A Critical Analysis Of The Role Of Bank Of Industry Towards The Development Of Small And Medium Scale Enterprises In Nigeria

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A Critical Analysis Of The Role Of Bank Of Industry Towards The Development Of Small And Medium Scale Enterprises In Nigeria


Abstract


This study covered a critical analysis of the role of bank of industry towards the development of small and medium scale enterprises in Nigeria where many Small and Medium Scale Enterprises are springing up and more microfinance banks are being established. The study presented here makes a contribution to this field of research by providing a first view on microfinance banks and Small and Medium Scale Enterprises in order to examine the impact of microfinance banks on the growth of small and medium scale enterprises in Ilorin metropolis, to examine the impact of microfinance banks on the growth of small and medium scale enterprises in Ilorin metropolis, to examine the problems Microfinance banks face in providing finance to SMEs, and to recommend solutions to the problems facing Microfinance banks in providing finance to SMEs. We found out that There is no significant difference between the roles of microfinance banks and the growth of SMEs in Ilorin metropolis and that the services rendered by MFBs have a significant difference on the growth of SMEs.
The results encourage further in depth research.


Chapter One


Introduction

1.1 Background of the Study

The study of the role of government agencies towards the development of small scale enterprises is quite interesting. These enterprise have a very important impact on the life of everybody in the society. Small independence business are everywhere and in every line of work, they can also be seen in every community. This business is as old as man. So virtually everything is done in life involved the element of business. Small scale enterprise constitutes an importance in todays business activities or system. The role of small scale enterprise in our economic history however, has been one of the distribution and contribution.

Although its relative importance has decline with the growth of the big business, small scale business is till major contribution to the countries economy. Business in Nigeria today is made up of both large and small business. Today small scale enterprise have to enjoy more prestige than ever before because of its vital contribution to the nations economy. So vital is small scale business. There are successful small scale enterprise operating like the manufacturing plants, retails, stores, wholesales, drugs, computers, construction firms and hundred of other type of business.

Nigeria population was estimated to be 140 million in 2007 with about 75% of this made up of small scale enterprise operators. Lack of full study of government agencies in the development of these enterprises especially, the financial institution made it impossible to know the size, structure and function of these small scale business to the development of the economy. Government agencies are charged with the responsibilities among others to carryout duties and deliver utilities as may be regulated from time to time on behalf of the government for the purpose of uplifting the standard of living. Government agencies such as bank of industry (BOI) is charged with the responsibility like provision of medium and long term finances by way of equity funding, loan and lease financing, guarantees, investment in corporate bonds business development services, co-financing, working capital finance and promotion of small scale enterprises and industries project, co-sponsoring financial institutions and small scale enterprises. This bank of industry was formerly originated from Nigerian industrial development bank limited was established in 1964 following the reconstruction of the investment company of Nigeria limited (ICON) NIDB was set up primarily to accelerate Nigerian industrialization.

The bank was to conceive shortly after Nigerian attains independence in 1960. The idea was to set up development financial institution to serve as a dedicated window for channeling fund from within and outside the country to the young nation states industrial sector. Economic reconstruction fund (NERFUND) in the last regime of Obasanjo administration is renamed as BOI.


1.2. Statement of the Problem

Most government agencies have undergone number of re-organization especially bank of industry (BOI) which affect their forces and activities that leads to effective performance and lack of proper control on their activities.
The most obvious problems of Bank of Industry (BOI) is how to produce or provide efficient financial resources technical assistance, security on loan given out to customer (SSE) evaluating of project that are financed which may take more time than stated at the beginning. Also the project time table, which depends on nature and complexity of the project, it may take one to two years sometimes longer from when project was identified to when it was commissioned. On the part of small scale enterprises (SSE) how effective are they utilizing the services rendered to them by the bank of industry (BOI). Also are they able to cope with the policies adopted by this agency (BOI) in obtaining loan and other services rendered such as interest rate on capital collateral facilities and the role of government.


1.3. Objectives of the Study

The aims and objectives of the study is to analyse various role played by (BOI) in developing of small scale enterprises in Nigeria.

