The Role Of Bank In Financing Small Scale Industry In Imo State (A Case Study Of Union Bank Plc)

Project and Seminar Topics with material for Banking and Finance

Project and Seminar Topics with material for Banking and Finance


Abstract


This study was carried out to find out the role of banks in financing of small scale business in Nigeria using Union Bank in Owerri as a case study and also to identify the problems of Union ban Owerri. The survey method which was for this study are the instrument for data collection was questionnaire.

An extensive literature review was undertaken. Chapter four dealt with the analysis and presentation of data got from survey and questionnaire administered.

Before the researcher conclude that small scale industries plat more satisfactory role in the economic development of the country and further recommended that small services through prompt claim payment and also should provide a board base for its effectiveness. At the end of the work, recommendations were made for The improvement of the Union Bank in Nigeria.


Table Of Contents


Preliminary Page(s)

Title Page

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

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of problem
  • 1.3 Purpose of the Study
  • 1.4 Research Question
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Nature and characteristics of Nigeria small-scale enterprise
  • 2.3 The role of small scale industries
  • 2.4 Advantages of small-scale business in Nigeria
  • 2.5 Major disadvantages of small scale enterprises
  • 2.6 Review of main sources of financing and promoting scale enterprises
  • 2.7 The role of Union bank in financing and promoting small scale enterprises
  • 2.8 Opinion from improved access to credit for small scale enterprises.

Chapter Three

3.0 Research Design And Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources/methods of data collection
  • 3.4. Population and sample size
  • 3.5 Sample techniques
  • 3.6 Validity and reliability of measuring instruments
  • 3.7 Method of data analysis

Chapter Four

4.0 Presentation And Analysis Of Result

  • 4.1 Introduction
  • 4.2 Presentation of Data
  • 4.3 Analysis of data
  • 4.4 Interpretation of result

Chapter Five

5.0 Summary, Conclusion And Recommendation

  • 5.1 Introduction
  • 5.2 Summary of findings
  • 5.3 Conclusion
  • 5.4 Recommendation
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One


1.0 Introduction.

1.1 Background Of The Study

Industrial development involves development of a technical arrangement that moves an economy from the traditional method of production to a more complex system of mass manufacturing of variety of goods and services involving technology and management techniques. Industrialization tends to propel growth and quicken the achievement of structural transformation and diversification of economy.

It enable country utilize its factors endowments and depends less on external sector for its growth and sustenance. They provide employment for a substantial proportion of the industrial establishment. Therefore due to the above mentioned role played by industrial sector, that is small scale business in the economy. It requires some financial support from government for running the business.

But small-scale industry is a sub-sector of industrial development that is of great importance as mentioned above, but it has not received the type of attention it deserves that is why the government and the federal ministry of industries lay down the parameter under which an industrialist may take advantage of the various incentive created by the government for growth of the small-scale industries. Such incentives are the form of loan, provision of plant, machinery, equipment, and raw materials.

The process of taking advantage of the various incentives schemes are so cumbersome and its subject of bureaucratic radicalism and only few small-scale industries are able to utilize them.

The importance of small scale business to survival of a nation can no longer be saved. They have moved from the substance level to pre-indigenization period of importance in the country’s industrial process. Therefore the authorities should not relent to the effort of making small scale industries to be incentive due to lack of funds.
The Nigeria bank was established to provide among other financial services to the indigenous business community, especially small scale industries.

Following the recommendation of the financial system review committee of 1976, government made bank the apex financial institution for small scale business. The bank obtains funds from the federal government to assist small business and loans granted are relating on soft terms.

During the 1970s and 1980, bank promoted of soft loans and advisory services of operational and funding and poor loans repayment by medium scale entrepreneur. Bank loans and advances fluctuated from #87.7 million, #223 million, #305.3 million, #984 Million and 1994 respectively.

Similarly, its deposit liabilities fluctuated from #252.0 million in 1990 to #423.3 million in 1991, #318.7 million in 1992 and 32.0 million in both 1993 and 1994.

Following this the government utilized the opportunbity to equip the bank with power to act as a catalyst in development by operating like an all purpose universal bank to engage in all types of investment banking and under writing operations.


1.2 Statement Of Problems

The study titles “the role of banks in financing small-scale industries attempt to determine the ways by which the union bank contributes to the role of banks in financing problems which they encounter are as follows:

  1. Most small scale business lack finance as start up or working capital for their business but could not mobilize such fund easily from commercial banks.
  2. Procurement of machinery and equipment post problems on small scale business and requires development banks to assist them solve such problems.
  3. Small-scale business lacked technical and managerial expertise as a result had not been functioning optimally.
  4. Most small-scale business, because of their small nature, they are unable to compete with the big ones for the necessary raw materials for their production and are unable to produce massively to take advantage of economic of scale.

1.3 Purpose Of The Study

The purpose of the study are as follows:

  1. To determine how the development banks have helped to provide finance to small-scale business as start up or working capital for their business.
  2. To determine how Nigerian banks help to procure machines and equipment for small-scale business either through leasing or hire purchase to encourage massive production.
  3. To determine how development banks has helped to provide technical and managerial expertise including undertaking of feasibility on consultancy arrangements.
  4. To find out how the development banks will be able to provide adequate raw materials for the small scale business to encourage massive production so that they will be able to compete with the large scale industries.

1.4 Research Questions

The critical appraisal to give answer to the following questions.

