EFFECT OF BANK OF INDUSTRY ON FINANCING SMALL AND MEDIUM SCALE ENTERPRISES IN ENUGU STATE
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EFFECT OF BANK OF INDUSTRY ON FINANCING SMALL AND MEDIUM SCALE ENTERPRISES IN ENUGU STATE
ABSTRACT
This study empirically investigated the impact of the Bank of Industry on financing small and medium-sized businesses in Enugu state. The goal of this study is to look into the influence of the Bank of Industry on Nigeria’s small and medium-sized firms.
The goals of this study were to investigate the impact of credit from the Bank of Industry on the performance of small and medium-sized businesses in Enugu state, as well as to assess the success of the Bank of Industry in its role of attracting resources for use by small and medium-sized businesses in Enugu.
The study’s focus is Enugu state in 2019, with business owners as participants, and financial growth theory as a framework. The research design employed for this study is a survey, and the target demographic is all business owners. 400 business owners were chosen as the sample size, and the cluster sampling technique was used.
This study’s instrument is a questionnaire. Data were acquired from original sources. According to the findings of the data analysis, credit from the Bank of Industry has an impact on the performance of small and medium-sized businesses in Enugu state.
The Bank of Industry plays a role in attracting resources for use by small and medium-sized businesses in the state. Following the findings, it was proposed that credit from the Bank of Industry be extended to small-scale businesses at a low interest rate and for a longer repayment period, and that the loan application procedure be reduced.
Keywords: Small and medium-sized business enterprises, Bank of Industry, business performance, Enugu state.
Chapter one
INTRODUCTION
1.1. Background for the Study
Small and medium-sized businesses are undoubtedly the driving force behind economic growth, poverty alleviation, job creation, and crime reduction. They make up a huge percentage of enterprises worldwide and play an important part in any economy.
Small and medium-sized businesses face a variety of challenges, including funding, that threaten their long-term viability. Researchers have found that the failure rate of small and medium-sized businesses in developing countries is greater than in the developed world (Marlow, 2009).
A company’s capacity to meet its key performance indicators in a sustainable manner is critical to achieving its goals (Simerly and Mingfanf, 2000; Wan and Yiu, 2009). The Bank of Industry was established in Nigeria to improve access to loans and savings services for small and medium-sized businesses.
Businesses, large and small, require effective financing to gain a competitive advantage. The importance of finance to the world at large, and businesses in particular, cannot be overstated.
The Nigerian government has previously launched a variety of programmes and policies aimed at small and medium-sized businesses in order to improve the flow of financial resources to these organisations (Oni and Daniya, 2012). The Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) and the National Credit Guarantee Scheme were both created in 2003.
The Microfinance Policy Regulatory and Supervisory Framework (MPRSF) was established to address the issue of small business operators’ lack of access to credit, along with the Small Scale Industrial Credit Schemes (SSICS), the Nigeria Industrial Development Bank (NIDB), the World Bank-Assisted SME II loan project, international financial assistance
the National Economic Reconstruction Fund (NERFUND), and the Bank of Industry (BOI), among others. Despite the implementation of various programmes and policies in Nigeria, poverty, unemployment, and stunted economic growth remain pervasive (Lawson 2007; Owenubiugie and Igbinedion, 2015; Obadeyi, 2015).
Bank of Industry Limited (BOI) is one of Nigeria’s major development financing institutions, and it has been a pioneer in providing long-term financial support to numerous businesses in the country’s economy.
The BOI’s responsibility includes providing financial help for the formation of big, medium, and small projects, as well as the expansion, diversification, and modernization of existing businesses and the rehabilitation of failing ones.
Bank of Industry (BOI) is the country’s oldest and largest financial institution, having been established in 1964 as the Nigerian Industrial Development Bank (NIDB) Limited. In 2001, the NIDB was transformed into the current BOI.
Despite the fact that small and medium-sized businesses play a critical role in the national economy, they continue to face several challenges. They face major obstacles that jeopardise their ability to function and contribute effectively to the economy.
Small and medium-sized businesses continue to face a number of challenges, including difficulty accessing credit, short loan repayment periods, banks’ inability to finance small and medium-sized businesses, and high interest rates, among others.
In Nigeria, small and medium-sized businesses account for approximately 90% of the industrial sector, 70% of national industrial employment, and 10% of manufacturing production (Ajayi, 2002).
According to Anwatu (2006), small and medium-sized firms account for 75% of the private sector in Nigeria. Developing the private sector is a driver of growth, wealth generation, and employment in Nigeria.
Small business enterprises in Nigeria perform below expectations (Basil, 2005; Abiodun, 2011). Thus, this study evaluates the impact of the Bank of Industry on financing small and medium-sized businesses in Enugu state.
