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The small scale enterprises as one of the pillars of the economy could lead to sustainable growth if it maintains its mutual relationship with financial institutions in the country. This work beamed it searchlight on the evaluation of financial institutions in financing small scale industries in Nigeria with reference to Lokoja town. The purpose is to find out the source and also evaluate financing of small scale industries by financial institutions and to make provision for additional financing, to examine thoroughly the nature and impact of small scale industries in Lokoja town and to proffer possible solutions to problems of start-up financing in small scale industries. The finding will very much benefit small scale owners, the researchers and government. The data was collected using questionnaire and analyzed using chi-square (X2). The population of the study is the object that the research is interested in. the population of this study is about 300 small scale industries in Lokoja town. Based on the findings, it reveals that, sufficient capital has contributed to the growth of small scale industries. Therefore, recommendations were made in respect of improving the efficiency and image of small scale industries and the need for federal government to reduce duty on imported raw materials. In the area of raw materials, the government should endeavour to reduce duties on imported raw materials in order to reduce the cost of production so as to enable the small scale business owners to work hard towards promoting the economic sector in the Nigerian economy.


Key Words:

Small Scale



Financial Institutions




Title Page                                                                                 i

Abstract                                                                                   ii

Table of Contents                                                                     iii


CHAPTER ONE:      INTRODUCTION                                       1

  • Background of the Study 1
  • Statement of the Problem 4
  • Objectives of the Study 5
  • Statement of the Hypothesis 5
  • Significance of the Study 6
  • Scope of the Study 7
  • Limitation of the Study 8
  • Definitions of Terms 9



2.1   Introduction                                                                     10

2.2   History of Small Scale Industries                                     10

2.3   Nature of Small Industries                                               13

2.4   Small scale Industries and the Industries Set-up            15

2.5   Classification of Small Scale Industries                           17

2.6   Forms of Business Enterprises that constitute

Small Scale Industry                                                                17

2.7   Sources of Finance for Small Scale Business                  19

2.8   The Utilization of Existing Resources                                      24

2.9   Importance of Small Scale Business to the Nigerian Economy          25

2.10 The importance of finance in Business                            27

2.11 How to set up a Small Business Enterprise                     28

2.12 Problems and Prospects of Small Scale Business            31

2.13 Summary                                                                         32



3.1   Introduction                                                                     34

3.2   Research Design                                                              34

3.3   Population Description                                                    35

3.4   Sampling Design and Procedures                                    35

3.5   Determination of Sample Size C                                      38

3.6   Method of Data Collection                                                       40

3.7   Method of Data Analysis                                                  41



4.1   Introduction                                                                     42

4.2   Presentation of Data                                                        42

4.3   Test of Hypothesis                                                           46



5.1   Introduction                                                                     54

5.2   Summary                                                                         54

5.3   Conclusion                                                                      55

5.4   Recommendations                                                           55

Bibliography                                                                    57

Appendix                                                                         60



  • Background of the Study

The term “small scale industries” is used within the broad sense of the word. It comprises not only the ‘modern’ industrial enterprises employing 10 to 50 people family business engaging 3-4 family members, cottage industry or independent workers in the formal sector of the economy. We shall advance some definitions in order to have a clearer view on the meaning of small scale industries.


Kilby (1969) sees small scale enterprise as a quasi-sponge for urban employment and a provider of expensive consumer goods with little or no import content, serving an important pressure releasing and welfare augmenting function.


According to the central Bank of Nigeria (1998), a small scale enterprise is one with a maximum turnover of five hundred thousand naira (N500,000.00) with capital investment of not more than two hundred thousand (N200,000.00) excluding the cost of land.


For commercial banks, a small scale enterprise is one with annual turnover not exceeding five million naira. For the Federal Ministry of Industry, a small scale business is that with total cost not exceeding half a million naira excluding the cost of land.


The World Bank (1989) defined small scale business as any ongoing concern whose total project cost does not exceed three million naira.


The Nigerian Industrial Development Bank classified a small scale enterprise with project cost (investment and working) not exceeding seven hundred and fifty thousand naira. While the United Nations Industrial Development Organization classified small scale business as any business with less than one hundred and fifty employees on its payroll.


This project is aimed at the role played by financial institutions in financing small scale industries as well as devising means of improvement. If the need be, various schools of thought have offered various definitions of small scale business using such parameters as:

  1. Total investment cost.
  2. Size of the workforce.
  • Level of turnover.
  1. Operational environment within the context of the present Nigeria.


Developing countries have been made to believe and realize that to rise above poverty industrialization is necessary. They envisaged that development which is a rise in the standard of living of the people can be attained as quickly as possible through entrepreneurial development which means setting up small scale industries perhaps as one man operation. With time and good management, they blossomed into big business and multinational enterprises. It is therefore not surprising that the fate of small business is a great concern to an economy especially a developing economy with Nigeria inclusive.


Until the 1960s, many economists viewed the continued existence of small scale industries in less developed countries as justified by scarcity of capital and administrative experience. It was often argued that with economic growth, the small traditional type of enterprise would, in one sector after another be superseded by modern forms of large scale productions. In order to ensure orderly institution, small industries were seen to deserve support, but mainly in sectors where modern methods could not be immediately applied.


It should be noted that successful economic development efforts depend upon an adequate supply of a number of factors. These include; entrepreneurship, competent management, modern technology and techniques, skilled labour and capital, which have been apparently in short supply in developing countries including Nigeria.