  1. To what extent has union bank of Nigeria Plc helped to finance small-scale industries?
  2. What are the problems encountered by the small-scale industries in obtaining finance from union bank of Nigeria Plc.
  3. What are the various measures introduced to boost industrial production and its financing and how this has affected the realization of the set goal?
  4. What are the causes of changes in small-scale industries financed by union bank of Nigeria?

1.5 Significance Of The Study

This study will highlight problems associated with role of commercial banks in financing small scale industries in Nigeria. It will give information on the possible areas for improvement. Furthermore, the study will help commercial banks to assess and appraise their role in financing small scale industry in Nigeria. Moreover, suggestion and recommendation made in this paper will help policy makes formulate new economic policies maintain the existing one. It will equally serve as guideline to research who may wish to decide with the study in the future. It will also help small scale entrepreneurs to make sufficient preparation in their request for credit assistance.

It will guide the entrepreneurs in making credit demands that are compliance with government policy. The last but not the least, it will help the entrepreneurs to display competence in preparing justification coming up with cash projections, projected balance sheets.


1.6 Scope Of The Study

The scope of the study is the role of banks in financing small-scale industries in Nigeria. A case study of union bank of Nigeria Plc. It does not cover the role of commercial bank in financing medium and large-scale industries.


1.7 Limitation Of The Study

However, there were constraint imposed on the researcher, this include the following:

Time:

A study of this nature needs a relatively long time during which information for accurate or at least near accurate inferences could be drawn. The period of the study was short, hence time posed as a constraint to the researcher.

Cost:

The researcher would have extended the survey of other areas, but limitations here include cost of transportation to source for materials and cost of type setting the already completed work.

Death (Scarcity) Of Statistical Data:

Lack of statistical data from our financial institutions like central bank of Nigeria (CBN) ministry of finance and economic development, commercial and merchant banks posed a constraints. Commercial banks adhere strictly to the rule of secret in banking thus they refuse to release information.


1.8 Definition Of Terms

The definition of terms include the following:

Credit:

It means ability to command capital of another in retain for a promise to repay at a specific time in the future.

Financing:

Financing simply implies obtaining means of payment need by an organization for the short, medium and long terms.

Loans:

This is the transfer of finance from one economic entry to another.

Small-Scale:

Small scale industry is a manufacturing or service company whose capital investment does not exceed #250,000 in machinery and equipment only.

Fund:

This simply means money made available to be spent.

Fluctuate:

This Means changing frequently in size, amount, quality, etc. especially from one extreme to another.

Liquidity:

This means the state of owning things of value this can be easily exchanged for cash.


Chapter Five


5.0 Summary, Conclusion And Recommendation

5.1 Introduction

Having presented and analyzed the data, it is necessary in this chapter to summarize the findings from the raw data.


5.2 Summary Of Findings

The research findings are summarized as follows:

  1. Nigeria bank for commercial and industry (NBCI) encourage the small business dealers in the economy in procurement of machinery and raw materials.
  2. It gives special assistance to small business dealers. This include given out loans without demanding for collateral securities, gives advice on where to invest the loan and charge little invest on loan.
  3. The bank gives loans to the community dwellers that are dealing in small business on the basis of their personal recognition in the economy and the strength on their transaction with the bank.
  4. It lends money on long- term basis and these loans last from one year to ten years inclusive of a 2 – 4 years grace period.
  5. The bank provides feasibility studies, investment and advice on constancy arrangement to educate the small business dealers on business management for them to function optimally.
  6. Nigeria bank for commerce and industry (NBCI) is highly efficient in the contribution, the economic development by providing enough finance through loan to the small business.
  7. The interest which the bank changes on loan does not favour the small business dealers. Therefore, they should read just to the normal bank interest rate structure.
  8. Some factors that adversely effect the banks operation include the following
    • Poor lending policy
    • Poor investment policy
    • Issuing of loans
  9. Actions have been taken by bank to ensure that the beneficiaries do not apply loans.
  10. The appoint incompetent individuals as board of directors and this make the management efficient
  11. This is weak internal control and poor accounting system and those perpetuate fraud which decrease the capital base of bank.
  12. From the beneficiaries, we find out that retire loan up for intendment.
  13. The beneficiaries of the loan find the loan very difficult to retire due to increase in the loan interest rate.

5.3 Conclusion

Based on the research findings, the following conclusion are drawn.

  1. The Nigeria bank of commerce and industry (NBCI) assist on economic development to be encouraging small scale business dealers through the renting of credit facilities.
  2. The appointment of incompetent individual to the board of directors of management of its operation.
  3. The bank does not provide a means through which the small business dealers can procure machinery and equipment for massive production.
  4. Many of the racers of the bank loan fined it difficult to retire because of the rate attached on it.
  5. Its operational efficiency is reduced and low earnings and loan default.

5.4 Recommendation

The following recommendations have been made in the light of the finding and the discussion with the relevant conclusion, which has been highlighted are as follows:

  1. Small and medium size firms requires import license to bring in machinery, spare parts and raw materials should be given special attention by the government especially where such fund are to purchase goods and services with the ultimate objectives of replacing imported.
  2. The central bank of Nigeria (CBN) should encourage financing project by number of commercial bank and penal such commercial bank that show how tendering to frustrate the syndic able business after it has well begun.
  3. State and federal government increase their assistance to small and medium scale enterprises instead of shifting the burden entirely to the financial institutions.
  4. In addition small scale enterprise should award themselves of financial advisory service of the merchant bank so as to have effective amendment could be the timely compilation and auditing of annual reports, effective cost control and monthly or quarterly management of accounts.
  5. There should be intensive recovery effort through application or policies to recover irrelevant loans or overdraft.

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