  1. To determined the problems of small and medium scale enterprise in Nigeria.
  2. To review the policies of government and determine if they are aimed towards developing Small scale enterprise in Nigeria.
  3. It is also to find out if the bank of industries (BOI) has contributed effectively to the development of the economy through the role played in financing and provisions of other necessary features for development of Small scale enterprise.

1.4. Significance of the Study

The significance of the study is to serve a reference material to other students who may write on, make research on similar topic and serve as recommendation to bank of industry (BOI) in discharging its functions to the customers as well as the mode of rendering services to the customers small scale enterprise.


1.6. Research Hypothesis

Hypothesis One
  • Ho: The bank of industry does not significantly influence the development of small and medium scale enterprises
  • Hi: The bank of industry significantly influences the development of small and medium scale enterprises
Hypothesis Two
  • Ho: Government have favourable policies towards development of small scale enterprise.
  • Hi: Government does not have favourable policies towards development of small scale enterprise

1.7. Scope of the Study

This study will cover the area of activities and role played by the government agency (BOI) in developing small scale enterprises in illorin metropolis.

The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following.

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.


1.8 Definition of Terms

Small Scale Enterprises (SME):

A type of business that is run and managed by a single person

Microfinance Banks:

These are special banks established by the federal government to promote the growth and development of Small and Medium Scale Enterprises/businesses.

Microfinances:

It is the provision of a broad range of financial services such as deposits, loans, payment services, money transfer and insurance to the poor and low income households and their microenterprises. (Asian Development Bank, 2000).

SMEs:

Nigeria’s national Council on Industry; an SME is defined in terms of employment i.e. as one with between 10 and 300 employees.

Entrepreneurs:

This refers to the proprietor or owner of a privately owned business enterprise. The entrepreneur employs his capital in the business, manages the business resources and takes the risk of business alone. He is self employed i.e he is not employed by anyone but instead he employes others to work for him.

Development:

An event constituting a new stage in a changing situation.

Growth:

An increase in size, number, value or strength higher education.

The Bank of Industry

Bank of Industry (BOI) is the oldest and largest Development Finance Institution (DFI) currently operating in Nigeria. It is owned by the Ministry of Finance Incorporated (MOFI) Nigeria (94.80%), the Central Bank of Nigeria (CBN) (5.19%) and private shareholders (0.01%). The bank has 11 members on its board and it is chaired by Aliyu Abdulrahman Dikko.

The bank is a parastatal under the Federal Ministry of Industry, Trade and Investment tasked with providing financial assistance for the establishment of large, medium and small projects as well as the expansion, diversification and modernisation of existing enterprises; and rehabilitation of existing ones. In line with the Nigeria Industrial Revolution Plan and Economic Recovery and Growth Plan (ERGP) released by the Government of Nigeria, the bank focuses on financing industrial projects in key sectors of the economy such as: Agro and Food Processing, Light Manufacturing, Gas and Petrochemicals, Engineering and Technology, Solid Minerals and Creative Industries (arts and entertainment). BOI also focuses on promoting youth entrepreneurship, women-owned businesses and renewable energy projects. Over the years, the bank has undergone several transformations and re-engineered its processes to improve service delivery. In 2014, the bank commenced the use of Business Development Service Providers (BDSPs) in order to improve the quality of entrepreneurs and loan applications. The BDSPs are expected to assist MSMEs with structuring their business plans and business models and provide relevant capacity building and training programmes.


1.8 Organization of the Study

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

  • Chapter one is concerned 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.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • 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 a critical analysis of the role of bank of industry towards the development of small and medium 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 are made, which in the opinion of the researcher will be of benefit in addressing the issues on the bank of industry towards the development of small and medium scale enterprises in Nigeria.


5.2 Summary

This study aimed at having a critical analysis of the impact of microfinance banks on Small and Medium Scale Enterprises in Nigeria. Three objectives were raised. These objectives include: to determined the problems of small and medium scale enterprise in Nigeria, to review the policies of government and determine if they are aimed towards developing Small scale enterprise in Nigeria, finally to find out if the bank of industries (BOI) has contributed effectively to the development of the economy through the role played in financing and provisions of other necessary features for development of Small scale enterprise.


5.2 Conclusion and Recommendations

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn. From the collected and analysed data, the bank of industry significantly influences the development of small and medium scale enterprises, Government has favourable policies towards development of small scale enterprise.


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