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Full Project – PROBLEMS OF SMEs IN IKORODU LOCAL GOVERNMENT AREA OF LAGOS STATE

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CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Despite of these small and medium scale enterprises when established varies in its mode of formation, its sizes, its organizational set up, and in its activity. The reason for this is because the type chosen by each individual operator will depend on the financial capability to manage such business. Small scale business forms the bedrock of the economic growth of every nation. This is because no nation can achieve a viable economic growth and development without the establishment of small scale business. The entrepreneurship which is part of small scale business is very relevant to the empowerment of the citizens for sustainable development. It gives substantial opportunities for the assumption and the use of local raw materials for vertical and horizontal linkages. Therefore, it has been said that the growth and development of small scale business would improve the economy and welfare of Nigerians.

The small and medium scale enterprises have a very important and effective role in developed countries generally and in developing countries especially because it is considered the backbone of their economies. Rajan (2013) states that the definition of small and medium scale enterprises may vary from county – to – country, year – to – year, from period to period and from time to time according to the level of economic development reached in a country. Sometimes it is defined in terms of number of workers employed and on the use of electric power supply and also in terms of investment made.

Also, new businesses bring new and improved products and services thereby increasing competition and challenging existing business to improve their performance. Since 1960s to date, small scale business have been given due recognition especially in the developed nations for playing very important roles towards posturing accelerated economic growth, development and stability within several economics. However, it appears that, considering the enormous potentials of the small scale business sector and despite the acknowledgement of its immense contribution to sustainable economic development, its performance still falls below expectation in many developing countries most especially Nigeria. This is because sectors in these developing countries have been bedeviled by several factors such as management ability militating against its performance and leading to an increase in the rate of small and medium scale enterprises failure. These factors include the unfavorable and very harsh economic; conditions resulting from unstable government policies, strained by the difficulty in accessing credits from banks and other financial institutions; high operating cost, lack of transparency and corruption.

Small scale business generally have weak capital base since majority of them are either sole- proprietorship or partnerships. They have no opportunity to draw money from the capital market as big companies do. Consequently, the only options is to borrow money and at times with unfavourable term. Small scale business operators rely primarily on ‘own equity’ bank financing, trade credit and cease financing to finance their business. But before going into sources of financing, it is important that the potential investor has an idea of an estimated level of fund needed for his particular type of business. He needs to count how much money of his own (equity) he is prepared to put into the business before he thinks of borrowing and other financial assistance. Budget becomes absolute necessity. Proper budget helps to ensure that proper controls and evaluative procedures are established in a business.

1.2 Statement of the Problems

Nigeria is classed as a developing countries among the countries of the world based on their economic status. Although the country is blended with varieties of human and material resources but very poor in the management of those resources. The country is however dependent upon import goods and services on daily basis, so as to meet human wants.

Problems like electric power supply, poor business financing, poor government policies among others have been the major barriers to economic advancement in the country. However, the role of small scale business in the nation’s economic development remains sacrosanct, if the Gross Domestic Product (GDP) of the country will increase. Advancement in the SME will therefore boost the GDP and the nation’s economy.

It was observed by the researcher tha most of the small scale business have a lot of Problems which do not allow them to make profit and part of the Problems of the issue of financing of the small scale business

Financing of the SME is a limiting factor to the development of SME. The problems range from high interest rate, on loans, difficulty in loan assessment, poor attitude to loan repayment among others.

1.3 Purpose of the Study

The study is meant to investigate

To determine whether managerial skill constitute major challenge in the performance of small scale business in Ikorodu Local Government Area.
To determine whether finance constitute major challenge in the performance of small scale business in Ikorodu Local Government Area.
To determine whether multiple taxation constitute major challenge of small scale business in Ikorodu Local Government Area.
To determine the solution of small scale business in OgbomosoNorth Local Government Area.

1.4 Research Questions

From the above research objectives the following research questions were formulated.

To what extent has managerial skills constitute a major challenge in the performance of small scale business in Ikorodu Local Government Area?
To what extent has finance constitutes a major Problems in the performance of small scale business in Ikorodu Local Government Area?
To what extent has taxation constitute major challenge in the performance of small scale business in Ikorodu Local Government Area?
What are the solutions to the constraints of small scale business in Ikorodu Local Government Area?

1.5 Research Hypotheses

The following hypotheses are formulated:

H0₁: There is no evidence to show that poor planning affects the management of small scale business.

H0₂: There is no evidence to prove that lack of financial support and poor funding can lead to finance of small – scale business.

H0₃: There is no significant relationship to show that multiple and high taxes and the management of small scale business.

H04: There is no evidence to show the solutions to constraints small scale business.

1.6 Significance of the Study

The findings of this study which enable management of small – scale business to appreciate better the need for a proper feasibility study and business plan before starting up a business for easy management.
The study will enable the government, private sector and prospective small- scale business entrepreneurs to come up with policies that will improve the management of small – scale business
The study will be of immense help to other people and students who wish to carry out other research in the field or related field.

1.7 Scope and Limitation of the Study

The study covers small scale business in Ikorodu local government and their financing Problems within the area. However Ikorodu local government is one of the thirty – three local governments in Lagos State in the Lagos North senatorial district. The local government comprises of various small scale which have been the major key to the economic development of the local government area.

In carrying out this research many factors served as constraints.

Negative attitude of respondent: – the problem facing the researcher with the regards to the respondents relates to the non- cooperation and uncompromising attitude of some respondents is giving out relevant information or facts. The researcher was able to get the relevant information as the end of the day.
Time limitation: – time factor constitutes a major limitation of this research study. It relates to the fact that the time for this research work.
Funding: – due to high financial involvement of this project work, the researcher has narrowed the study to10 small scale business in Ikorodu Local Government Area.

1.8 Definition of Terms

The following are the major definition of research topic:

Challenge: a job, duty or situation that is difficult because you must use a lot of effort, determination, and skill in order to be successful. In another way round challenge can be defined or say, to compete against someone or ask them to prove that they can achieve a particular goal. Challenge something, for instance, consumers are challenging manufacturers to adopt greener policies.
Financing: simply means asking any financial institution (bank, credit union, finance company) or another person to lend you money that you promise to repay at some point in the future.
Small scale business: it sometime called a small business. A small scale enterprise is a business that employs a small number of workers and does not have a high volume of sales such enterprises are generally privately owned and operated sole proprietorships, corporations or partnerships.

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