Abstract
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
SMEsin community development.
CHAPTER ONE
INTRODUCTION
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.