THE UNIQUENESS AND IMPACT OF COMMERCIAL BANK LENDING ON THE GROWTH OF SMALL-SCALE INDUSTRIES
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THE UNIQUENESS AND IMPACT OF COMMERCIAL BANK LENDING ON THE GROWTH OF SMALL-SCALE INDUSTRIES
ABSTRACT
This work is motivated by a desire to understand the value of commercial bank lending to small-scale industries, both internally and externally. The first chapter of this book introduces us to the work, defines small-scale, and discusses its instruments.
They play a part in the commercial lending securities. Chapter two introduced us to the definitions of the terms used by small-scale enterprises when borrowing from commercial banks.
The third chapter discusses the procedures used in small-scale industries and how they are carried out. The fourth part of this topic discusses data presentation and analysis, specifically how small-scale industries are presented in society and how people react to them, whether positively or negatively, while the fifth chapter focuses on summary, conclusion, and suggestions.
Chapter One: Introductions (10)
Based on my observations, I’ve concluded that when the term “small” is said, people’s minds immediately turn to something or a picture that is small, less essential, or not up to par in nature. This is also true in business; when a small-scale industry is mentioned, many dismiss it, but fail to recognise that everything huge begins small.
However, contemporary economic studies have demonstrated that relying solely on giant commercial organisations makes it difficult to maintain balance and long-term economic growth. Small and large enterprises are known to play an important role in establishing a strong and vital economic base in both developed and emerging countries.
Over the years, management studies have frequently focused on huge organisations with rigid structures and impersonal relationships. The obvious reason for this is the high level of risk associated with significant capital investment and large-scale operations.
In Nigeria, the word “small-scale business” has multiple definitions. The reason for this is that different countries have varying levels of development and operate under distinct economic conditions.
According to the Bank of Commerce and Industry (NBC), a small-scale business is one whose assets do not exceed N750,000.OO, but the Central Bank of Nigeria defines a small-scale enterprise as one whose assets do not surpass N25 million per year.
As a result, we will look at the originality and level of Commercial Bank credit to small-scale enterprises, as well as how effective this credit has been in resolving their financial problems.
Background of the Study
According to Osubor and Okafor (2006), a commercial bank is a financial entity that deals in money and credit, some of which are repayable on demand through cheques.
Commercial banks are limited liability companies formed for profit and owned by shareholders. Commercial banks are the nation’s most important financial institutions. They stand out in terms of service performance.
Commercial banks are currently recognised for their restrictive credit policies as a result of the economic situation we are in, the leadership we have, and a lack of trust among one another.
This approach has made it nearly impossible to obtain the industrial financing that they require for the expansion and growth of their firm and economy. In cases when loans are granted, the issue may be that the amount is insufficient or that the loan disbursement date does not correspond to the time the loan is needed.
Commercial bank financing to small-scale industries has not been appropriately addressed. This is due to their high interest rates on bank loans, the need for collateral security, and their expertise of small-scale businesses.
1.2 Statement of Problems
Just as humans encounter obstacles on a daily basis, businesses and organisations will seek to modernise many primary industries1. The standard of operation has moved into the capital intensive stage, and new industries require sufficient money to begin operations. Here comes the Commercial Bank.
Commercial banks’ lending rules have denied small-scale enterprises the opportunity to use bank facilities for growth. These obstacles hampered the development of small-scale businesses in Nigeria, which include:
Commercial banks are eager to lend to small-scale businesses.
Lack of trust in small business owners. Insufficient asset base for obtaining loans and advances from banks.
1.3 GOALS OF THE STUDY
Commercial banks are currently recognised for their restrictive credit policies as a result of the economic situation we are in, the leadership we have, and a lack of trust among one another. This regulation has made it nearly impossible for small-scale industries to secure financing necessary for commercial and economic expansion.
In cases when loans are granted, the issue may be that the amount is insufficient or that the loan disbursement date does not correspond to the time the loan is needed. The purpose of this work is to determine the appropriate level of commercial bank lending for small-scale enterprises.
Concerning the sufficiency or insufficiency of commercial banks’ financing to small-scale companies. To what extent does the commercial bank lend to small-scale industries. To provide solutions and recommendations when necessary.
1.4 RESEARCH QUESTIONS
– What are the primary factors that contribute to the Commercial Bank’s uniqueness? i.e. the impact of financing to small businesses.
– What role has the Commercial Bank played in the expansion of small-scale industries?
Is there any difference in how small businesses acquire loans from commercial banks?
– Is the development of this small-scale industry contributing to economic growth?
1.5 Significance of the Study
The study’s aims include:
– EMPLOYMENT GENERATION: Small businesses give self-employment opportunities for the majority of people in our society. As a result, they will be able to earn a living and contribute to society.
– ENTREPRENEURSHIP DEVELOPMENT: Small-scale firms provide a training ground for entrepreneurs.
Experience and Skill Development Running a successful small business can lead to profitable employment in large-scale industrial settings.
– INDUSTRIALIZATION OF RURAL AREAS: Small-scale industries located in rural areas form the foundation of industrialization.
Because of the low degree of infrastructural facility requirements, small-scale industries thrive in rural areas.
– LESS FOREING EXCHANGE REQUIREMENT: Small businesses demand little or no foreign exchange. The majority of their equipment is fabricated locally.
– RELATIVELY LOW CAPITAL OUTLAY: Small enterprises do not require a significant capital outlay in comparison. At the same time, they offer speedy payback. They also offer a degree of flexibility because they can rapidly react to shifting economic circumstances.
1.6 SCOPE OF THE STUDY
The study will look at the actions of Lagans Venture, Mind the Glass, and Commercial Banks. This is required for cost-effectiveness, information access, and time efficiency. The above organisations are located at No. 3 Ekerinah St. Aba and 186 Azikiwe Road Aba, respectively.
1.7 Limitations of the Study
There are always some constraints to research activity in order for it to be efficient and productive.
COST: Additionally, the high cost of everything is one of the study’s limitations.
1.8 Definition of Terms
BANKING LENDING: This is a system in which commercial banks and other financial institutions provide credit facilities to their customers for business transactions, expansion, and growth.
BANK LOAN: A bank lends a customer a predetermined sum over a set period of time and on specific terms.
BANK UNIQUENESS: What distinguishes Commercial Bank from other institutions is its capacity to cooperate with all fields without discrimination.
Collateral security refers to an asset deposited with a bank as a substitute in the event of a client default.
Small-Scale Industry: According to the Central Bank of Nigeria’s 1991 credit guidelines (Monetary Policy Circular No. 25), a small enterprise for merchant and commercial bank loans is defined as one whose capital investment does not exceed N5 million (excluding land and working capital) or whose annual turnover does not exceed N25 million.
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