CHAPTER ONE

INTRODUCTION

1.1    Background of the Study

In both developed and developing countries, the small scale industry is seen as the vehicle for rapid industrialization, sustainable economic growth and development, poverty alleviation as well as the seed bed of innovation and employment generation. It goes without saying therefore, that small scale enterprises have the potential of becoming the engine of the economic growth in any country (http://www.snbd.com, July 8 2010).

Because of this paramount importance of small scale businesses, there has been a pressing need for the involvement of banks in financing its development in Nigeria and Kaduna in particular. This is due to the fact that banks loans constitute the most important source of institutional financing for both start-up and growing enterprises.

It is the realization of this fact that made the government to establish various schemes and programmers in the past to enhance credit availability to small scale enterprise in Nigeria. In recent time now however, the Nigeria bankers committee in 1999, approved the scheme requiring all banks in Nigeria to set aside 10 percent of their profit before Tax (PBT) for equity development in small scale and medium scale industry.

Despite these measures, many small scale businesses with economic potentials for growth often fail and close down due to lack of funds, insufficient working capital, lack of managerial experience and skilled labor, poor accounting records as well as lack of infrastructural facilities (central Bank of Nigeria: the billon, October/December 2004:58-b5)

Thus, how banks have contributed to improving the aforementioned challenges and the expectations, regarding the development of small scale enterprise in Kaduna are the issues discusses in research work.

1.2    Statement of the Problem

Although the small scale enterprise is regarded as the bedrock of industrialization of an economy, attempts made by many entrepreneurs to start and operate them have met with high percentage of failures, lack of fund and insufficient working capital have identified as some of the cause of such failures. The study therefore seeks to answer such questions as; have banks been able to make available capital on affordable terms to small scale enterprise? What measures have been put in place to ensure that such funds are effectively used by enterprises? Does small scale enterprise actually have easy access to credit facilities? These and more issues constitute the problems that necessitate this research work

1.3    Objective of the Study

The objective of this research work are :

i.             To evaluate the role of banks in financing small scale enterprise in Kaduna.

ii.           To indentify challenges faced by small scale businesses in accessing loans

iii.         To identify possible factors handing implantation of credit policies on loans and advance to small scale entrepreneur.

1.4    Significance of the Study

The significance of this study is that, it shows the relevance of banks in financing small scale businesses, thus enhancing business growth and expansion an attainment of goals and objective of the business. It is also beneficial for formulation of policies and programmes by the federal and state government as they might be looking forward to taking necessary steps to prevent the collapse or failure of small scale businesses in Nigeria and Kaduna in particular. Again, it will enable the entrepreneurs to have more understanding of how businesses should be financed, thus having knowledge on funding further research in this area.

1.5    Research Questions

For the purpose of this research work, the following questions would serve as a guide to evaluate the development role played by the united bank for African (UBA) plc.

i.             Is capital made available on affordable terms to small scale enterprise?

ii.           Are there challenges facing small scale enterprise in accessing bank loan?

iii.         What factor hinders implementation of credit policies on loans and advances to small scale entrepreneurs?

1.5.1 Statement of Hypotheses

H0:    Capital is not made available to small business on affordable terms.

H1:    Capital is made available to small business on affordable term.

H0:    There are no challenges facing small scale business in accessing bank loans and advances.

H1:    There are challenges facing small scale business in accessing bank loans and advances.

H0:    There are no factors hindering implementation of credit policies on loans and advances to small scale businesses.

H1:    There are factors hindering implementation of credit policies on loans and advances to small scale businesses.

1.6    Scope of the Study   

This research work is limited to cover the development in terms of financing the small scale business enterprise in Kaduna using the united Bank for Africa Plc as a case study, with a view to highlighting related problems and proposing solutions to the problems.

1.7    Limitation of the Study

This study is constrained by the cost of acquiring information as the researcher had to browse on the internet, search academic journals and books relating to the subject matter of the research work. Also, considering limited time, other competition course works with this study does not allow for exhaustive research work.

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