Effect Of Financing Small Scale Business In A Depressed Economy (A Case Study Of Might Investment)

Project and Seminar Material for Business Administration and Management BAM

Effect Of Financing Small Scale Business In A Depressed Economy (A Case Study Of Might Investment)


Chapter One


Introduction

1.1 Background of the Study

In the recent years, the experience has shown that it is a known fact that is both developing and developed nations, that small-scale business from the bedrock for rapid and sustainable growth and development of national economics.

Therefore, in reality, Nigeria is underdeveloped nation where small-scale business are not well developed to number of factors, improper finance and economy depression and the government has emphasized and encourage the development of large industries which are party owned by Nigeria and foreigners.

Small-scale business finance by an interested investors requires the business to be a sound management good business and long term survival.

It is understandable that the main objective behind the establishment of small-scale business is to make profit, and the continuous survival of the business but, in most cases, small-scale business to fail even with good ideals because of finance and economy depression.

In a depressed economy, careful finance planning is a continuing necessity. A current shortage of funds is see and agreed that finance is pillar of any small-scale business.

Finance constitute the major success factor if a small-scale business is financed in economy depression depends upon the yardstick and investor is using in lending, it’s money to the growth of business.

It must be categorically state that banking institution is not the only way of raising fund for a small-scale business, we also have individual financials and credit facilities granted by suppliers.

Some of the small-scale business ranges from sole-traders, wholesalers, retail business, partnership enterprises, co-operatives societies such as food processing, leather industries, garment industries, printing, candle making, soap and detergent making, agricultural processing and block industries.

As a catalyst to the economies the importance of small-scale business need not to be over emphasized especially in a less industrial state like, kwara state which has in recent times been given reasonable suitable incentives, mostly design to complement finance and management to these small-scale business so as to create employment opportunities and boost the economic activities of Kwara State, mobilization of resources and minimize rural-urban drift.

With above introduction, small-scale business is very important if the national economy will have to develop.


1.2 Statement of Research Problem

The small scale industry is acknowledged to have huge potential for employment generation and wealth creation is any economy yet in Nigeria, the sector has stagnated and remains relatively small in term of it contribution to GDP or to gainful employment. Activity mix in the sector is also quite limited-dominated by import dependent processes and factors. Although, there is no reliable data, imprecise indicators show that capacity utilization in the sector has improved perceptibly in the period since 1999. But the sector is still faced with a number of constraints (such as low patronage, low technical know, limited market, poor infrastructures, lack of incentives etc.) with lack of credit availability as the principal constraint. It is in the light that the main thrust of this research work will focus on the effect of structural rigidity which often characterize economic depression on the growth of small industries in Nigerians.


1.3 Aims and Objectives of the Study

The objective of this study is to analyze and highlight the utmost relevance of small-scale business finance in Kwara State economy in a manner to find ways to improving areas that are below business expectation.

The predominance of small scale in kwara state coupled with the ineffectiveness of the banks in meeting the needs of small-scale business and economic depression which affect the while, which makes one presume that government should rise up to the task.

Furthermore, the objectives of this study are:

  1. Examining the state of small-scale business in a depressed economy.
  2. To examine the different alternative sources of finance opened to small-scale business in the development of less developed state as kwara state.
  3. To examine the role of small-scale business in the development of less developed state as kwara state.

1.4 Significance of the Study

The project work will be of help to the owner of small-scale business and managers even the intending entrepreneur in their application of fund, it will also review the ability of a owner of small-scale business with respect to the economy and the available resources.

It is expected also to and the owners in planning and controlling of fund in a depressed economy. Also is the proper application of the available resources.

The study will also be useful as a guide to government agencies and policy makers on small-scale business in kwara state economy.

Finance particularly in kwara state and also in depressed economy, the business available sources of fund during economic depression, the role of entrepreneur of small-scale business in economic depressed and kwara state as it geographical scope of the study.

More so, the research work would cover only four local government areas of the state as its population scope because the researcher belief that those areas are areas where business enterprises are well practice and managed. The areas are Offa, Ilorin west Kwara state.

Also, every important, the research work would cover certain which forms its industrial scope such as furniture works, fashion designers, block industries and leather work.

Because of time and financial constraint, the research work is limited some local government areas in the state with little or more business oriented activities on which this research as based upon.

Another area of limitation is the finance open to a business. The sources of fund available to an industries, the impact of a depressed economy on the state business.

Regardless of the constraints, believe that in this research work, the deduction will be useful for generation.


1.5 Research Question and Hypothesis

The research question, which would guide this study are as follows:

  1. What factor hinder the growth of small scale enterprises during economic depression?
  2. To what extent has the government contributed to the promotion and growth of small scale enterprise in Nigeria.
  3. What are the economic potentials of small scale enterprises.
  4. How could the problem identified above be solved so that the growth of small scale enterprises could be enhanced in Nigeria.
Statement Of Hypothesis
Hypothesis I

Ho : That there is no relationship between economic depression and growth of small scale enterprises in Nigeria.

Hypothesis II

Ha: That small scale enterprises are economically productive.


1.6 Research Methodology

The reliability and validity of any survey depend as upon a number of factors.

Among these, are the method used in gathering and analyzing information for the survey. In recognization of this, the method for this research are stated.

Two set of data collection would be used in the cause of this study. This are primary and secondary sources of data.

The primary data is a raw fact collected or gathered for the first time for the purpose of the study. The primary data are collected through the use of questionnaire and this would be design and said to the respondents.

The use of questionnaire would be supplement with personal interview with appropriate stratified sample selected business. Questionnaire to be used because of dispel areas to be covered.

The secondary data are data originally or collected for purpose other than solution to the research problems that is research problem other than one question.

