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1.1 Background of the study 1
1.2 Statement of the problem 4
1.3 Objectives of the study 6
1.4 Research Questions 6
1.5 Research Hypothesis 8
1.6 Scope of study and methodology 9
1.7 Limitation of Study 10
2.1 Introduction 11
2.2 Scope and relevance of small and medium scale
Enterprises ( SMEs) 12
2.3 The Contribution of small and medium scale
Enterprises to socio-economic development of Nig 14
2.4 Financing Micro, Small and medium scale
Enterprises 20
2.5 Alternative sources of financing SMEs 40
2.6 Accessibility to Bank Credits by small and medium
Scale enterprises 44
2.7 Appraisal of past Government efforts towards
Financing SMEs 56
2.8 Microfinance Policy of Nigeria 68
2.9 Appraisal of micro-credit program in other economies 83
3.1 Research Design 96
3.2 Sources of Data 97
3.3 Population 97
3.4 Sampling Procedure 99
3.5 Instrument of data Collection 101
3.6 Data collection procedure 102
3.7 Method of data analysis 103
4.1 Analysis of data from small and medium scale
Enterprises 107
4.2 Analysis of data from Commercial and
Microfinance Bank staff 121
4.3 Test of Hypothesis 134
5.1 Summary of findings 147
5.2 Conclusion 152
5.3 Recommendation 155


3.1 Small and Medium scale enterprises in Delta State 98
3.2 Dep. Money Banks and Microfinance banks in
Delta State 98
3.3 Sample size of SME selected 99
3.4 Sample size of Banks selected 100
4.1 Sex of respondents 107
4.2 Marital Statutes of respondents 108
4.3 Educational qualification of respondents 109
4.4 Age classification of respondents 110
4.5 Business experience of entrepreneurs 111
4.6 Sectoral classification of business 112
4.7 No of sources of fund utilized 113
4.8 Sources of Business finance 114
4.9 Percentage of capital as bank credit 115
4.10 Level of dependence on Bank credit 116
4.12 Percentage of SME that encounter problems
In accessing loans from Banks 117
4.13 Ranking of problem encountered in accessing
Loan in order of reoccurrence 118
4.14 Level of impact of Govt Programme 120
4.15 Gender Classification of respondents 122
4.16 Marital status of the respondents 122
4.17 Educational qualification of the respondents 123
4.18 Age distribution of the respondents 124
4.20 Experience of Bank staff 124
4.21 Sources of finance for SMEs 126
4.22 Percentage of capital that is bank credit 127
4.23 Ranking of reason for loan disapproval by Banks 128
4.24 Benefit of other country’s programme to Nigeria 130
4.25 Impact of Govt programme on SME finance 132
4.26 Sources of funding for SMEs 135
4.27 No of sources of funding 137
4.28 Degree of impact of Govt programmes 139
4.29 Level of bank credit 142
4.30 Gross Domestic Product 143
4.31 Correlation of Total Bank Credit & GDP 144
4.32 Correlation of loans to SME and GDP 145
The economy of any nation is driven by the level of
industrialization, while the level of industrialization is
determined by a number of other factors. In a developing
economy like Nigeria, Small and Medium scale enterprises
play a vital role in economic development. Unfortunately ,
these categories of industries are bedeviled with many
problems ranging from lack of infrastructural facilities, low
technological know how, lack of technical skills to financing
problems. This research is centered on financing small and
medium scale enterprises for economic development. It
explored the present pattern of financing, the alternative
sources of financing SMEs as well as government effort past
and present geared towards improving the financial status of
such categories of industries. It also examined the problems
faced by SMEs in raising the needed capital. The overall
objective of the study is to seek for improved or new
methods of financing SMEs for improved performance which
will in turn lead to economic growth and development of the
nation. To carry out the study; data were collected from
both primary and secondary sources. The main data
collection instruments were a structured questionnaire and
personal interview. The data collected were presented in
tables as frequency distribution and analyzed with
percentages and frequencies. The sign test and person
product moment correlation coefficient were used to test the
hypothesis. The end result of the research shows that small
and medium scale enterprises were underfinanced and
various measures were suggested to improve the funding
status including direct government intervention in financing.
The Nigerian Economy has been unstable. It has witnessed a
lot of downturn over the years. Since the oil boom of the
80’s, the state of the economy has deteriorated and Nigeria
has continued to be ranked among the least developed
nation. So many reasons can be adduced for the slow pace
of economic growth. Such reasons include; mono-cultural
economy, low industrialization, high import dependency and
corruption. Various regimes in the past had come up with
one initiative or the other in a bid to turnaround the
economic fortunes of this country. Also some bodies or
agencies have been established to oversee and solve the
problem of poverty and promote economic advancement. In
this regard, bodies like the National Poverty Alleviation
Programme (NAPEP), Family Economic Advancement
Programme (FEAP), Small and Medium Scale Enterprises
Development Agency (SMEDAN) etc were established.
Past governments have been involved in different
development plans all geared towards uplifting the nation’s
economy. The government of Gen Sanni Abacha lunched a
development plan tagged vision 2010. It was a plan that
was drawn to put to achieve certain level of development of
Nigerian economy by the year 2010. The government of
President Olusegun Obasanjo in effort to turnaround the
economy, embarked on so many reforms in different sectors
of the economy including; education, energy, solid minerals,
works, transport etc. He also established the Due Process
Office that brought a lot of positive changes in the contract
award process and execution.
The present government of Alhaji Yar’adua has come up with
its own agenda popularly known as the seven point agenda.
Through the seven point agenda his government intends to
focus on key sectors of the economy that will speed up
economic development of the nation. He has also launched a
development plan titled vision 2020.Through this plan he
intends to speed up economic development that will put
Nigeria among 20 topmost economies by the year 2020.
