The Role Of Development Finance Institutions (DFIs) In The Financing Of Small-Scale Industries (SSIs)

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


The aim of this research work is known as the “Role Of Deevelopment Finance Instituion” in financing of small scale industries”.

This research work consists of the chapter. Chapter one is the introduction which consists of the general overview of the study, statement of problems, objectives of the study, scope of the study, research questions, significance of the study, limitation of the study and definition of terms.

While the chapter two is the literature review which consists of the definitions of small scale industries (SSIs), the economic potential of SSIs development finance institutions DFIs, the funding role of development finance institutions (DFIs) major constraint of the SSIs sub sector.

The chapter three is the research methodology, which consists of sources of primary data sources of secondary data, method of presentation and analysis.

The chapter four is the presentation and analysis of data while the chapter five is the summary, conclusion and recommendations which also consist of the following above and also bibliography appendix.

This research work intends to know the roles development finance institutions plays in assisting SSLs and how they achieve that and also to know if small scale industries is of importance for the country or economy.

Table Of Contents

Preliminary Page(s)

  • Title page
  • Certification page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 General overview of the study
  • 1.2 Statement of problems
  • 1.3 Objectives of the study
  • 1.4 Research Questions
  • 1.5 Scope of the study
  • 1.6 Significance of the study
  • 1.7 Limitations of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Definitions of small scale industries (SSLs)
  • 2.2 The economic potential of SSLs
  • 2.3 Development Finance Institutions (DFLs)
  • 2.4 Funding of development finance institutions
  • 2.5 Major constraints of the SSLs Sub Sector
  • 2.6 Types of small scale industries
  • 2.7 The size of the industries

Chapter Three

3.0 Research Methodology

  • 3.1 Sources of primary data
  • 3.2 Sources of secondary data
  • 3.3 Method of investigation
  • 3.4 Reasons for adopting the method
  • 3.5 Method of presentation of analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Data presentation
  • 4.2 Analysis of data
  • 4.3 Analysis of research questions
  • 4.4 Summary

Chapter Five

5.0 Summary, Conclusion and Recommendations

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

Chapter One

1.0 Introduction

1.1 General Overview Of The Study

The post independence Nigeria Government adopted the import, substitution large scale industrialization strategy to accelerate the country’s industrial development. The death of indigenous entrepreneurship constrained government to assume the role of the entrepreneur and the urge to off set the economic neglect of the colonial government resulted in ambitious industrialization programmes.

When the Nigerian industrial development bank limited (NDB) was established in 1964 for the purpose of spending up the industrialization process. Its mandate was to promote industrial project, which were large enough to make appreciation contribution to the national economy.

However, the collapse of the oil boom in the early 1980’s exposed the inherent weakness of this strategy. The inability to sustain the importation of inputs resulted in large idle capacities thereby crippling many large industrial enterprises. Industrial out/put as well as industries contribution to the gross domestic product (GDP) declined in the face of the strong national aspiration for the restructuring of the economy and reduction of the dependence on petroleum. Small and medium scale industries have since become the focus of nation industrial policy.

The significance of finance in the drive for economic growth is fairly well established and generally accepted for instance, they take off and efficient performance of any industrial enterprise be it small or large will require the provision of funds for its capitalization working capital and rehabilitation needs, as well as for the creation of new investment.

Apart from the entrepreneur, funds are required to bring together the other factors of production, land, labour and capital before production can take place. Provision of funds to the industrial sector of particularly for the SMEs has therefore been of prime interest to policy makers in both the republic and private sectors.

Successive governments in Nigeria. Have since the last three decades, shown great interest in financing of SME by establishing specialized banks and other credit agencies/schemes to provide customized funding to the sub sector. Most of these institutional arrangements have however, performed bellow expectation over the years owing to operational bottle necks.

The failure of most of the schemes and the need for a sustainable source of financing small scale inductees (SSLs), therefore necessitate the recent central bank of Nigeria (CBN) inspired bankers committee initiative, which is aimed at committing the banking industry to the provision of finance and other ancillary support to the sub sector. This project therefore, attempts to articulate the prospects of the current desire to ensure efficient and sustainable credit delivery system to the SSLs

1.2 Statement Of The Problem

Although the development of finance institution has contributed significantly to the growth and development of small-scale industries, certain lingering problems still constrain it optional operation. They include:

Inadequate Record

It has been observed that many finance institution in Nigeria due to lack of adequate record of their operations makes it difficult for proper running of institutions
Accounting records have been known to offer major assistance to enable one determine the success in operation. But due to the fact many. But due to the fact many finance institution takes no adequate record. This therefore constitute a major problem in the development of finance institution.

Lack Of Management Expertise

Many finance institution still do not consider management training essential fore success in their business. The finance institution in Nigeria term to employ young school leavers that do not know much about the fiancé rather than employing gradates that are well trained in finance.

