CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Prior to the 1970s, the view that large
firms were the cornerstone of a modern economy dominated the literature
(Nnanna, 2003). The theory of economies of scale, which is
predicated on the advantages of large scale operations prevailed. Thus,
entrepreneurial business was seen as belonging to the past; out-moded,
and a sign of technological backwardness. More recently, however, this
view has shifted due to the important role played by relatively small
entrepreneurial business firms in promoting industrialization and
facilitating sustainable economic growth and development.
The concept of entrepreneurship evokes
varying meanings or interpretations, depending on the perspective of the
user. However, as Duke (2006, p.1), puts it, “an individual
who pioneers a new technology or introduces a new method of doing
business typifies entrepreneurship. He also is a person that carries on
with an existing technology or method, but in an innovative way. The
entrepreneur usually undertakes and operates a new business venture and
assumes some accountability for the inherent risks”. Thus, an
entrepreneur is an integrated person who brings about some changes
through innovation for both personal and societal benefit. As such the
entrepreneur is a critical factor in driving socio-economic change as he
seeks new opportunities, and brings about new techniques, new products
and co-ordinates the activities required to manage an enterprise.
In Nigeria, the development of
entrepreneurial activities has manifested in virtually all aspects of
the economy including micro finance, personal services, food, clothing,
ICT, telecommunications, entertainment and hospitality, and
agriculture/agro-allied business. These entrepreneurial efforts have
contributed to the attainment of some of the nation’s economic
development objectives. Such contributions include employment generation
for the growing rural and urban labour force, production output
expansion, income redistribution, utilization of local raw materials and
technology, increase in revenue base of government, as well as
production of intermediate goods that help to strengthen inter and intra
industrial linkages (Osuji, 2005). Similarly, developed countries such
as United States of America, Japan, Germany, Italy, and Britain, have
been found to owe their overall economic development to entrepreneurship
(Fasua, 2006).
The development and growth of
entrepreneurship in Nigeria, has remained a major concern for the
government. The importance of a private sector-driven economy can best
be described and appreciated from its potential for facilitating food
security, employment generation, service delivery, wealth creation and
economic empowerment of the citizenry. These are outcomes that are also
aligned with the goals of the National Policy on Micro, Small and Medium
Enterprises (MSMEs), National Economic Empowerment and Development
Strategy (NEEDS), State Economic Empowerment and Development Strategy
(SEEDS) and the Millennium Development Goals (MDGs)
Unfortunately, the impediments of
entrepreneurship development in Nigeria today include the dearth and
paucity of credible and reliable database, weak infrastructure,
inconsistent government policies, lack of knowledge of the various laws,
policies, or statutes that protect SMEs and which can even help them
expand and grow, poor credit administration, corruption, and, lack of
capital and/or inadequate funding due mainly to poor access to
conventional banking facilities (MSME, 2010). Lack of capital and/or
inadequate funding in particular, makes it difficult for entrepreneurs
to transform their initiatives, creations and innovations into finished
products and services capable of satisfying the needs of consumers. It
is universally acknowledged that banks and other financial institutions
are only able to provide credit for just twenty five percent of all
clients (Fasua, 2006). The situation is even worse for entrepreneurs as
only two percent of micro enterprises are being served by the banks
(Casson, 1995). In response to this problem, government and the
international development agencies have over the years, instituted
various programmes, strategies and policies aimed at providing credit to
entrepreneurs, with a view to promoting micro, small and medium scale
business ventures. Typical among these efforts, are the various micro
credit schemes instituted by some state governments, multinational
companies (MNCs), United Nations Development Programme (UNDP), United
Nation Industrial Development Organization (UNIDO), and private
organizations, such as the Tony Elumelu Foundation.
However, the impact of these credit
programmes and schemes has so far been unclear. More worrisome is the
perception that micro and small scale business sector has still not
realized its actual potential in Nigeria. This therefore puts a question
mark on the efficacy of the available credit programmes. It is against
this background that this study seeks to examine and establish the real
contribution of micro credit programmes on the development of
entrepreneurship in Akwa Ibom and Cross River States of Nigeria.
1.2 STATEMENT OF THE PROBLEM
In spite of the intervention strategies
of government and other development partners, through direct lending or
credit guarantee programmes and schemes to micro and small business
firms and entrepreneurs, the growth and development of entrepreneurship
remains observably low. For instance, Nigeria remains listed among the
poorest countries of the world, with unemployment and poverty levels
rising increasingly (World Bank, 2010). This is indicative of the
inefficacy of micro and small businesses in helping address these
problems. Specifically, the micro credit programmes are perceived to be
poorly coordinated and managed. The credit administration mechanisms
used for the schemes and programmes are generally considered to be weak
and non-responsive to the challenges of monitoring and controlling of
the lent funds. Also, there are issues of corruption surrounding the
management of the funds. Finally, funding of these programmes,
especially the ones instituted by State governments, is considered to be
poor and insufficient.
