IMPACT OF MICRO FINANCIAL INSTITUTIONS ON THE GROWTH ON SMALL AND MEDIUM SCALE BUSINESS.
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IMPACT OF MICRO FINANCIAL INSTITUTIONS ON THE GROWTH ON SMALL AND MEDIUM SCALE BUSINESS.
Chapter one
1.1 Background of the Study
Microfinance is the facilitation of financial services to meet the needs of low-income individuals, such as micro-entrepreneurs, through the provision of small loans (microloans), small savings deposits (micro-savings), micro-insurance, and the enhancement of simple payments services required by micro-entrepreneurs and economically active poor people who do not have access to formal banking services.
The loans granted are minor in quantity and are intended for entrepreneurial endeavours. The loans are collateral-free and bundled, with the majority going directly to entrepreneurs, with little or no interest rates.This is due to their capacity to manage little amounts of money profitably (UNITUS, 2000).
The National Council of Industries defines SMEs as small enterprises with a total cost of less than two million naira (N2,000,000) excluding land.
The federal ministry of trade and industry defines SMEs as businesses with up to 50 paid workers and a total investment of up to $750,000, excluding land costs. Small and medium-sized enterprises (SMEs) play an important role in national economic development.
This role includes technological and industrial development, job creation, technology acquisition, capacity building, boosting growth, raising living standards, industrial spread, serving large-scale enterprises, export promotion, rural development, and innovation.
The research aims to look into the impact of microfinance on the growth of small and medium-sized businesses in Lagos, Nigeria.
1.2 Statement of the Problem
Several years after the microfinance policy was implemented, a higher proportion of the poor and vulnerable poor segments have yet to fully realise the benefits of financial services, such as acquiring a microcredit facility for entrepreneurial firms.
The National Council of Industries defines SMEs as small enterprises with a total cost of less than two million naira (N2,000,000) excluding land.
The federal ministry of trade and industry defines SMEs as businesses with up to 50 paid workers and a total investment of up to $750,000, excluding land costs.
Small and medium-sized enterprises (SMEs) play an important role in national economic development. This role includes technological and industrial development, job creation, technology acquisition, capacity building, boosting growth, raising living standards, industrial spread, serving large-scale enterprises, export promotion, rural development, and innovation.
It is worth noting that, while microfinance banks are prepared to disburse funds to this category, they are constrained in their financial resources to accommodate the enormous number of clients seeking microcredit.
The segment’s activities result in low savings deposits. As a result, there is a need to reassess the impact of microfinance activities on the performance of small and medium-sized enterprises in order to identify the challenges that microfinance banks face in effectively carrying out their constitutional mandate of providing financial services to the economically active but poor segment of society.
Therefore, the problem confronting the research is to identify the impacts of micro finance on the growth of small and medium-sized firms in Lagos, Nigeria.
1.3 GOALS OF THE STUDY
To investigate the influence of microfinance institutions on the growth of small and medium-sized businesses in Lagos Nigeria.
1.3 RESEARCH QUESTIONS
What is the nature of microfinance institutions and small and medium-sized businesses in Lagos, Nigeria?
What is the influence of microfinance institutions on the growth of small and medium-sized businesses in Lagos Nigeria?
1.4 Significance of the Study
The study provides an analysis of the influence of microfinance institutions on the growth of small and medium-sized businesses in Lagos Nigeria.
1.5 Research Hypothesis
Ho The influence of microfinance institutions on the growth of small and medium-sized businesses in Lagos, Nigeria, is modest.
Hi The influence of microfinance institutions on the growth of small and medium-sized businesses in Lagos, Nigeria is substantial.
1.6 SCOPE OF THE STUDY
The study focuses on assessing the level of impact of microfinance institutions on the growth of small and medium-sized businesses in Lagos, Nigeria.
It will also act as an important source of information for policymakers.
1.7 Limitations of the Study
The investigation was limited by logistical and geographical constraints.
1.8 Definition of Terms
SME
The National Council of Industries defines SMEs as small enterprises with a total cost of less than two million naira (N2,000,000) excluding land.
The federal ministry of commerce and industry defines SMEs as small enterprises with paid employees of up to 50 people and a total investment of up to 750000, excluding the cost of land.
MICROFINANCE BANK DEFINED.
Microfinance is the facilitation of financial services to meet the needs of low-income individuals, such as micro-entrepreneurs, by providing small loans (microloans), small savings deposits (micro-savings), micro-insurance, and improving simple payments services required by micro-entrepreneurs and economically active poor people who do not have access to formal banking services.(USAID, 2000).
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