Lack Of Data For Planning

Finance institution does not have proper planning for financing of small scale industries. Most of them do not look into the prospect of the small scale business before giving out loans. In this case some small scale do not get the loans their need why some get more that they need for financing their business.

High Interest Ratio On Borrowed Fund

The cost of borrowing in Nigeria is still high and un-affordable by most proprietors of small-scale business who need fund for starting or expanding their business because of the lending rate. Many people with variable business ideas, shy away from going to ask for bank loan.

High Collateral Securities

Coupled with the high interest rate is the problem of collateral or securities worth more than the amount they want to borrow.

1.3 Objectives Of The Study

This research work aims at knowing the way development finance institutions (DFIs) contributes in the small scale industries. And how (DFLs) is used to channel funds to the newly industrialized countries for industrial development. DFL in Nigeria is used to channel funds to SSLs. The need for importance of SSLs derives form the fact that their development is what is requires to enable the country’s industrial sector meet the contemporary challenges of globalization, economic restructuring and poverty eradication.

Government ensures that all future (SSLs) small scale industries as well as medium scale industries (MSIs) funding schemes have a working capital window. All these and others are been done to ensure that small scale industries in a country can no longer depend solely or foreign importation of goods. In other to ensure stability in the economy of a country and high standard of living.

1.4 Research Question

This study tried to seek answer to the following research questions.

  1. What are small scale industries?
  2. What are the importance of small scale industries?
  3. What are the roles of development finance institutions?
  4. What are the major constraints of the small-scale industries?

1.5 Scope Of The Study

The project attempts to trace or know the roles the development of finance. Institutions plays in other to help the small scale industries to grow. And also how importance for the interest of the country.

The small scale industries (SSLs) have their share of the problems, which generally plague the country’s industrial sector, which this project work attempted to know.

1.6 Significance Of The Study

This study is of immeasurable benefits both to the financing institutions and also to the entire country and individuals as a whole.

The critical importance of adequate financial assistance to SSLs derives form the fact that their development is what is required to enable the country’s industrial sector meet the contemporary challenges of globalization, economic restructuring and poverty eradication. The economic significance of SSLs has been recognized word-wide

To the economy at large and the entire country’s this research work will be of help since SSLs are critical in the effort to reduce industrial import dependence. They can be use to meet the input needs of larger enterprises.

1.7 Limitation Of The Study

As a student researcher, time and money were my greatest problems. Therefore, there is non doubt that these two factors will have some limiting impact on my ability to men around for data collections.

Apart form these two factors, some of the development finance institutions like NIDB, CBN like very other business organization with its requirement of secrecy is handling its official document could not provide enough data as required by the researcher.

For instance, the staff of these three institutions NIDB, NBCL, CBN could not give any information on the level of their inability to release fund at the point it will be needed. If they were able to give the researcher the whole information needed, it would have been of a very good help to this project work.

1.8 Definitions Of Terms


Nigerian industrial development bank


Gross domestic product


Small and medium enterprises


Central bank of Nigeria


Small scale industries


Medium scale industries


Development finance institutions


National association of small scale industries


Nigerian association of small scale medium enterprises


Industrial development centers

Chapter Five

5.0 Summary, Conclusion And Recommendation

5.1 Summary

The development finance institution (DFLs) has been a great work towards the financing of small-scale industries in other to help the industrial sector meet the contemporary challenges of globalization. As a result of this, the economic significance of SSLs (small scale industries) has been recognized world wide.

SSLs also have their share of the problem, which generally plague the country’s industrial sector, which includes inadequate working capital, infrastructural deficiencies etc.

Finally, DFLs is trying to eradicate the problems of SSLs and to help them meet the contemporary challenges of globalization in order to enhance economic development.

5.2 Conclusion

The future of Nigeria industrialization process is largely dependent on the fortunes of the SSLs sub-sector considering in inherent benefits to a developing economy.

It is the sub sector that holds the promise of meeting Nigerians industrialization challenges in the century. Consequently all the parties involves in the promotion of the sub-sector (Government private sector and the banking system). Must jointly ensure that sub sector is given all the support it needs to play its role efficiently.

The banker’s committee initiative which was necessitated partly by the programme failures and also by the need for evolving a sustainable source of financing, therefore, passes great potential if it is well implemented with, adequate complementary policy measures. We are optimistic that the initiative shall lead to the funding of SME on a sustainable basis.

5.3 Recommendations

From the beginning of chapter 2 of this research work, one can see that the need for small-scale industries is very important. We can also see that development finance institution is of great importance to SSLs in other to help in the development and economic significance. During the course of study, I found out various importance of SSLs which includes rising of standard of living, eradication of poverty etc.

I also found out their problems that is making them to lag behind which the DFLs should try more in given them the helping hand, especially the CBN which has the regulatory power of all these institutions.

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