Improving The Performance Of Small Scale Entrepreneurship Through Adequate Funding By Commercial Banks And Microfinance Institutions (A Case Study Of Union Bank Plc, Owerri Branch)

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


This research work is designed to look into adequate means of funding the small-scale entrepreneurship by commercial banks, and microfinance institutions. Prior to this time, Small Scale industries in Nigeria had received little attention but in line with industrialization, the Central Bank of Nigeria in line with Federal Government has developed different policies in order to encourage small scale industries.

In the course of carrying out this research work, data was collected from both primary source and secondary source. Primary source of data includes: Administered questionnaire. While secondary source of data include: Textbooks, Journals, Newspaper, magazines, etc.

The methodology used includes the collection of data through the use of questionnaire, thirty two were distributed and thirty were returned. The data collected were analyzed, interpreted and presented through the use of tables. However, conclusion were drawn and recommendations on how to correct and eliminate the constraints faced by small –scale enterprises.

Table Of Content

Preliminary Page(s)

  • Title
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

1.0 Introduction

  • 1.1 General overview of study
  • 1.2 Statement of problem
  • 1.3 Objectives of the study
  • 1.4 Scope of the study
  • 1.5 Statement Of Hypothesis
  • 1.6 Significance of the research
  • 1.7 Limitation of study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Meaning of small-scale industry
  • 2.2 Government policy on small –scale entrepreneur
  • 2.3 Promotion of small-scale entrepreneur
  • 2.4 Commercial bank financing of small-scale industry
  • 2.5 Financing small-scale enterprise through microfinance institution
  • 2.6 Improving the performance of small scale entrepreneur through adequate funding
  • 2.7 Problems facing the small scale entrepreneurs

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Method and sources of data
  • 3.3 Population size
  • 3.4 Sample size /procedure
  • 3.5 Questionnaire design
  • 3.6 Method of data analysis

Chapter Four

4.0 Data Presentation and Analysis

  • 4.1 Data presentation
  • 4.2 Analysis of data
  • 4.3 Test of hypothesis
  • 4.4 Interpretation of result

Chapter Five

5.0 Summary, Conclusion, Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • Bibliography
  • Appendix

Chapter One

1.0 Introduction

1.1 General Overview Of The Study

The importance of commercial banks and micro finance institutions in financing small-scale entrepreneurships adequately can only be fully appreciated when one realises the dominant role it plays in our economic redevelopment. Having known that the small -scale entrepreneurship is the main stay of the Nigerian economy, providing almost seventy percent (70%) of employment to able men and women in our society. Even if there are controversies, what is not contestable is the contribution they are making to the Nigerian economy.

They also promote entrepreneurship and economic development through the utilization of local resources, production of intermediate goods and the transfer / transformation of rural technology. Infact, Small–Scale entrepreneurs are generally regarded as the engine driving the growth of this economy and provide the best opportunity for job creation and rural development. These industries have been established to import, export, manufacture, distribution and even retail various goods and services to our teaming population.

The performance of small scale entrepreneurs ready for “active service” in the context growth, through adequate funding by both financial institutions simply means the part the Commercial Banks and Micro-finance institutions play in raising fund for the small scale enterprise.

It is the realization of its importance that successive Government in Nigeria have been allocating deliberate National Development plans and subsequent rolling plans every year, each successive government annual budget speech is supplemented by a credit guideline for that year.

These credit guidelines, which come in form of monetary policy circulars, have now been established as the “Banker General Orders” subject to review every year. This which contains specific directions to banks in respect of their general operations in any given year as they affect the economy of the country.

However, the discovery of the Central Bank that this policy was not enough by itself led to the request that all commercial banks must reserve a proportion of their credit allocation and micro finance banks, having under her policy (December 2005) that existing Community Banks are to convert to Micro -Finance Banks, also ready to assign her own portion to indigenous borrowers for small-scale entrepreneurs.

Without the development of small scale enterprises in Nigeria, the nation’s quest for industrialization will certainly remain forever at a stake. It is in the humble opinion of the researcher that future development in our industrialization must address the basis issue of creating linkages with the economy to begin to produce real inputs to our manufacturing activities.

Empirical evidence indicates that strong producer incentives to small scale enterprises are necessary not only to meet the food requirements but also to provide growing inputs supplies and demand as a foundation for sustained industrial growth.