1.3 OBJECTIVES OF THE STUDY
The main objectives of the study are:
1. To determine the impact of micro credit programmes on entrepreneurship development in Akwa Ibom and Cross River States.
2. To establish the effect of
operating cost on the performance of micro credit programmes in Akwa
Ibom and Cross River States.
3. To establish the effect of
credit administration on the performance of micro credit programmes in
Akwa Ibom and Cross River States.
4. To make recommendations based on the findings of the study.
1.4 RESEARCH QUESTIONS
The following research questions will be relevant to this study:
- To what extent do micro credit programmes affect entrepreneurship development in Akwa Ibom and Cross River States?
- To what extent does operating cost affect the performance of micro credit programmes in Akwa Ibom and Cross River States?
- To what extent does credit administration affect the performance of micro credit programmes in Akwa Ibom and Cross River States?
1.5 RESEARCH HYPOTHESES
Arising from the foregoing, the underlisted hypotheses will be stated for the research:
HO1: Micro credit
programmes do not have a significant effect on entrepreneurship
development in Akwa Ibom and Cross River States.
HO2: Operating
cost does not have a significant effect on the performance of micro
credit programmes in Akwa Ibom and Cross River States.
HO3: Credit
administration does not have a significant effect on the performance of
micro credit programmes in Akwa Ibom and Cross River States.
1.6 SIGNIFICANCE OF THE STUDY
This study will be useful to governments
at the various levels, (Federal, State and Local) and their ministries,
departments and agencies (MDAs) charged with the responsibility of
implementing policies and programmes on entrepreneurship development
such as National Bureau of Statistics (NBS), SMEDAN, NDE, NAPEP, NDDC,
NASSI, CBN (Development Finance Department), Small and Medium Industry
Development Agency (SMIDA) and National Association of Small and Medium
Enterprises (NASME), among others.
Secondly, the study will be useful to
International Development and Funding agencies, Multinational
Corporations (MNCs) operating in the country, and Non-Governmental
Organizations (NGOs), which have been partnering and supplementing the
efforts of government in providing micro credit for entrepreneurship
development in the country. They include United Nations Industrial
Development Organization (UNIDO), United Nations Development Program
(UNDP), World Bank (SMEs department), Lift Above Poverty (LAPO), and Oil
and Gas Companies (Exxon Mobil, Shell, Agip, Chevron, etc), who will
find the work a useful intervention document for designing and
projecting the extent of their involvement in meeting their social
responsibility expectations in their area(s) of operation. Others are
private organizations like Tony Elumelu Foundation that recently donated
about N2.5billion for the development of Entrepreneurship in Nigeria
and Dangote group that has been partnering government in this
direction.
Thirdly, this study will be of benefit
to management scholars in universities, polytechnics and professional
bodies as it will enrich the body of literature on micro credit
programmes and their impact on entrepreneurship development in Nigeria.
The content of this study will also stimulate further research on
related subjects.
1.7 ASSUMPTIONS OF THE STUDY
- It is assumed that the variables used for the study are appropriate.
- It is assumed that the sample selected for the study is truly representative of the population.
- The methodology employed in the study is appropriate and replicable.
1.8 SCOPE OF THE STUDY
The study is cross-dimensional as it
involves more than one state. Geographically, the study will be limited
to Akwa Ibom and Cross River States in South-South Nigeria. The study
will limit its scope to the examination of micro credit as a catalyst
and a facilitator of micro and small enterprises development in the two
states.
1.9 DEFINITION OF TERMS
- ENTREPRENEURSHIP: Entrepreneurship is the act of
creating a new business in the face of risk and uncertainty, for the
purpose of achieving profit and growth by identifying significant
opportunities and assembling the necessary resources to capitalize on
them (Zimmerer, Scarborough & Wilson, 2013).
- MICRO CREDIT: Micro credit is the extension of
small loans to active poor people (entrepreneurs) who are unable to
access traditional bank loans to engage in self employment projects or
to finance micro and small business initiatives, in order to generate
income to cater for themselves and others (Edeghe, 2005).
- MICRO ENTERPRISES: These are enterprises whose
total assets (excluding land and buildings) are less than five million
naira, with a workforce not exceeding ten employees (SMEDAN, 2010).
- SMALL ENTERPRISES: These are enterprises whose
total assets (excluding land and buildings) are above five million
naira, but not exceeding fifty million naira, with a total workforce of
above ten, but not exceeding forty-nine employees (SMEDAN, 2010).
- INNOVATION: This is the act of bringing about
changes by introducing new methods, new ideas, new technology and new
ways of doing things. It is the ability to apply creative solutions to
problems and opportunities to enhance people’s lives.
- LATENT CAPACITY: This is an existing capacity for entrepreneurship which is not yet visible or developed.
- GROSS DOMESTIC PRODUCT: The GDP is the market value
of final goods and services produced within a country at a particular
period, usually a year. It is earned domestically, rather than abroad.