Full Project – The impact of banks financial and non-financial services on small-scale industries

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CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUND OF THE STUDY

       Banks are the major channel of financial flows, and as a result they have important role to play in promoting the activities of small-scale industries through the services they offered by banks such as extension of credit facilities, business advice in promoting of small-scale business.

Hence, the Central Bank of Nigeria, through the monetary and credit policy guidelines have given especially commercial and merchant banks, the directives to grant at least 20 percent of their total credit facilities to this important sector.  The Commercial Banks primary function is to accept deposit and other liabilities from corporate and the general public and pay on demand.

To be financed by a bank, one must be a customer of the bank among other requirement.  There must be a financing agreement and availability of funds.

1.2  STATEMENT OF PROBLEM

       The banking services are still inadequate and unattractive to financial and non-financial because they do not favour long term lending and even for short term lending, their high interest rates discourage small-scale enterprise for doing business with them.  Problems emanating from this study lay emphasis that:

1. Most banking houses are small-scale business who face the task of devising survival strategies to deal with major changes in government policy that threaten their very existence.
2. Most small-scale business owners are ignorant of the governments and would banks micro credit schemes, most of them die pre-maturely due to unhealthy competitions from imported items.
3. A general lack of technical know-how and manpower hinders manufacturing in small-scale business in Nigeria.
4. Small-scale industries are at a distinct disadvantage as compared to large-scale industries. The scale of operative availability of finance, ability to use modern technology, procurement of raw materials is some of these areas.  This gives rise to several problems.  Most of these problems can be attributed to the small size of their business, which prevent them from taking advantages, which accrue to large business organization.  Some of these problems faced by small-scale industries include delayed payments, uncertainty of getting orders from the parent units and so on.

1.3  THE OBJECTIVES OF THE STUDY

1. To determine the extent to which banks have contributed to the development of small-scale industries.
2. To determine if the bank comply with the directives guidelines of Central Banks in relation to small-scale industries.
3. To determine if the assistance rendered by banks really measure up to the need the small-scale industries in terms of financial advisory, consultation and others.
4. To ascertain what constraints prevent Commercial Banks, Merchant Banks, from granting short-term and medium-term loans to small-scale industries.
5. To ascertain the specific impacts rendered by bank on small-scale industries.
6. Examine how the volume of deposits affects the level of loans and advances granted by the Commercial Banks to the small-scale industries/enterprises.
7. To ascertain whether the cost of capital has a significant effect on the propensity to borrow or not.

1.4  RESEARCH QUESTIONS

1. To what extent has the financial assistance offered to the banks improved the level of employments of small-scale enterprises?
2. What are the financial and non-financial services provided by banks to small-scale industries?
3. What are the sources of funds for small-scale industries?
4. To what extent has financial assistance received from bank enhanced their profitability of small-scale enterprises?
5. How accessible are small-scale enterprises in obtaining financial assistance from banks?
6. To what extent does commercial and merchant banks comply with the directives of the Central Banks to small-scale enterprises?

1.5  SIGNIFICANCE OF THE STUDY

       This study should be of considerable interest to policy makers in government to the bankers and distributors of bread products and consumers and to the public at large.  The study hopefully will give government some documented information on the effect of the major policy changes.  The information should enable government to establish what new measures need to be taken as well as provide some basis of determining in advance the likely consequences of similar measures in future.

Then, it will help bring into focus some ideas of how small-scale information would enable banks and regulators to fashion out better ways of funding and extending services to small-scale enterprises.  This study will help to highlight the contributions of banks to the small-scale industries.  And the benefit of banks in getting in more customers and also to improve in their services.  The study will highlight how the (private sector) have fared.  The successful ones will see what it was that enable them weather the consequences of the bank on what importation.  It will also educate the private sector how important it is to be successful in business.  This study will be benefited by the students for research purpose.

This study will also be beneficial by the researchers who done this in improving the small-scale industries.  This will help to enlighten the public about the existence of various financial and non-financial facilities extended by the Commercial Banks and Central Banks and how they will go about in search for such facilities.  It is also intended to create awareness on the contribution which the financial sector creates by increasing the growth and development of the economy in Nigeria.

1.6  SCOPE OF THE STUDY

The project under study intends to analyze the impact of bank financial and non-financial services on small-scale industries.  The emphasis of this study is on small-scale business in Imo State.  This research is conducted within the framework of banks financial orientation organization.

The study focuses on the efforts of banks financial and non-financial services in respect to smalls-scale.  The study intends specifically to investigate the impact of banks financial and non-financial services on small-scale enterprises on the bankers and the strategies adopted by them to survive.

1.7  LIMITATION OF THE STUDY

       This study was constrained by many factors among which were time, funds and the uncooperative attitude of some respondents.  An investigation of this kind is faced with several limitations, which is inevitable, for example, some need facts required for this study are either non-available due to lack of textbooks, journals, magazine etc.

Also due to financial constraints, the researcher is unable to travel to many places of interest (small-scale industries) in other to gather comparable data or information for this research project.  The financial crunch needs not to be mentioned although it is general phenomenon but it hinders my study a lot.

Limited time factors is nothing to write home about amidst the students need to attend classes for her lecturers, read other course, compound her inability to collect response from many companies as one would have loved to do.   Even some people don’t give reliable data to the researcher, the problem associated with unreliable statistics, blazed information, poor audience by respondents is a high limitation to this project.

1.8  DEFINITION OF TERMS

• Small Scale Business: Is a business that is privately owned and operated with a small number of employees and relatively low volume of sales.  Small-scale business concern is one that is independently owned and operated and which is not dominated in its field of operation.  It is also defined as business industry by industry to determine what businesses were eligible for SBA’S programme.

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Full Project – The impact of banks financial and non-financial services on small-scale industries