EFFECTIVENESS OF THE TECHNICAL SUPPORT FOR SMALL SCALE INDUSTRIES BY COMMERCIAL BANKS
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EFFECTIVENESS OF THE TECHNICAL SUPPORT FOR SMALL SCALE INDUSTRIES BY COMMERCIAL BANKS
Chapter One: Introduction
Prior to the 1970s or so, the belief that giant corporations were the foundation of the modern economy dominated economic research (Nnanna, 2001). The theory of economies of scale, which is based on the benefits of large-scale activities, was nearly orthodoxy.
Small scale industries (SSIs) were viewed in this context as a relic of the past, an outmoded model, and a symbol of technical backwardness. Indeed, their precipitous reduction became an indicator of industrial progress (Owualah 2001).
This perception has recently evolved, as the role of small-scale industries in fostering industrialization and economic progress has been recognised around the world.
According to studies, SSIs have served as a mechanism in many countries to encourage indigenous entrepreneurship, increase job opportunities per unit of capital invested, and aid in the development of local technology (Sule, 1986; World Bank, 1995).
They contribute to the mobilisation of savings for investment and encourage the use of locally sourced raw materials. Furthermore, SSIs help to develop industrial linkages and integrate industrial with other sectors of the economy by producing intermediate items such as raw materials, replacement parts, and machinery.
It is widely recognised that small businesses adapt more easily to difficult and changing situations because their low capital intensity allows product lines and inputs to be modified at a lower cost.
Given these benefits, there has been an increased focus on promoting SSI globally.
According to Economics Dictionary (1960), industry is defined as the leading sectors of the economy, consisting of all factories, works, power plants, mines, and workshops that produce tools and equipment, use materials, and produce logs, timbers, and woods, and then use the immediate goods produced by industries as well as agriculture.
There is no clear definition of small-scale industry. Each government develops its own definition based on the role SSIs are intended to play in its economy and the assistance programmes meant to attain that goal.
Different definitions between countries may result from disparities in industrial organisation at different stages of economic growth, as well as variances in economic development within the same country (Sule, 1986).
The definition includes the following criteria: capital investment (fixed assets), yearly turnover, gross output, and employment. Prior to 1992, many institutions in Nigeria used varied definitions of small businesses.
The institutions, which included the Central Bank of Nigeria, Nigerian Bank for Commerce and Industries, Centre for Industrial Research and Development, and the National Council on Industry (NCI), streamlined the definition of industrial enterprises to ensure uniformity and provided for a four-year review.
The definition was changed in 1996 and is as follows (NCI, 1986). A small scale industry is defined as an enterprise with a total cost (including working capital but excluding land costs) of more than N1 million but less than N40 million, and a workforce of 11 to 35 people.
A diagram illustrating the categories of small-scale industries:
Small-scale industry.
Factories Non-factories
Cottage Industries Crafts Industry
The increasing development of small-scale industry in Nigeria can be shown from the prominent position it holds in various National Development Plans.
For example, in the second National Development Plan, the government said that it is its objective to actively promote and develop the country’s small-scale industries.
To this purpose, the government has undertaken a number of policies and programmes to help them achieve their goals, culminating in the establishment of the Nigerian Industrial Development Bank (NIDB).
In reality, the fourth National growth Plan 1980-1985 stated that the goal of establishing a special assistance programme for the growth of small-scale companies is for them to serve as a crucial tool for the development of Nigerian businesses.
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