Impact Of Credit Management On The Operation Of Small Scale Enterprises In Nigeria

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Impact Of Credit Management On The Operation Of Small Scale Enterprises In Nigeria


Abstract


The study delved into impact of credit management on the operation of selected small scale enterprises in Nigeria. The study examines whether integration of the world economic enhances product development and performance and whether the advent of internet has effect on product innovation in the beverage industry.

The survey research design was employed in this study and the questionnaire was the main research instrument. A total of 30 respondents make up the sample size of the study and chi-square was used as the statistical tool to analyze or in analyzing the collected data.

The findings of this study revealed that extension of credit to customers is an average for imploring sales of small scale industries. Efficiency in the management of small scale business lies on the way credit is been managed. Furthermore, small scale business credit standard and credit analysis before extending credit to customers.


Chapter One


Introduction

1.1 Background of the Study

Private Sector Development as suitable alternative for promoting sustainable and balanced growth in African has attracted considerable attention. Many government and development organizations have focused on the promotion of medium-scale enterprise (SMEs) as a way of encouraging broaden participation in the private sector. The promotion of SMES and especially of those in the informal sector is viewed as a variable approach to sustainable development because it suits the resources in Africa. The contemporary business environment faced with a number of challenges particularly the globalization process is on course is attempt to standardize operation. One the strategies used in coping with globalization is credit management. Credit management refers to those decision variables that influence the amount of trade credit that is, investment in recurable which a business firm may undertake to any given time. It plays a vital role in promoting small scale industries in Nigeria. The promotion of small scale industrial business is well recognized and much better strategies of industries development in developed and developing countries and its ability to enhance entrepreneurial and management skills. In (1973) Nigeria Small Scale Industries Association defines small scale business as those having investment like capital, land, building and equipment up to 60,000 and employing no more-than fifty people. Some scale industries a business could be referring to the sector of economy that is mostly concern with the distribution and marketing both industrial and domestic products. According to Ajonbadi (2002) saying Small Scale Industry is an industry which the total capital employed is over 1.5 but not more than 50 million including working capital of it 100 workers. The research work is to analyze critically the impact analysis of credit management strategies to sector of trade, the problem in managing credit problems and with the aim of finding a lasting solution to the problems and expand the activities of small scale business in the economy in order to arose the attraction both government and individual


1.2 Statement of the Problem

Small medium businesses have limitations and problems that account for their failures. All business organization is irrespective of their objectives have philosophy of growth, survival and adaptiveness. (LAWAL, 1993).

The important role which small scale enterprise play in the economics of nations, from the first to the last sage in the developmental countries makes them very relevant in many aspects of economic policies especially those of industrial development. However, the extent to which these enterprises contribute to industrial development depends on the level of growth and development of these enterprises.In Nigeria, just as in most other countries, small scale enterprise are more in number than large scale enterprises. This is not surprising given the nation’s how level of development in both human resources and capital formation.Small Scale Firms like medium firms, however create bulk of the employment provided in the promotion of entrepreneurship and utilization of indigenous technology as well as ensuring even and more appropriate location of industries.


1.3 Objective of the Study

The general objective of the study is to examine the impact of credit management on the operation of selected small scale enterprises in Nigeria.

Evidence has shown that small scale firms usually carryout “NICHES” and produces highly specialized service of product in a geographical area and do not perceive any clear competition.

  1. The main objective of this research is to understand the types of credit, standard of credit, administration of credit and credit terms.
  2. Then review the problems of managing credit of small scale business in Nigeria, with the aim of finding lasting solution to them and possibly bring up innovational and ideas general towards expansion in the growth and development of small scale enterprises (SME) in the state.
  3. To intensively review the role of the government over the year in the small scale industry enterprises so as to draw attention of the government to the development of the sector.
  4. To ascertain the relationship between credit management and the growth of small scale enterprise

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: there is no relationship between credit management and the growth of small scale enterprise
    H1: there is relationship between credit management and the growth of small scale enterprise
  2. H02: credit management strategy of SMEs does not have significant effects on their profitability.
    H2: credit management strategies of small scale enterprises have a significant effect on their profitability

1.5 Significance of the Study

The important of small and medium enterprises in the economy. AT the end of the study, the researcher expects that the finding will serve as a point of reference to the managing of business organization student, professional, student of economist and general public. This study will reveal the relevant of credit management.This study also contributes to knowledge in terms of provisions of additional information in the form of ideas, opinions and views from the field (industry operators) to develop and move the sector forward by way of checking the relationship that exists between the financial institution and SMEs in Nigeria