The secondary data were obtained from text books, newspaper and business journals which discuss the subject matter would be consulted for information.


1.7 Scope and Limitation of the Study

This study shall focus on the operations small scale enterprises in Nigeria. The economic potential of small scale enterprise shall also be explored as well as their benefits examined.

The scope shall cover all the small scale enterprise that is operating in Nigeria. However, the survey shall be conducted in a selected area in kwara to include Ifelodun study lies in the methodology to be adopted.

The empirical analysis would be base on the opinion of the respondent which might have some result of analysis may not be completely dependable.

Also direct the relatively small effect of cloud seeding on top of this very large natural variation with any degree and distribution of the use of informal sources of finance for initial and improving lending.


1.8 Plan of the Study

A key step in starting a new business enterprise is to preparing a business plan.

Business plan is a financial plan which given is reasonable forecast of expected cash flow a plan is also a statement of what is to be done in a future time period.

Plan always have alternative sets of assumptions as their inputs.

Planning processes should involve each operational unit but for the business plan as follow:

i. Worst Case:

Plan would require making the worst possible assumption about the business as a whole as well as the mighty investment to be processed.

ii. Financial Requirement:

The plan will include a section on the financing arrangement that are necessary the plan should discuss profit policy and debit policy and the amount of financing.

iii. Asset Requirement:

Plan will describe projected capital spending. In addition, it will discuss the proposed use of the net working capital (current asset, current liabilities).

iv. Sale Forecast:

All financial plan require a sale forecast, perfect sale forecast are not possible because sale depend on the uncertain future of the mighty investment.

v. Best Case:

This plan would require making the most optimistic assumption. It could reflect new product.

vi. Normal Case:

plan would require making most likely assumption about the business as well as it competitors.


Chapter Five


5.1 Summary, Conclusion and Recommendation

5.1 Summary

The research carried out revealed what constitute small-scale business, its finance during economic depression. The small scale business in kwara state amount have come the stay, they from the basis of development because a large sum of the economy depend on them as a result of its important.

In reality, kwara state is an underdeveloped state as earlier on mentioned part of this research study where small scale business predominance, although there are a few number of quaint companies.

Finance on the other hands has played a major role in day to day running of the business because without finance whether institutional or non-institutional, the small-scale business whether institutional or non-institutional, the small scale business owners will have nothing to run their business.

The imitated capital, inability to engage in new investment, low capital per income and low innovation and low profit margin during economic depression are the factors or effect of economic depression which show development of small scale business, this has been attributed to a number that is the government has emphasized and encouraged development of large industries.

The small scale business finance in depressed economic have always been a problem to the small scale owners and sometimes to financial institution involved as a result of the effect of depressed economic despite the importance of small-scale business. Though small scale business have been trying their best to improve on Small Scale Industries Credit Scheme (SSICS) which was established in accordance with the Federal Government’s policy of giving effective financial aid to indigenous small scale business.

It is also recommended that the government should endeavour to create a conducive environment for the growth of small scale business in term of formulating favourable economic policies for survival of these industries training of would be personnel and provision of good means of transportation for use. If these are provided all over the country, it will help speed up the development temps in the rural areas thus, reducing the rural, urban migration, because people will now in settle in rural areas since they are sure of getting employment and other basic thing available in cities.

There is needed to enlighten small scale industrialists above the necessity for partnership and limited liability companies so that their experience as well as problems could share rather them restricted to sole proprietorship. Through this, better and qualified management of personnel could be employed in order to enhance the running of small scale business efficiently and effectively.

There is need to make raw materials or equipment used by small scale business available locally, so that production level will be increase and also it will prevent them from premature death which is sometimes due to lack of raw materials or equipment.


5.2 Conclusion

Based on facts gathered and analyzed the following conclusions were arrived at for the research to achieve the objective of the study.

Small scale business are more predominant and makes larger contribution to both government plan and employment them the large scale based industries. This becomes possible as a result of their numerical number in kwara state.

Small scale business in kwara state gives allowance for the dispersal of business into remotion places which enhances growth in quality of life of the rural dweller, there by discouraging rural-urban migration.

Financing generally affects the survival of small scale business to a great extent but they were able to exist through their personal saving, trade credit and ploughing back of their profit.

Small scale business in kwara state serve as sources of revenues generation to the state government purse through taxes.


5.3 Recommendation

In view of the nature of the problems facing small scale business in field of finance during depressed economic. It is hope that the following recommendation, if properly and promptly implemented would help their rapid development and thus enable them the make a meaningful contribution to the small scale business development of the state.

The small scale business particularly in kwara state should be provided with finance at a concessional rate and a recovery period ranging from 5 to 10 years. This will enable them to stand on their feet before repayment of loans begins.

The association of small scale enterprise should be formed and they should try as much as possible to educate their members on the need to maintain proper books of account which are very important in order to obtain loans from financial institution. It should also strive to establish a form financial institutions could meet constantly, so as to enlighten small scale business owners on the requirement expected of them before they could be considered for financial assistance.

The government of kwara state through the ministry of commerce and industries and with assistant of kwara investment cooperation in the state, should strive promote projects in which a number of small scale business owner could be brought together to changes in the attitudes of small scale industrialists towards future development.

The aspect of finances also needs much to be desired, small scale business need a lot of support and encouragement from financial institutions especially in this era of high normal rotes which abound everywhere.

The government should make more efficient the operation of agencies for promoting small scale business like the methods of finance the business through the personal saving, ploughing back of profit.

In spite of many problems that are facing the semi-scale business in kwara state, they are still able to developed and also played a very important role in the economic development of kwara state and the country as a whole. They help in the diversification of the economy utilization of local resources.


Effect Of Financing Small Scale Business In A Depressed Economy (A Case Study Of Might Investment)


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