1.2. Statement of the Research Problem
The survival of small and medium-sized businesses is regarded as critical in any economy for addressing issues of poverty, unemployment, and crime while also assuring economic progress.
There is deficiency in the performance of small and medium-sized commercial enterprises in terms of economic growth, job creation, and poverty alleviation, making it difficult for small firms to achieve their desired outcomes.
Most businesses fail to consider suitable funding, which reduces their prospects of long-term survival and causes a progressive reduction in their abilities. One of the most significant challenges that small and medium-sized businesses face is a lack of funding.
In a situation when funds/credit are readily available, there is the issue of high interest rates and a short repayment period. Additionally, most banks are loath to lend to small and medium-sized businesses. All of them, among others, are located in Nigeria and therefore have an impact on the performance of small and medium-sized businesses.
It is distressing to notice that the Nigerian government has historically failed to appropriately assist the poor in growing small and medium-sized businesses.
In Nigeria, the capacity of small and medium-sized businesses to develop and maintain a competitive advantage is dependent on the availability of appropriate techniques for preserving operations. Against this backdrop, the researcher examined the impact of the Bank of Industry on financing small and medium-sized businesses in Enugu state.
1.3. Objectives of the Study
The purpose of this study was to analyse the impact of the Bank of Industry on financing small and medium-sized firms in Enugu state. Specific aims are to:
Examine the influence of credit from the Bank of Industry on the performance of small and medium-sized businesses in Enugu state.
Assess the success of the Bank of Industry in its mission of attracting resources for use by small and medium-sized firms in Enugu State.
1.4. Research Questions.
This study will be led by the following research questions.
What influence does credit from the Bank of Industry have on the performance of small and medium-sized businesses in Enugu state?
To what extent does the Bank of Industry mobilise resources for use by small and medium-sized firms in Enugu state?
1.5 Research Hypotheses.
The investigation is guided by the following hypotheses.
H0: Bank of Industry financing does not impact the performance of small and medium-sized businesses in Enugu state.
H0: Bank of Industry failed to mobilise funding for small and medium-scale enterprises in Enugu state.
1.6. Significance of the Study
The importance of small and medium-sized businesses to the success or growth of any country is highlighted. This is because the availability of funding influences the ability of small and medium-sized businesses to achieve their objectives.
Small and medium-sized businesses play an important role in an economy since a lack of funding reduces production and prevents the achievement of critical goals.
This empirical study is being conducted to assess the impact of the Bank of Industry on financing small and medium-sized enterprises in Enugu state in order to alleviate the problem of low productivity faced by small and medium-sized businesses.
This study will be useful to small and medium-sized businesses because it will provide guidance on how to operate. It will teach it the necessity of money from the Bank of Industry
as well as the necessary steps for obtaining financing for commercial purposes. It will also assist small and medium-sized business owners in extracting the greatest value from their operations.
This study would be extremely valuable to investors, the government, and researchers since it will provide policy suggestions to various Nigeria stakeholders for implementing suitable measures in small and medium-sized enterprises to accelerate capacity investment.
It is believed that the exploration of small and medium-sized firms in Enugu state will offer investors and the government with a comprehensive understanding of how these businesses operate.
It will add to the current literature on the subject by conducting empirical research into the role of the Bank of Industry in the country’s small and medium-sized businesses. This study will be beneficial to:
Members of the academic community will find the study useful because it will serve as a foundation for future research and a reference tool for academic work.
Government: This study will explain to the government what is happening in small and medium-sized businesses, as well as the Bank of Industry. Formulating and implementing policies based on these findings would secure the area’s development.
Investors: This study will also benefit investors, particularly those with a research interest, as it will drive their private investment selections.
1.7. Scope of the Study
The purpose of this study is to examine the influence of the Bank of Industry on financing small and medium-sized enterprises in Enugu state in 2019 by interviewing small and medium-sized business owners in Enugu state, Nigeria.
1.8. Operational Definitions of Terms
The terms listed below have been defined operationally.
Small and medium-sized business enterprises are defined as those with a small number of employees and a limited flow of funds and resources.
Business performance refers to an organization’s efficiency and effectiveness as expressed in its management objectives.
Financing is the process of supplying funds for corporate operations, purchases, or investments.
1.9. Structure of the Study
The study is organised into five chapters. The first chapter is an introduction, which includes the study’s history, statement of problem, research questions, research hypotheses, study objectives, the study’s importance, scope and constraints, and lastly the study’s organisation.
The second chapter is a survey of the literature, which includes conceptual, theoretical, and empirical material, as well as the theoretical framework. The third chapter discusses research methodology, which includes research design, study population, sample size, sampling strategy, data collection method, data analysis instrument, data analysis method, and instrument validity/reliability.
The fourth chapter presents and analyses data, as well as discusses the findings. Chapter five includes a summary, conclusion, and recommendations.
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