1.6 Scope and Limitation of the Study

The study covers credit management SMEs in Nigeria, particularly in Lagos State and does not extend to other sectors. This study is restricted to selected small scale enterprises in Ikeja local government of Lagos State. The study covers a representative numbers of the generality of SMEs. No special consideration is given to sex, age and nationality in collecting data from the respondents.The level of accuracy in this study is proportional to the availability of information that the respondents are willing to give. Also, there is this uncertainty that information given is without bias. Also, undertaking a research study is a serious business. It requires a commitment of time, money and energy, both intellectual and physical. Hence, balancing the study with academics and going to work is a Herculean task. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.


1.7 Definition of Terms

Credit Management:

Decision variables that influence the amount of trade credit that is, investment in recurable which a business firm may undertake to any given time.

Banks:

This is a financial institution that aid in collection of deposit and granting loans and other auxiliary service to the public.

Banking:

Is a service delivery business in which information is pivotal, whether in the honoring of cheques or other withdrawals.

Consolidations:

This is another term used in place of merger and acquisition. Thus, it is the combination of two or more corporation.

Enterprises:

This is any commercial undertaking that is either publicity of privately owned or controlled. The word is used interchangeably with organisation in this study.

Performance:

The degree of efficiency and effectiveness with which the organisation objectives are achieved.
Small Scale Enterprises: These are enterprises in which power consumptions, number of employees, quantum of raw materials, output like are small in size


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  1. Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of credit management in operation of small scale enterprises in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challengesof credit management in operation of small scale enterprises in Nigeria


5.2 Summary

This study was on the impact of credit management in operation of small scale enterprises in Nigeria. Four objectives were raised which included:The main objective of this research is to understand the types of credit, standard of credit, administration of credit and credit terms, then review the problems of managing credit of small scale business in Nigeria, with the aim of finding lasting solution to them and possibly bring up innovational and ideas general towards expansion in the growth and development of small scale enterprises (SME) in the state, to intensively review the role of the government over the year in the small scale industry enterprises so as to draw attention of the government to the development of the sector, to ascertain the relationship between credit management and the growth of small scale enterprise. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staffof selected SMES in Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made of managers, secretaries, sale representativesand junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

In conclusion, from the empirical and analytical findings the results reveals that Banking sector credit was important but insignificant in understanding growth variations in Nigeria’s Small and Medium Sector. The implication to the study is for banks to understand that irrespective of the size of SME’s, banking sector credit is an important factor to the overall success of SME’s in Nigeria which is a catalyst for Nigerian economic growth. The current priority attention being accorded the banking credit sector by government is well deserved. This is because the sector has great potentials to be the engine of growth in Nigeria. In the face of rising unemployment and high poverty levels, growth generated from this sector. The sector is capable of lifting the greatest number of people above the poverty level. While efforts are being made to address the credit bottlenecks are very commendable, there is the need for complementary reforms to provide the other critical elements. These include improving power, transportation, water, and all other ancillary issues which account for under-performance in the sector. As part of the suggestions for further research, there is need for more research into other variables that could equally determine output that were not captured in the study. It is important to consider further studies on the effects of banking sector growth on SMEs in Nigeria and other possible factors that impede or accelerate growth of the sector.


5.4 Recommendation

  1. Monetary Authorities should endeavour to remove bottlenecks involved in the process of granting banking credit facility to SME’s as this would encourage easy accessibility of loans and other incentives that will improve SME financing and subsequently, economic growth.
  2. The Federal Government’s fiscal and monetary authorities should improve in its management of macro-economic variables, such as the exchange and inflation rates; this will help maintain the value of the currency such that funds could be valuable enough to improve SME investments that will yield positive returns in the country.
  3. SME’s should be encouraged to building stronger internal structural base such that funds will be adequate to enable them function more effectively and compete favourably.
  4. Deposit Money Banks should provide more training to help the SME’s in financial management practices as this will enhance the accounting processes of SME’s for improved accountability, transparency and effective management for better performance.
  5. The federal government should come up with more institutionalize laws that will ensure adequate protection of SME’s from any form of exploitation in a bid to access funds or ensure expansion and growth of their businesses.

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