AN APPRAISAL OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT; EVIDENCE FROM ANAMBRA SOUTH SENATORIAL ZONE, ANAMBRA STATE
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AN APPRAISAL
OF PERFORMANCE OF SMALL SCALE ENTERPRISES IN COMMUNITY DEVELOPMENT; EVIDENCE
FROM ANAMBRA SOUTH SENATORIAL ZONE, ANAMBRA STATE
Abstract
This study
examines an appraisal of performance of small scale enterprises in community
development; evidence from Anambra south senatorial zone, Anambra state.
Specifically the study provides the reasons for going into SMEs; sources of
financing SMEs; role of SMEs in community development and factors militating
against SMEs in community development. The researchers distributed 143
questionnaires to the respondents that make up the sample size. The research
questions were answered using mean rating under the modified four-point likert
scale.Result of the investigation reveals that SMEs play the following role in
community development: Generation of employment; Service provision; Improve
living standards and poverty alleviation. Consequently this study therefore
recommends that: government should re-introduce the small business credit
scheme so that beneficiaries can use them to run the micro, small and medium
enterprises; government, chamber of commerce and other non-governmental
organization should regularly organize seminars for potential and actual small
and medium enterprise operators where they should be educated on how to plan,
organize, direct and control their businesses there should also be a
re-introduction of soft loans for small and medium business by the government
and financial institution to enhance the performance of SMEs in community
development.
CHAPTER ONE
INTRODUCTION
1.1
Background Of The Study
SMEs have
been discovered to be a key driver for a country’s economic growth (Schmiemann,
2009) hence, SMEs cannot be overlooked in the economic development of any
country. Okongwu (2001) argues that SMEs are recognized as the main source of
economic growth and a major factor in promoting private sector development and
partnership, in developed and developing countries. SMEs help to create
employment and are often seen as very important for the growth and innovation
of dynamic economies (Mutula and Brakel, 2006). Therefore, economic growth and
development in Africa can be achieved through the emergence of strong SMEs,
which will later grow to become major players in the developing economy. SMEs
help to diversify economic activities that have significant contributions to
imports and exports, they are flexible and can adapt quickly to changing market
demands (Ongori, 2009). Thus, SMEs contribute more and more to the national and
international economies of the world.
According to
Wattanapruttipaisan (2003), the significance of SMEs for growth, productivity
and competitiveness of the economies in both developed and developing countries
is acknowledged universally, since SMEs bring about substantial local capital
formation, contribute to improved living standards and achieve high levels of
productivity. SMEs are identified as a major means of achieving equitable and
sustainable industrial diversification.
The
contributions of SMEs to Nigeria’s economy are not contestable as about 10% of
the total manufacturing output and 70% of the industrial employment are by SMEs
(Aina, 2007). Through the utilization of local resources, SMEs promote
industrial and economic development and are responsible for the production of
intermediate goods and the transformation of rural technology (Aina, 2007).
Nigerian SMEs not only provide employment and income for majority of its
citizens but are also recognized as the breeding ground for domestic
entrepreneurial capabilities, technical skills, technological innovativeness
and managerial competencies for private sector development (SMEDAN, 2005, Aina,
2007).
The
assistance of SMEs to any economy are obvious, as SMEs are known to contribute
to the development of several economies in terms of output of goods and
services and creation of jobs at relatively low capital cost (Apulu and Latham,
2010). SMEs also improve forward and backward linkages between economically,
socially and geographically diverse sectors of many economies (SMEDAN, 2005).
Thus, the development of SMEs is an essential element in the growth strategy of
many economies including Nigeria.
1.2
Statement of The Problem
The key
problem facing most small scale enterprises is lack of finance whether for the
establishment of new industries or to carry out expansion plans. The inability
to attract financial credit or resources has hindered or stifled the growth of
small scale enterprise. The reasons for the lack of fund include the
followings:
High rate of
inflation that led to the vast depreciation of Naira exchange rate, thus making
it difficult for most Small Scale enterprise to obtain required inputs for
expansion.
Low level of
savings in the economy, which leads to low capital formation.
High rate of
interest charged on loans, which scares off potential Small Scale enterprise.
The
unwillingness of retail banks to grant credit to Small Scale enterprise because
of the low creditworthiness of these enterprises has also hampered their growth
over the years.
Bothered by
the persistent decline in the performance of the industrial sector and with the
realization of the fact that the small and medium scale enterprises hold the
key to the revival of the manufacturing sector and the economy, the Central
Bank of Nigeria successfully persuaded the Bankers’ Committee in 2000 to agree
that each bank should set aside 10 percent of its annual pre-tax profit for
equity investment in small and medium scale enterprises. To ensure the
effectiveness of the programme, banks were expected to identify, guide and
nurture enterprises to be financed by the scheme. The activities targeted under
the scheme included agro-allied, information technology, telecommunications,
manufacturing, educational establishments, services, tourism and leisure, solid
minerals and construction. The scheme was formally launched in August 2001. As
at end-December 2009, the cumulative sum set aside by banks was N42.2 billion.
The sum of N28.2 billion or 67.1 per cent of the sum set aside had been
invested (CBN, 2009). But the fact still remains that with these provisions
made are in most cases not accessible to the Small Scale Industries.
The main
thrust of this study is to evaluate the performance of small and medium scale
enterprises in community development with specific attention from Anambra South
Senatorial zone, Anambra State.
1.3
Objective of The Study
The specific
objectives of this study is
1 To
determine the sources of financing SMEs from the respondents;
2 To
ascertain the role of SMEs in community development; and
3 To
identify factors militating against SMEs in community development.
1.4 Research
Questions
This study
was guided by the following research questions:
1 To what
extent do small scale enterprise contribute to towards economic development of
a community ?
2 What are
the problems encountered by the small scale enterprise in sourcing for funds?
1.5 Research
Hypothesis
The
following null hypothesis was given for this study
i Ho: Small
Scale enterprise do not contributes immensely towards economic development of a
community.
Hi: Small
Scale enterprise contributes immensely towards economic development of a
community.
ii Ho: Small
scale enterprises do not encountered problems in source for funds.
Hi : Small
scale enterprises encountered problems in source for funds.
1.6
Organization Of The Study
This paper
is divided into five sections. Following the background, section II reviews
related literature on the topic. Section III set out the research methodology,
while Section IV presents and analyses the empirical results. Section V rounds
it up with the conclusion and recommendations.
1.7
Significance of the Study
Small-Scale
Enterprises in Africa rely largely on own savings, not only to grow but also to
innovate, firms often need real services support and formal finance assistance.
This study will be of benefit to the operators of the Small and Medium
Enterprise, the government, and the general public on the possible financing
options and survival strategies available to the Small and Medium Scale
enterprise and give the possible means of accessing them.
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