Banks have historically been adverse to lending to small-scale entrepreneurs due to high risk inherent in lending to that sub-sector. The banks however took another look at the small-scale entrepreneur and under the auspices of the bankers committee set up; chaired by Mrs. Ibru C. Managing Director of Oceanic Banks International limited some other banks to review the industries. The committee’s recommendations have resulted in the agreement by banks to commit 10% of their profit before tax (PBT) to the funding of these industries.

However, remarkable improvement has been recorded since after the introduction of the guideline and the emergence of Micro-finance institutions. But this does not mean that there are no problems or setbacks which militate both financial institutions from performing credibly well in funding our industries adequately. To this extent, the research intended to investigate the degree to which commercial banks and microfinance institution will improve funds adequately to small scale entrepreneurship.

1.2 Statement Of Problem

It is well known that the development of small scale industries and attainment of self reliance on industrial production coupled with the provision of raw materials for other industries is among the top priorities of the successive government in the country.

Furthermore, the continuous escalation of Nigerians import bill and unemployment are a threat to the nation. It is therefore necessary for all to put heads together to formulate a meaningful policy that will stimulate a positive takeoff of our small-scale entrepreneurship sector.
The unwillingness of the financial institution towards improving funding to small scale enterprises affects the growth and development. Notwithstanding, the government policies has not been favouring the industry as it should.

Thus, the study identifies small-scale entrepreneurs financing by commercial banks and micro-finance institution as part of the wider subject of industrial development because finance is one of the factors of production.

1.3. Objective Of The Study

The objective of the study includes:

  1. To improve on the extent to which Commercial Banks and Micro Financial banks has helped to financial small-scale entrepreneurs and problems hindering such.
  2. To examine how effective commercial banks and micro finance banks have been, in financing small-scale entrepreneurs.
  3. To evaluate various measured introduced to boots industrial production and its financing and how this has affected the realization of the set goals.
  4. To outline the role and problems of small –scale enterprises as regards to financing.
  5. To determine the causes of variability in small –scale entrepreneurship financing by both institution.
  6. To proffer solution to the identified problems.

1.4 Scope Of The Study

This project work is limited to improving the performance of small-scale entrepreneurship through adequate funding by Commercial Banks and microfinance institutions, with particular reference to Union Bank Plc Owerri.

1.5. Statement Of Hypothesis

  1. Establishment of micro-finance institutions have significantly and positively affect the shape and operation of small –scale enterprises.
  2. Commercial banks funding of small-scale entrepreneurs has help improved their liquidity and profitability position.

1.6 Significance Of The Study

The development of small –scale entrepreneurs and self –reliance in industrial and food production, couples with the provision of raw materials for other industries is among the top priorities of the Nigeria government in the successive development plans.

Against this background, the review of the financial problem facing small –scale industries is essential. Such as review will enable the sector face the ever –increasing demand upon it. An investigation on commercial banks performance in financing small-scale entrepreneurs will enable us find to a large extent why there has been a decline in industrial output in recent years.

This work is going to be a reference to other researchers interested in small –scale entrepreneurs and its finances, especially by Commercial Banks and microfinance banks.

1.7 Limitation Of Study

The research which aims at investigating on improving the performance of small-scale entrepreneurship through adequate funding by commercial banks and microfinance institutions. Making suggestions and recommendations is delimited to a selected bank (union bank of Nigeria Plc). The findings for the researcher are based in Owerri in Imo State.

In writing this project work, the researcher was constrained by distance.

Also, the existence of various levels of managerial staff in banks, a situation which made it impossible for lower level management staff to give the information that are readily at their disposal.

There was also a financial constraints, the writer found it extremely difficult to offset the cost of this project financial requirements.

Another problem is that of time factor, the manager and others involved persons delayed rapidly in providing research work.

1.8 Definition Of Terms


This is a person with high organizational abilities that pull his resources together by mobilizing and putting them into production uses. It also takes the risk of starting and managing a business.

Small –Scale Enterprise:

This is a business that is owned and controlled by one or few persons, with direct owner(s) influence to decision making and have a relatively small share of the market and relatively low capital requirement.


This is any sum of money used to support a particular project, which can be raised internally or externally.


This is a statement of ideas proposed by government on the administration of particular project.


A loan is any sum of money lent to a borrower, which will be repaid at a stipulated maturity data.


This is a form of security deposited by a customer for a loan collected.


These are various source of encouragement given to small –scale enterprises.


This is a form of providing financial services to the SMES and the poor who are traditionally not served by the conventional financial institutions.

Long -Term Fund:

These are loans available to business enterprises which the maturity dates exceed one year.


These are all cash inflow of a firm or company used in financing its business.


