vol.25, No. 3.
Gelinas J. B. (1998). Freedom from Debt: The re-appropriation of development through financial self-reliance. University Press, Dhaka-Ottawa
Golis, C. (2008), “Enterprise and Venture Capital”: A Business Builder and Investment Handbook, 3rd edition. Allen and Urwin Business/Finance, Australia.
Holiness Scott (2001).“Definition of Small Business” Final Report of the Small Business Coalition (SBC) Australia.
Honourary Presidential Advisory Council on Investment in Nigeria (HPACI, 2002), “Sectoral Profiles on Small and Medium Scale Enterprises”. Vol. 1 and 2, May.
Hossain, N. (1998). “Constraints to SME Development in Bangladesh”. Job Opportunities and Business Support (JOBS) Program, October.
Ifedi Victor (1989).“Imperatives of Corporate Survival” Guardian Financial Weekly. Lagos: Guardian News Papers Limited.
Iorpev, L. (2012). “Does Bank Size Matter to Small and Medium Scale Enterprises (SMES) Financing In Nigeria?” International Journal of Business and Management Tomorrow. Vol. 2, no. 3, pp. 1-9.
Iwuji C. E. &Okoroafor A. E. (1999). “Small Scale Industry and Employment Generation in Human resources and African” (ed) by Ukandi G. Domachi& Victor Diejemah (Praeger Publisher, New York,
Kadiri, I. B. (2012). “Small and Medium Scale Enterprises and Employment Generation in Nigeria: The Role of Finance”. Kuwait Chapter of Arabian Journal of Business and Management Review. Vol. 1, no. 9, pp. 79-93.
Muritala, T. A.; Awolaja, A. M. and Bako, Yusuf.A. (2012).“Impact of Small and Medium Enterprises on Economic Growth and Development”.American Journal of Business and Management. Vol. 1, no. 1, pp. 18–22.
Okoh Julius (1989). “To curb failure to small business”.Guardian Financial Weekly Guardian Newspaper, Lagos.
Olorunshola, J. A. (2003). “Problems and Prospects of Small and Medium-Scale Industries in Nigeria”.Central Bank of Nigeria Seminar on Small and Medium Industries Equity Investments Scheme (SMIEIS).Publication of CBN Training Centre, NO.4 Lagos
Olorunshola, J. A. (2003). “Problems and Prospects of Small and Medium-Scale Industries in Nigeria”. Being A Paper at CBN Seminar on Small and Medium Industries Equity Investments. Lagos: August, No. 4, pp.34-49.
Osagie, C. (2004), “SMIES mostly Targeted at Real Sector- Sanusi”, Industry Column, Thisday, Vol. 10, No. 3243, Page 25
Owualah, S. I. (1999). “Entrepreneurship in Small Business Firm”: G – MAG Investments Ltd., Ikeja- Lagos.
Owualah, S. I. (1999). Entrepreneurship in Small Business Firms, Lagos; G. Mag Investment Limited
Oyelaran, O. (2003). “Financing and Development of Small-sale industries in Nigeria”.Central Bank of Nigeria, Economic and Financial Review.Vol. 24.No. 4, December.
Pacific Economic Co-operation Council (PECC), (2003). Financing Small and Medium Enterprises. Challenges and Options, Singapore”, PECC International Secretariat.
Safiriyu, A. M. and Njogo, B. O. (2012).“Impact of Small and Medium Scale Enterprises in the generation of employment in Lagos State”.Kuwait Chapter of Arabian Journal of Business and Management Review.Vol.1, no.11, pp. 107-141.
Sanusi, J. (2004), Paper presentation at the National Summit on Revamping Small and Medium Industries, Thisday, Vol. 10 No. 3243, page 25
Sule, E. I. K. (1986). “Small Scale Industries in Nigeria: Concepts, Appraisal of Government Policies and Suggested Solutions to identified problems” CBN Economic and Financial Review Vol. 24 No. 4.
Sagagi, M. S (2006). Entrepreneurship Development Policy; A Renewed Perspective for achieving Economic development in Nigeria. Nigerian Academy of Management Journal, vol. 1 No. 1, pp. 179-192.
Secretariat, UNCTAD (1998). Promoting and Sustaining SMEs Clusters and Networks for Development. United Nations Conference on Trade and Developments, Geneva, Switzerland. Issues Paper TD/B/COM.3/EM.5/2.
Uchegbu, Michael A. (1989). “The Need for Business Strategy.Guardian Financial Weekly Guardian Newspaper Limited.