CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The primary function of the banking system has been in the area of credit intermediation. This involves using surplus deposit to lend the deficit area of need for the purpose of developing the nation. Such lending are made to different categories of borrowers under a very unique and different condition the bank have not been noted to show some reluctance in financing entrepreneurs in order to accelerate rapid economic development. Over the pass twenty years, the federal government of Nigeria has been making serious effort towards encouraging the entrepreneur but government attempts to force the bank to finance small and medium scale entrepreneur through the introduction of the sector credit allocation policies. In other to achieve its aim more rapidly, the federal government of Nigeria resorted to poverty alleviation programme as a way of uplifting the standard of the masses. The Nigeria economy is continuously under distortion as a result of the over dependence of the country on the oil sector of the economy. It was observed that in the 70s and early 80s Nigeria as a nation was in oil wealth, she neglected other significant sector of the economy. As a result of this, it has led to huge drain in our foreign exchange reserves. As virtually all items are imported attention was paid to commercial activities that yield quick profit. Little or poor attention was paid to the establishment of entrepreneurship. Propelled by the illusion of the oil wealth to embark on every capital intensive project, the government borrowed extensively to finance neither the projects which are not productive not self financing. Due to the huge financial commitment involved.
Compelled with other misallocation and mismanagement of the public funds, the Nigeria economy has been passing through a very difficult and traumatic era. The conscious affect to diversifying the productive base of the economy to encourage self reliance, create employment opportunities etc. In Nigeria, there has been a decisive switch of emphasis from philosophy of import substation to entrepreneurship with immense potential for development of domestic linkage for rapid sustainable industrial development. Apart from their potential for ensuring a self reliant enterprise in terms of ability to rely largely on local raw materials small scale enterprise are also in better position to boost employment, guarantee more even distribution of industrial development of the country. Having recognized the significant roles of entrepreneurship especially new lending schemes and institutions this now aims at examine the role played by microfinance banks towards development of entrepreneurship in Nigeria. It will also be identify the challenges facing the microfinance banks.
1.2 STATEMENT OF THE PROBLEM
The key problem facing the development of entrepreneurship in Nigeria includes the following.
Inadequate finance for entrepreneurs venturing into establishment of new enterprise.
High rate of interest charged on loan by Microfinance bank which scare off potential entrepreneurs.
Low level of saving in the economy which leads to low capital formation.
High rate of inflation that led to the vast depreciation of Naira exchange rate.
Inability of specialized financial institution such as Bank of Agriculture, Bank of industry etc to provide enough funds for entrepreneurs expansion plans.
1.3 OBJECTIVES OF THE STUDY
- To identify the problems encountered by entrepreneurs in obtaining adequate finance to establish new enterprise.
- To identify why high rate of interest loans scare away potential entrepreneurs.
iii. To determine the causes for low level of saving in the economy which leads to low capital formation.
- To determine the causes of high rate of inflation of Naira exchange rate.
- To make suggestion on how specialized institution can provide enough funds for entrepreneurs.
1.4 RESEARCH QUESTION
- To what extent has microfinance bank been able to provide adequate fund for entrepreneurs venturing into establishment of new enterprise.
- Does high rate of interest charged on loans scare off potential entrepreneurs.
iii. Does low level of saving in the economy lead to low capital formulation.
- What are various measures introduce to curtail inflation that has led to the vast depreciation of Naira exchange rate.
- To what extent has therarions specialized institution entrepreneurs expansion plan.
1.5 SIGNIFICANCE OF THE STUDY
The importance of the study cannot be over emphasized since our aim in this work is to improve our economy and increase the creation of job opportunities in Nigeria through entrepreneurship.
However, this research works when completed will be of immense value not only to academics but also to investors, industrialist and government all levels to academician, this research workers to stimulate them in coming out further research in this area. (i.e contribution of microfinance banks to entrepreneurship development in Nigeria).
Also this study will be of help to both small, medium and large scale investors to meet their financial assistance and to combine effectively all factors of production.
To government, it will be useful to the government in poverty alleviation programmes.
1.6 SCOPE OF THE STUDY
The scope of this study covers microfinance banks and entrepreneurship development in Nigeria. It is an obligation on the past of the researchers of survey and evaluate the purpose of entrepreneurial development and its benefits in Nigeria. A case study of microfinance Bank Ekwulobia.
1.7 PLAN OF THE WORK
The project shall be divided into five chapters the first chapter shall provide the introduction and background of the subject matter justifying the need for the study.
Chapter two shall present related literature review concerning the contribution of microfinance bank to entrepreneurship development in Nigeria. The research methodology shall be stated in chapter three with data presentation and analysis will be made in chapter four.
Concluding comments in chapter five shall reflict on the summary, conclusion and recommendation based on the finding of the study.
1.8 DEFINITION OF TERMS
Loan: This is the act of allowing a borrower to make temporary use of funds, placed at his disposal.
Capital: This is the amount of cash and other asset includes accounts renewable equipment and lend/building of this business.
Entrepreneur: Is one who has ultimate responsibility for the overall direction of a business and bears the risk and reward thereof.
SMEs: The European Union has defined SMEs as a legally independent company with no more than 500 employees.
Microfinance Bank: This is defined as the bank of the poor. It means investing in the income generally activities of the poor. It also meant for those who cannot be efficiently served by regular deposit money universal or merchant banks because their activities and volumes are too low to warrant the high cost of services by these big institutions.
Profitability: This ultimate measures of overall performances.
Advance: This is accommodation made available by a bank to its
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