This he has already started pursuing with greatest emphasis
on the power sector.
Despite these laudable programmes and plans, the pace of
economic development seems to be at a standstill. In fact
with the global financial meltdown leading to world economic
recession, the economy seems to be deteriorating further.
One problem that has been identified as a clog in the wheel
of economic advancement is the neglect of small and
medium scale enterprises or what some call microentrepreneurs. It has been established in both advanced and
emerging economies that the growth of most economies has
been anchored on the growth of small and medium scale
enterprises Muhammad.Y( 2003)
Countries like Bangladesh, India, Indonesia etc are doing
well today because they have gotten it right in developing
the middle level manpower that accounts for more than half
of the productive sector.
In Nigeria, despite the fact that government has in one way
or the other tried to recognize the sector and accord it a sort
of priority, there are still many challenges restraining the
small and medium scale enterprises from realizing their
objectives. Some of the challenges that are teething to small
and medium scale enterprises range from lack of
infrastructural facilities, low technological advancement in
terms of machinery, absence of experts and technical skills
to lack of fund and inability to access credit facility from
The most critical among the challenges faced by small and
medium scale enterprises is lack of adequate capital and
inability to access bank credit. An economy can only grow
through support from the financial sector in availing credits
to different sectors. One of the agenda of banking reforms or
recapitalization was to enable banks support the real sector
of the economy by availing credits to firms in these critical
sectors. If credit is made available to the formal sector while
neglecting the informal sector where the medium and small
scale enterprises fall in, there will still be gap in the growth
of the economy.
While the large scale enterprises have access to bank credit,
the small and medium scale enterprises find it difficult to
obtain bank credit. It is in the bid to resolve this problem
that the Federal Government in conjunction with Central
Bank of Nigeria carried out reforms in the lower side of the
finance industry. Among the reforms is liberalizing the
licensing of micro-finance banks and conversion of
community banks to micro-finance banks.
Micro-finance banks are expected to provide micro-credits to
small unstructured businesses, salary earners, artisans, food
vendors, small farmers and traders. It is in pursuit of this
objective as well as the drive to reduce unemployment that
the Central Bank established skill acquisition centers located
in three geopolitical zones in the country. The essence of
establishing the centers is to empower the youth through
relevant skills training and subsequently increase their
access to fund (credits) with which to start up business.
The main issue now is whether government has realized or
failed to realize its objective of enabling the informal sector
of the economy to have easy access to credit and whether or
not the sector has contributed meaningfully to the economic
development of the nation.
This research will focus on micro-credits and its accessibility
by medium and small scale enterprises and individuals
entrepreneurs and other modes of financing them.
The research will be tailored to provide answers to the
following questions.
1. What is the present pattern of financing of microenterprises in Nigeria?
2. How much of the financing has come from bank microcredit.?
3. Apart from bank credit what other alternative sources
of funding are open to small and medium scale
4. What are the problems encountered by the small and
medium scale enterprises in accessing Micro-credit?
5. What specific lessons can Nigeria learn from other
economies in the area of facilitating access to microcredit scheme?
6. Has micro credit disbursed to small and medium scale
enterprises contributed to the Gross Domestic Product
of the nation?
The research is intended to achieve the following
1. To find out the present pattern of financing medium
and small scale enterprises and the relative
contribution of bank credit to the financing portfolio of
such enterprises.
2. To identify the major problems encountered by small
scale enterprises in accessing credits from banks and
ascertain why banks seem to be unwilling to disburse
credit to them.
3. To identify and evaluate alternative sources of capital
or funds for micro entrepreneurs.
4. To evaluate the experience of other economies in the
area of micro-credit delivery in order to see specific
areas Nigeria can benefit from such experience.
5. To establish the relationship if any between the level of
micro credit disbursed and the contribution of small and
medium scale enterprises to Gross Domestic Product.
6. To make recommendation based on the findings on
realistic approaches toward solving the financing
problems of small and medium scale enterprises.
The following hypotheses are formulated in null form for the
research study.
1. Medium and small scale enterprises are mainly financed
through personal funds of the owners.
2. Medium and small scale enterprises have only one
source of funding.
3. Government effort towards financing small and medium
scale enterprises have not had much impact.
4. There is no relationship between the level of microcredit disbursed and the contribution of small and
medium scale enterprises to Gross Domestic Product.
The research will be conducted using data generated from
three senatorial districts in Delta State and will rely heavily
on information(data) from the following area;
1. Response to questionnaire and oral interview to be
administered on a sample of small and medium scale
entrepreneurs and Bank staff within the selected areas.
2. Secondary data derived from newspapers, magazines
and journals both locally and internationally and from
CBN statistical bulletin and quarterly bullion.
3. Internet facilities will also be explored to extract
relevant data and literature required for the research.
This study will assist small and medium scale enterprises in
exploring other areas of financing their businesses outside
their own personal fund. It will be of immense help to the
Government of the day in identifying the possible areas of
assistance in financing small and medium scale enterprises.
The study will also assist the government to assess t he
impact of microfinance banks in financing small and medium
scale enterprises since their introduction and their overall
impact on the economy. Finally the study will be of immense
benefits to students and researchers in areas of financing
SME’s and serve as a reference point for further studies on
the subject.
Due to logistics and the wide scope of this research that
entails studying SME’s nationwide, we have restricted the
study to only one state. Majority of the entrepreneurs are
not literate and as such getting accurate data from them will
be a problem. Again because most people are not happy
about the way government has handled the plight of the
entrepreneurs, they might not be willing to respond to the
There is also time constraint on my side since I have to
combine my work with the research work


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