AN APPRAISAL OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT
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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.
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
H0: Small Scale enterprise do not contributes immensely towards economic development of a community.
H1: Small Scale enterprise contributes immensely towards economic development of a community.
H0: Small scale enterprises do not encountered problems in source for funds.
H2: Small scale enterprises encountered problems in source for funds.
1.6 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.
1.7 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers an appraisal of performance of small scale enterprises in community development, but in the cause of the study, there were some factors which militate against the scope of the study
- a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
- b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
- c) Finance: the financial resources at the disposal of the researcher was very limited, which in turn affect the scope of the study as the researcher could not afford to travel to other neighboring state to source for data
1.8 OPERATIONAL DEFINITION OF TERMS
SME
The European definition of SME follows: “The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro
Community development
Community development is a process where community members come together to take collective action and generate solutions to common problems. Community well-being (economic, social, environmental and cultural) often evolves from this type of collective action being taken at a grassroots level
Finance
Finance is a field that is concerned with the allocation of assets and liabilities over space and time, often under conditions of risk or uncertainty. Finance can also be defined as the science of money management.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows
Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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