ABSTRACT
This project work is carried out to examine
the contribution of micro finance banks to the development of Small and medium
scale enterprises in Nigeria. The Brass micro finance bank is used as a case
study. Data were collected through a well structured questionnaire and the
information elicited from the respondents were analyzed through tabular
presentation of data, frequency distribution and percentages. The findings
revealed that Microfinance banks have contributed immensely to the development
of small scale business in Nigeria and most especially Small Business Ventures.
However, it was discovered that the small scale businesses are beset with
myriads of problems which can be solved through an improvement in the service
of Micro finance banks by the government.
CHAPTER
ONE
INTRODUCTION
1.1
BACKGROUND TO THE STYUDY
Nigeria is an immensely endowed country
in both natural and human resources, with the population of over 140 million
people who are largely engaged in the farming sector and small scale business.
This sector is primarily dominated by micro, small and medium scale enterprises
(MSMEs) and both peasant farmers who require financial assistance to boost
their business and improve their livelihood. However, lack of access to formal
financial assistance has constrained their development in the country.
Microfinance bank in Nigeria has no been affecting people life in the time past
due to unavailability of fund at their disposal and government policy that has
constrained their activities and relegate it to the background. Kudos should be
given to the Central Bank of Nigeria Governor who has greatly revolutionalised
the banking sector through bank consolidation and turned the community banks
into microfinance banks. In the same vein, it is very difficult for a common
man to receive loan from banks like UBA, First Bank, Skye Bank etc. due to lack
of Collateral security but microfinance has made it possible to receive loan
with little or no collateral. These microfinance banks have gone to the extent
of buying tools, paying for shops and providing business capitals to
enterprises. However, the problem is even with the creation of microfinance
banks, what benefits has the sector
derived from them over the years.
1.2
STATEMENT OF THE PROBLEM
The
Nigeria economy has been progressing as expected, the unemployment rate is so
high that it is believed that 3 out of 5 graduates are likely to be jobless in
the first 5 years of their graduation, inflation is galloping as prices double
almost daily, poverty rate reached a chronic state where countries in the world
and general welfare is dilapidating, mortality rate is increasing across the
year basically due, to poor infrastructure and social amenities. To solve these
problems, there is a need to investigate which sector has the highest potential
to contribute positively to the economy, and most importantly to the
grassroots.
Although,
theory may back enormous contributions of small and medium scale enterprises to
economic development, there is need to investigate if that is the case in
Nigeria. It is obvious that if the available SMEs, in Nigeria were not faced
with certain problems of infrastructure, funding, raw material sourcing,
foreign dumping amongst other.
It
is however, in the light of the above problems that this research study is
initiated to investigate the problems, the extent of their hindrance to growth
of the sector and their possible solution.
1.3 OBJECTIVES OF THE STUDY
The main objective of this research
work is to assess the contribution of micro-finance banks in the development of
small and medium scale enterprises in Niger state. Specific objectives of the
study are:
1. To
determine the socio-economic characteristics of the respondents.
2. To
determine the level of growth in the microfinance banks over time in Bida,
Niger state.
3. To
determine the impact of microfinance banks on the development of small and
medium scale enterprises.
4. To
determine the constraints to securing loans from microfinance banks.
5. To
make recommendation based on research findings.
1.3
RESEARCH QUESTIONS
The following will constitute the research
question for this study.
1.
Do we have enough
microfinance banks in the state to cater for the existing small scale and Small Business Ventures?
2.
What has been the
impacts of Microfinance banks on SMES?
3.
How easy is it for
the organization to secure loan from the existing microfinance banks?
4.
Are the microfinance
banks accessible to other sectors asides small scale businesses?
1.4
FORMULATION OF HYPOTHESIS
H0: Microfinance banks do not influence
small scale business profitability.
H1: Microfinance banks influence small
scale business profitability.
H0: Microfinance banks do not give loan
to Small and Medium Scale Businesses
H1: Microfinance banks give loan to Small
and Medium Scale Businesses
H0: Microfinance banks have no impact
on the rate of sales in small scale business.
H1: Microfinance banks have an impact
on rate of sales in small scale business.
1.5
SCOPE OF THE STUDY
The research work is focused on the
contributions of micro finance banks to the development of SMES using Brass
Micro Finance bank, Bida as a case study. However, the result obtained in this
research work will be use as a benchmark for making reference to other small
and medium scales business.
1.6
HISTORICAL BACKGROUND OF MICROFINANCE BANK OF NIGERIA
Microfinance is about providing
financial services to the poor who are traditionally not served by the
conventional financial institutions. Three features distinguish microfinance from
other formal financial products. They are: The smallness of loans advanced; The
absence of asset – based collateral Simplicity of its operations. Who are
Microfinance Clients/Customers Anybody who possesses the following
characteristics shall qualify as a customer of microfinance bank. Has a monthly
income of not more than twice the monthly per capital income in Nigeria, or
minimum wage whichever is higher; Has a total productive asset (including those
of land) of not more than five hundred thousand naira (N500,000.00); Is not
regular employee of any organization Is aged between 18 and 60years. Generally,
microloan is expected to be granted to the operators of micro-enterprises such
as peasant farmers, artisans, fishermen, rural women, senior citizens, salaried
and non-salaried workers in the formal and informal sectors. What is Microloan?
A microloan is a facility granted to an individual borrower or a group of
borrowers whose principal source of income is derived from business activities
involving the production or sale of goods and services The principal amount to
be granted shall not exceed five hundred thousand naira (N500,000.00) The said
loan are usually unsecured, but typically granted on the basis of the
applicant’s character and the combined cashflow of the business and that of the
household. Ordinarily, the tenure of a microloan is 180days. However in the
case of crops with a longer gestation period, a maximum tenure of twelve months
shall be permitted. Poor Person A poor person is defined as one who has meager
means of sustenance of livelihood and whose total income during a year is less
than the minimum taxable limit set out in the law relating to tax. (thirty
thousand naira (N30,000.00) Why do we grant Microcredit? The government
introduced the microfinance for a number of reasons among which are: Economic
empowerment of the borrower; Poverty alleviation; Creation of wealth Some
Permissible Activities of Microfinance Banks Microfinance banks are allowed to
engage in the provision but not limited to the following activities: Promotion
and monitoring of loan usage among its customers by providing auxiliary
capacity building in such areas as record keeping and small business management
Provision of loan disbursement services for the delivery of the credit
programmes of governments, agencies, groups and individuals for poverty
alleviation on a non – recourse basis; Operation of micro leasing facilities,
and microfinance related hire – purchase; Provision of loan to microfinance
clients for home improvement and customer credits.
1.7
DEFINITION OF TERMS
1. Microfinace Banks This is a type to
banking service that is provided to unemployed or low income individuals or
groups who would otherwise have no other means of gaining financial services 2.
Small And Medium Scale Business it is defined according to Central Bank of
Nigeria as a business independently owned and operated. A business that has a
small share of the market (not in position to significantly influence the size
of the market).
3. Economic Growth Economic growth is
an increase in the capacity of an economy to provide goods and service; compare
from one period of time to another.
5.
Economic Development
Economic development has been defined as “the process by which a community
creates, retains and re-invests wealth and improves the quality of life.
6.
Capital It is the
amount of cash and other assets owned by a business or it is wealth used for
the creation of further wealth