AN APPRAISAL OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT
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AN APPRAISAL OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT
Chapter one
INTRODUCTION
1.1 Background of the Study
SMEs have been shown to be a significant driver for a country’s economic growth (Schmiemann, 2009), hence they must not be disregarded in any country’s economic development efforts.
According to Okongwu (2001), SMEs are widely recognised as the primary source of economic growth and a vital factor in fostering private sector development and partnership in both developed and developing countries.
Small and medium-sized enterprises (SMEs) contribute to job creation and are frequently regarded as critical to the growth and innovation of dynamic economies.
As a result, economic progress and development in Africa can be achieved by fostering the establishment of strong SMEs that will eventually grow to become key actors in the emerging economy.
SMEs serve to diversify economic activities that contribute significantly to imports and exports; they are adaptable and can respond swiftly to changing market demands (Ongori, 2009). As a result, SMEs continue to make significant contributions to the global and national economies.
According to Wattanapruttipaisan (2003), the importance of SMEs for economic growth, productivity, and competitiveness is widely recognised, because SMEs generate significant local capital, contribute to higher living standards, and achieve high levels of productivity. Small and medium-sized enterprises (SMEs) have been identified as a key driver of equitable and sustainable industrial diversification.
Small and medium-sized enterprises (SMEs) account for around 10% of total manufacturing production and 70% of industrial employment in Nigeria. SMEs boost industrial and economic growth by utilising local resources, as well as producing intermediate goods and transforming rural technologies (Aina, 2007).
Nigerian SMEs not only provide employment and income for the majority of its citizens, but they are also regarded as a breeding ground for domestic entrepreneurial capabilities, technical skills, technological innovation, and managerial competencies for private sector development (SMEDAN, 2005; Aina, 2007).
The benefits of SMEs to any economy are evident, as they have been shown to contribute to the development of numerous economies in terms of output of products and services and employment creation at a low capital cost.
SMEs also promote forward and backward links between varied economic, social, and geographical sectors in many economies (SMEDAN, 2005). Thus, the development of SMEs is a critical component of many economies’ economic strategies, including Nigeria.
1.2 Statement of the Problem
The primary issue confronting most small-scale businesses is a shortage of funding, whether for the formation of new sectors or to carry out expansion plans. The difficulty to obtain financial financing or resources has hampered or inhibited the growth of small-scale businesses. The causes for the shortage of funds are as follows:
The high rate of inflation caused a significant depreciation of the Naira exchange rate, making it difficult for small-scale enterprises to purchase necessary inputs for expansion.
· limited savings in the economy, resulting in limited capital formation.
· High loan interest rates discourage potential small-scale enterprises.
Retail banks’ reluctance to provide credit to small-scale firms due to their low creditworthiness has hindered their expansion throughout time.
In 2000, the Central Bank of Nigeria convinced the Bankers’ Committee that small and medium-sized enterprises are crucial to the revival of the manufacturing sector and economy. As a result, each bank agreed to invest 10% of its annual pre-tax profit in these enterprises.
To ensure the programme’s effectiveness, banks were expected to find, guide, and nurture firms that would be sponsored by the initiative. The strategy targeted the following activities: agro-allied, information technology, telecommunications, manufacturing, educational facilities, services, tourism and leisure, solid minerals, and construction.
The scheme was officially introduced in August 2001. As of December 31, 2009, banks had set aside a total of N42.2 billion. N28.2 billion, or 67.1% of the total put aside, had been invested (CBN, 2009). However, the truth remains that the allowances made are, in most circumstances, inaccessible to small-scale industries.
The purpose of this study is to assess the impact of small and medium-sized firms on community development in Anambra South Senatorial zone, Anambra State.
1.3 Goal of the Study
The precise aims of this study are:
1. Determine the sources of finance for SMEs from the responses.
2. Determine the role of SMEs in community development.
3. To identify elements that work against SMEs in community development.
1.4 Research Questions.
The study was guided by the following research questions:
1 To what extent do small-scale businesses contribute to the economic development of a community?
2 What challenges do small businesses face when it comes to raising funds?
1.5 Research Hypothesis
This study’s null hypothesis was as follows:
Ho: Small-scale enterprises do not make significant contributions to a community’s economic development.
Hi: Small-scale enterprises make significant contributions to a community’s economic development.
ii Ho: Small-scale firms see no difficulties in obtaining funding.
Hi: Small businesses struggled to secure funding.
1.6 Organisation of the Study
The paper is broken into five sections. Following the backdrop, Section II examines relevant literature on the subject. Section III outlined the research methodology, whereas Section IV presented and analysed the empirical findings. Section V contains the conclusion and recommendations.
1.7 Significance of the Study
Small-Scale Enterprises in Africa rely heavily on their own savings to expand and innovate; nonetheless, firms frequently require real-world services and formal financial aid.
This study will aid Small and Medium Enterprise operators, the government, and the general public by identifying possible financing choices and survival tactics available to Small and Medium Scale enterprises, as well as providing access to them.
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