Thus, one of the measures taken by the federal government of Nigeria to ensure adequate provision of the aforementioned factors was the establishment of financial institutions which it was expected would assist in providing a sound financial system to stimulate rapid economic growth and development.


  • Statement Of The Problem

In Nigeria today, the role of small scale industries and their competitive nature has not been recognized; therefore, management techniques are becoming increasingly important to the continued well being of such business concern.


Irrespective of these management techniques, enormous problem still face small scale industries in Nigeria, this can be appreciated by the amount of failure rate in the industries. Although today, no adequate data exist. These persistent failures may be attributed to insufficient financing and financial mismanagement. This does not mean that large industries do not fail, they fail but to a negligible degree when compared to small scale industries.


For the fact that the government has been looking forward to the effective and adequate financing of small scale industries in Nigeria and has set up the development finance institutions to aid such projects, the small scale industries in Nigeria. This research work is aimed at studying some of the problems in financing small scale industries in Nigeria. They include:

  1. Inconsistency in government policies.
  2. Cumbersome land acquisition procedure leading to poor location, etc.
  • Problem of delay in micro loan delivery to the clients. This is a major problem faced by clients.
  1. How do you project the funds?
  2. The measures to be taken in order to improve the standard of business entrepreneurship in Lokoja.


  • Objective Of The Study

This study has been triggered off in order that I may explain the financing of small scale industries and to assess the role played by financial institutions and find the ways of combating financial problems faced by small scale industries in Lokoja. In summary;

  1. Appraise sources of financing small scale industries.
  2. To find out adequacy of loans.
  • Financing starting-up of small scale enterprise.
  1. To examine thoroughly, the nature of the impact of funding small scale industries in Lokoja town.


  • Statement Of The Hypothesis

A hypothesis is a conjectural statement of the relationship between two or more variables. A hypothesis is some testable belief or opinion, idea, suggestion put forward as a starting point for reasoning or explanation. It helps us to identify the condition and state what we are looking for.

Ho:   Sufficient capital has not contributed significantly to the growth of small scale enterprises in Lokoja metropolis.

H1:   Sufficient capital has contributed significantly to the growth of small scale enterprises in Lokoja metropolis.


Ho:   Professional training has not contributed significantly to small scale industries growth in Lokoja metropolis.

H1:   Professional training has contributed significantly to small scale industries growth in Lokoja metropolis.


Ho:   Small scale industries do not make significant contribution to the development of Lokoja metropolis.

Ho:   Small scale industries make significant contribution to the development of Lokoja metropolis.


The following questions are formulated in this research

  1. Has significant capital contributed to the growth of small scale industries in Lokoja town?
  2. Has small scale industries make significant contribution to the development of Lokoja town?
  3. Has professional training contributed to small scale industries in Lokoja town?


  • Significance Of The Study

In a developing economy like Nigeria, the significance of small scale industries cannot be overemphasized. Onje (2010) identified small scale industries as the bedrock of development in the developing countries. Therefore, the consistent failure of such business will spell a disastrous catastrophe for these countries. This brings about the need to identify the cause of these failures, the way to overcome these problems and the procedures in improving on the existing small scale industries.


If this is achieved, then Nigeria and other developing countries will be on the path of attaining technological and industrial power, not to talk of the complete freedom from the imperialist and their continuous oppressions.

However, the significance of this study is:

  • To find the solution to employment problem in the country.
  • It aimed at developing entrepreneurship for people becoming their own bosses.
  • It will also assist management in making and taking optional decisions.
  • This study will be significant to student researchers and the general public as a source of information, since it will expand the scope of existing literature in the area of small scale industry in Lokoja town.


  • Scope Of The Study

The research is restricted to financing aspect of selected small scale industries in Lokoja town. The researcher is to look at the source of finance, look at the information on small scale industries in Nigeria. The researcher will explore the need for additional finance and the efficient utilization of existing sources of funds.


Also, the researcher tries to assess the role of small scale industries in economic development and will further look at the problems faced in performing these roles.


Finally, a conclusion based on the available data and records will enhance overall development of small scale industries.


  • Limitations Of The Study

The project is limited by the following factors:

  1. Finance because of the present economic predicament in the country. Financial constraint also did not allow the researcher to go round and conduct personal interview with as many people as possible.
  2. Time is also another constraint; the time allowed for the completion of the research work is too short for effective data collection analysis, compilation and writing of the final report.
  3. The interviewee saw me as an agent of board of internal revenue, so they were unwilling to put answer some of my questions.






  • Definition Of Terms

Industrialization: The United Nation’s Committee on Industrial development defines” industrialization’ as the process of economic development in which a growing part of the natural resources is mobilized to develop technically up to date, diversified, domestic economic structure characterized by a dynamic manufacturing sector hearing and producing means of production and consumer goods and capable of ensuring a high rate of growth for the economy as a whole and achieving economic and social progress.


Small scale: Not great in size, extent and quality.

Business: The activity of making, buying, selling things for trade and commerce.

Role: A function that a person or thing typically has or is expected to have.

Competence: The ability and skill to do what is needed.

Financing: The raising of fund for particular project.

Fund: An amount of money that is collected and kept for a particular purpose.

Sufficiency: The state of being or having enough.

Utility: The satisfaction that household receive for consumption.




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