ROLE AND PROBLEMS OF FINANCIAL INSTITUTIONS TO THE GROWTH OF SMALL SCALE BUSINESS IN NIGERIA
This study's goal is to examine how money is raised and distributed to various economic sectors. The goal of the study is to learn more about how the Nigerian banking sector has helped both small and large businesses flourish, as well as how finance has helped small and medium businesses grow and develop.
This involves figuring out the main issues that these businesses are facing, which is the funding (money) issue. Additionally, the numerous financial resources that are open to small businesses are highlighted.
The study entails a field survey, and the necessary data were gathered using both primary and secondary sources. Secondary data was gathered from books, journals, newspapers, seminar papers, and other publications that covered related topics. Primary information was gathered from a variety of small business managers.
Introduction to Chapter One: The Role and Challenges of Financial Institutions in the Development of Small-Scale Enterprises in Nigeria
1.1 BACKGROUND OF THE STUDY
Although financial institutions play a significant role in the development of small businesses all over the world, I will focus on Nigeria in this talk.
From the definition of financial institutions or its functions, one can see that financial institutions could support the expansion of small businesses.
Financial institutions can be thought of as an institution whose primary functions are collecting and disbursing funds to individuals, firms, organisations, etc. for business purposes.
How may something be accomplished or done? What is the next thing that might cross someone's mind regarding what the financial institution could accomplish by disbursing funds in the form of funds? Requests from small business owners may result in overdrafts, assistance, and other things.
In order to properly define a small businessâwhich can be done in a variety of ways or from various perspectivesâmany variables must be taken into account. Meaning that what Mrs. Olu meant by “small scale business” might not be what Mrs. U.K. meant by the same thing.
Therefore, these few individuals and school of thought have provided an explanation of a small size firm, Blott Any independently owned and controlled business that is not the market leader in its industry is considered a small scale business, according to Lawrence's definition from 1973.
Small scale businesses were classified by the Committee for Economic Development (CED) of the United States as possessing at least two of the traits listed below.
A manager and owners, B owners who provide funds, C a small company in the industry
STATEMENT OF THE PROBLEM
1. Due to the difficulty in obtaining financing from Union Bank Plc, small-scale businesses are unable to purchase the production-related gear and equipment they need.
2. The bank isn't doing much to help because their requirements for granting loans are difficult to meet and the owners of small-scale enterprises are unable to support their requests with coherent and widely disseminated feasibility studies.
3. The bank's inability to assist business owners through loans and other instruments, such as equipment leasing, when their level of production, service provision, and sales is low compared to their level of capital utilisation.
4. The high interest rates and burden of the loan create extra issues and increase the likelihood of loan default.
5. The quick bank policies that went against C.B.N. norms and the resulting lack of collateral securities from business owners produced additional issues with the inability to obtain and use Union Bank Plc. capital.
3.0 OBJECTIVES OF THE STUDY
Studying how financial institutions function in small business will help people, small business owners, and other ancillaries understand how important these institutions are to the economy and how they can benefit from those roles to advance their own lives, those of their families, and the welfare of their countries.
Providing loans, advance overdrafts, grants and subsidies, and advising services are a few of these roles. When small business owners play their roles effectively, their companies grow. Financial organisations also face challenges from time to time.
These issues include government rules and regulations, late payments from borrowers, and more. This issue hinders the efficient operation of financial institutions by preventing the utilisation of resources that could have been allocated to industry expansion.
Government regulations and policies have an impact on financial institutions as well because they may be implemented to address specific economic anomalies. The fact that the policy might have an impact on their project makes it problematic.
1.4 RESEARCH QUESTIONS
The goal of this study would be accomplished by providing a response to the following question.
1. What roles do financial institutions play in small businesses?
2. Do financial institutions offer small-scale business owners loans and advances?
3. Can tiny enterprises afford to finance their operations?
4. Are small enterprises aware of the financial resources at their disposal?
5. Does a small business have access to banks and other funding sources?
1.5 RELATIONSHIP TO OTHER STUDIES
The development of small businesses is significantly influenced by the financial institutions. They perform the following roles:
1. Lending money to tiny businesses
2. Overdraft transfer
3. They offer professional business advice.
Giving Small Scale Businesses Loans: This is one of the ways that financial institutions support the expansion of small scale businesses. On request, they provide loans to individuals running small businesses. This helps entrepreneurs with limited resources perform better than they would otherwise.
Giving of Overdraft: Financial institutions permit small business owners with savings account deposits to, if they so want, withdraw from their accounts in excess of what is available.
The addition of the excess money to the amount withdrawn would help the small businessmen to plan better than they would have if they had just taken out the main fund he has in his accounts. This excess lets or enables the capital on hand to increase.
They Provide Business Advisory Services: Financial institutions provide small business owners with advisory services. The small business that follows the guidance given benefits from the advisory service they provide. It helps them expand their business.
simple record keeping and accounting are included into the operations of small business owners. This is due to the fact that most businesses do not maintain proper records of their operations, which might result in business collapse. The service providers, banks or financial institutions, have reported great success.
1.6 SCOPE OF THE STUDY
The purpose of the study was to ascertain the role that institutions play in small businesses in Nigeria. The study looked closely at how financial institutions operate in relation to the development of the aforementioned businesses.
The study concentrates attention on the evaluation of small scale industries that achieve the required heights and capacity due to the current emphasis on the industrialization of the industry in order to reduce countries export bill from foreign countries and unemployment.
The study looks at a few small-scale businesses in Enugu.
According to the definition employed in this study, small scale industries are those that are entirely owned by Nigerians and have an annual revenue of no more than 500,000 naira (N500,000).
1.7 LIMITATIONS OF THE STUDY
The study has its limitations and restrictions, just like any other human activity. The study has been hampered by the high cost of the materials.
Another disadvantage of the study is the time and travel necessary in gathering the source data. This is due to the severely insufficient amount of time between the conclusion of course work and the project submission.
Additionally, several respondents provided false information or neglected to return their questionnaires, which put a restriction on the research on the research.
1.8 DEFINITION OF TERM
Bank: A type of financial institution where consumers can deposit valuables including cash, gold, and jewellery. Customers must pay for their services.
Entrepreneur: The person who develops the concept for a business, manages it, takes on the risk, and profits or losses from it.
Financial institutions are institutions that are in charge of collecting and disbursing money to people, businesses, organisations, etc. for commercial purposes.
Grants are non-repayable financial aid provided by financial institutions or the government.
Loan: A financial service provided to borrowers by a financial institution. Before a financial institution may approve a loan, it must be payable and have collateral.
Manager: A person who establishes a procedure for managing the operations of a company.
Overdraft: This type of loan is given by banks, however in order to be approved, the borrower must already have a bank account. It occurs when a bank account holder withdraws more money than is actually in his account.
Small-scale business: A company whose managers are also its owners, with a focus on local markets and a modest size relative to its sector.