This is a loan given to a borrower on an agreed credit terms.


These are some standard, or of financial conditions that are difficult because there is not enough money.

Microfinance Institution (MFI):

– This is an institution designed to be a strategy for poverty reduction. It is established to solve of inadequate absence of commercial banking facilities in rural areas and some urban areas.

Simplify Services:

This is using a simple application process appropriate to low level (i.e. to make the credit programme customer friendly)


This describes the chances of bringing monetary advantages especially the difference between total costs incurred and total revenue earned.


Anything that slows down development or progress particularly in a business or an industry.


It is the capacity of an entrepreneur to develop new ideas, products, technology, market or business practices to enhance to fortunes of the enterprise.

Profit Margin:

– The concept simply explains the difference between the cost of buying or producing an item and the price of which it is sold.


– This are separated indefinable activities, which provide wants, satisfaction when reached to consumers industrial users and which are not necessary tied to the sale of a product on another services

Chapter Five

5.0 Summary, Conclusion And Recommendations.

5.1 Summary

From the study carried out, the following findings were made; the establishment of microfinance institution have significantly and positively affects the shape and operations of small-scale enterprises. This is because of its intrinsic potentials to enable the poor and low income groups to engage in profitability economic activities, generate employment and also to demonstrate that there was a way to make the poor credit worthy similarly, to show that microfinance institutions themselves are credit worthy.

It was also obtained that commercial banks funding of small-scale entrepreneurs has help improved their liquidity and profitability position. Having supported the government’s effort to grow the industrial sector. These banks believe that the sector is the engine for economic development.

Also creating a vibrant microfinance sub-sector that would be adequately integrated into the mainstream of the national financial system and providing the stimulus for growth and development.

5.2 Conclusion

Improving the Performance of small-scale entrepreneurs through adequate funding by Commercial Banks and microfinance institution in Nigeria. The government should therefore increase its commitment by providing the necessary incentives education and infrastructure and generally a conducive environment for the development of the small-scale industries.

Our Universities, Polytechnics, College of Technology and research institutions should devote more time and resources into the problems of small-scale industries to that the ultimate objective of industrial and commercial development of the nation can be achieved.

Our banks should adopt a more developmental approach to the financing of the small-scale enterprise. This can be achieved through the nature of advice and guidance that they give to their small-scale customers. They should also encourage them to use the facilities that suit them. They should also do emphasise collaterals as the over-riding condition for granting credit facilities to small-scale entrepreneurs.

Government should also create more microfinance banks in the rural areas. When those things are achieved other benefits of small-scale industries, as a source of raw materials, provision of food, creating of employment and self –reliance will be accomplished.

5.3 Recommendations

Having highlighted the problem and shortcoming of small-scale industries in Nigeria, the following recommendations aimed at correcting and eliminating those constraints put forward for consideration.

i. Risk in Small-scale Industries Lending:

In order to reduce the risk in small-scale industries lending, the central Bank of Nigeria and Government can do more than the government they are currently doing by broadening the credit guarantee scheme rediscounting by the central bank of Nigeria can sample possibilities for encouraging commercial Banks to gain experience in medium and long term building operations. A number of procedures can be adopted such as preferential discount rates, multiple certain purpose.

ii. Technical and Managerial Assistance:

The banks themselves can ensure minimum risk of the loan losses by providing technical and managerial resources various kinds of their small –scale industrial customers. This could embrace also assisting them from project preparation, implementation, financing and management. At the same time, small-scale industrialists can avail themselves of such services provided by the government at the industrial development centre.

iii. Rural Banking:

In order to make credit available to the small-scale industrial sector, the banks and the government should make more use of the rural banking programme. Each of this bank in the rural areas should be given free hand to take certain decisions concerning advancement of these loans and services to small-scale industrialists. They should be able to act as management consultants, identifying problems and suggesting solutions.

iv. Saving Scheme:

The banks should combine saving scheme for small-scale industrial sector with their credit programmes. Such a scheme would provide and create attachment of the enterprises to the bank and also solve the problem of every short moratorium period granted by bankers to small-scale enterprises, which was providing inadequate for the funding of enterprise activity in which the borrowers are engaged in, thereby creating repayment programme problem.

v. Insurance scheme:

The Federal Government has to established an insurance scheme to protect the hazard in industrial production; following the consolidation in the industry, this should also be extended to small-scale industrial sector. This policy should be implemented immediately without further delay; it will encourage commercial banks to lend and enable banks to grant a longer period of moratorium on loans for the small-scale entrepreneurs.

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