SMALL AND MEDIUM ENTERPRISES FINANCING: A CATALYST FOR ECONOMIC GROWTH IN NIGERIA
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
SMALL AND MEDIUM ENTERPRISES FINANCING: A CATALYST FOR ECONOMIC GROWTH IN NIGERIA
INTRODUCTION
Small and medium-sized enterprises (SMEs) have long been seen as a significant driver of economic growth and development worldwide. This is because SMEs have provided a mechanism for stimulating indigenous enterprise in many countries by creating job opportunities, training entrepreneurs, generating income, assisting in the development of local technology, and providing a source of livelihood for the majority of low-income households, all of which contribute to pro-poor economic growth in many countries.
Globally recognised, SMEs are necessary to lubricate the engine of socioeconomic development in developing countries’ economy by increasing per capita income, export earnings, and capacity utilisation in critical industries (Obasan and Arikewuyo, 2012).
With Nigeria’s aim to build its economy, the continued growth of the SME sub-sector is even more important. As a result, in order to contribute effectively to inclusive economic growth, SME access to credit has become vital, especially as they rely on Deposit Money Banks and other financial institutions to raise investment money.
Deposit money banks, also known as commercial banks, are financial institutions that provide services such as receiving deposits, making business loans, lending mortgages, and directing funds from surplus to deficit units for economic development (Uzonwanne 2015).
Nigeria’s financial system is predominantly dominated by the banking sector, particularly deposit money banks, which provide the foundation for economic growth.
Their credit component is a vital link between the monetary and real sectors of the Nigerian economy, and many financial analysts regard it as a stimulant for economic growth and development.
Statement of the Problem
Over the years, the Nigerian government has been involved in the financing and growth of small and medium-sized enterprises (SMEs) at many levels, including the formation of SMEs enhanced-financing institutions.
These include the Nigerian Industrial Development Bank (1962), the Small Scale Industries Credit Scheme (1971), the Nigerian Bank for Commerce and Industry (1973), the Mandatory Bank’s Credit Allocation to SMEs Scheme (1992), and the Bank of Industry, founded in 2001.
Furthermore, the Central Bank of Nigeria intervened by establishing several SMEs financing schemes, including the Refinancing and Rediscounting Facility, the N200 billion Restructuring/Refinancing Scheme
the N200 billion Commercial Agricultural Credit Scheme (2009), and, most recently, the N200 billion Small and Medium-scale Enterprises Credit Guarantee Scheme (SMECGS) in 2010.
In addition to the government and the CBN, several private organisations in Nigeria developed loan support schemes for SMEs, one of which was the Small and Medium Enterprises Equity Investment Scheme (SMEEIS), which was founded in 2001 with mostly the efforts of the Bankers’ Committee.
The CBN mandated the country’s commercial banks to drive and allocate lending facilities from the aforementioned institutions to SMEs in order to progress economic growth. However, there is a prevalent belief that bank loans are insufficient to boost the SMEs sub-sector.
This prompted some scholars to delve deeper to uncover the truth, one of which was a survey conducted recently by (Mordi, Anyanwu, Adebusuyi, Odey, Amoo, Mbutor, Adebayo, Akpan, Igue, Ibeagha, Belonwu, Zimboh in 2014), which revealed that commercial banks’ loans to private sector businesses, including SMEs, have not yielded the much-needed results to drive the sub-sector to achieve its goals.
In the same spirit, Sagagi (2006) discovered in his study that there is a negative association between the total amount of credit provided out by lending institutions to private enterprises and the real amount allocated to SMEs.
This is one of the reasons SMEs are reported to have contributed slightly to GDP, despite the fact that the nation’s GDP climbed to $509.9 billion in 2014 (CBN).
Need help with a related project topic or New topic? Send Us Your Topic