ROLE OF MICRO FINANCE BANKS IN PROMOTING MICRO, SMALL AND MEDIUM SCALE ENTERPRISES
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ROLE OF MICRO FINANCE BANKS IN PROMOTING MICRO, SMALL AND MEDIUM SCALE ENTERPRISES
Chapter one
INTRODUCTION
1.1 Background of the Study.
The Central Bank of Nigeria classifies small and medium-sized firms in Nigeria based on their asset base and number of employees. The requirements are an asset base of one million (N1,000,000) to two hundred million naira and a workforce of 11 to 20. Micro, small, and medium-sized firms play an important role in our economy in a variety of ways.
For starters, they help to increase capacity by serving as training enterprises. Second, because micro, small, and medium-sized firms have labor-intensive operations, they often generate more job possibilities per unit of investment.
In fact, they account for more than 95% of the number of enterprises in practically all countries, supplying between 50 and 80% of employment and 40 to 60% of GDP.
Micro and medium-sized firms also provide feeder industry services or function as important suppliers of intermediate goods, one of the smallest components to large-scale industries, and major agents for the distribution of such industries’ final products.
Furthermore, they create chances for the development of indigenous skills and technology acquisition through adaptation. The Aba-made syndrome is an obvious illustration or expression of such technology in the economy. Furthermore, micro, small, and medium-sized firms are viewed as instruments for generating long-term development.
A sustainable development is one that ensures that the general population may achieve an adequate level of wellbeing; however, there are numerous enterprises in many developing countries, with the most difficult task being discovering them.
Microfinance banks play a role in recognising the small and medium-sized enterprise sub-sector as an engine of industrial growth and material development targeted at addressing the sub-sector’s problems.
Microfinance banks are available to stimulate the growth of Nigerian home products by charging a ten percent (10%) profit on micro, small, and medium-sized enterprise projects (Can Mens vol. 27 ivo3).
This will require commercial banks to have stock in small and medium-sized enterprise projects. The programme was authorised during the bank committee’s 24b meeting on December 2, 1999.
According to them, this was a response to President Obasanjo’s concern and a policy step to promote micro, small, and medium-sized firms as vehicles for rapid industrialization, long-term economic development, poverty alleviation, and overall job creation.
This initiative intends to, among other things, aid in the sustainable and formation of new, viable micro, small, and medium-sized enterprise projects, thereby supporting economic growth and the development of local technology, as well as promoting indigenous enterprises, entrepreneurship, and overall employment.
1.2 Statement of Problems
Many micro, small, and medium-sized firms have become eyesores for Nigerians, possibly due to a lack of cash, capital, or property investment, as well as bad planning.
It could also be owing to commercial banks’ high loan interest rates, which cause managers and owners of small and medium-sized businesses to avoid collecting credit facilities in order to improve the business’s situation.
Some speculate that commercial banks are not interested in providing loans to empower these operators. This could be due to the inability of small business managers and owners to repay the loan;
thus, the researcher scaled to determine whether there is still a significant impact of financial houses on the growth of micro, small, and medium-sized enterprises in Nigeria, using Stanford Micro Finance as a case study.
1.3 Objectives of the Study
To evaluate the role of microfinance institutions in encouraging micro, small, and medium-sized firms in Nigeria.
To identify areas of need for micro, small, and medium-sized businesses in order to receive more financial assistance from microfinance banks.
To determine the level of success achieved by microfinance banks in fostering micro, small, and medium-sized firms.
To stress the importance of promoting micro, small, and medium-sized firm development in Nigeria.
To give appropriate recommendations that will aid the growth of micro, small, and medium-sized businesses in Nigeria.
1.4 Research Questions.
Are there any methods taken by micro, small, and medium-sized businesses to improve their performance?
Do microfinance banks in Nigeria help to establish and expand micro, small, and medium-sized enterprises?
1.5 Research Hypothesis.
The formulated hypotheses are:
Ho: null hypothesis.
Hello: Alternative theory.
Ho: There are no mechanisms in place to help finance micro, small, and medium-sized businesses.
aii. Hi: There are steps made to finance micro, small, and medium-sized businesses.
1.6 Significance of the Study
Many factors have had a significant impact on the role of microfinance banks in encouraging micro, small, and medium-sized firms in Nigeria, but the ongoing demand for greater financial assistance from micro, small, and medium-sized enterprises has become urgent.
Thus, the study would encourage microfinance bank management to take on issues in promoting and developing micro, small, and medium-sized enterprises in Nigeria.
This type of research would also provide vital and useful information to micro, small, and medium-sized enterprise managers, the government, agencies, and the general public in their efforts to integrate the micro, small, and medium-sized companies sub-sector. It will help in the future.
1.7 Scope or Limitation of the Study
Although this study is on micro, small, and medium-sized businesses in Nigeria, it focuses on a subset of them in Akwa Ibom state.
1.8 Study limitations: The study, “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 State, Nigeria.
1.8 Definition of Terms
Micro, small, and medium-sized firms are business organisations with a capital base ranging from $1 million to $20 million and a staff of 11 to 20 workers or employees.
The inability of small businesses to obtain funds from traditional microfinance institutions and the government.
Commercial banks operating in Nigeria typically provide short and medium-term loans to micro, small, and medium-sized businesses.
The phrase “capital base” refers to the funds generated by a company or firms as a result of an initial public offering that the collaboration makes at a given moment.
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