CHAPTER ONE
INTRODUCTION
1.1 Background of The Study
According to Bains, (2011), Business growth potentials refer to the state of the business having the potential to progress far. This potential progress can be measured by increase in capital, increase in number of employees, sales, business survival and expansion in terms of branches and product lines. In order to realize business potential growth, there is a need for the government to create conducive environment for small and medium enterprises (SMEs).
For instance, simplifying loans conditions, provide access to finance, create market for products, assist in the creation of business groups, ease the regulations controlling business, reform tax system, improving skills and training and provide business development services.
Furthermore, in order to create conducive environment for women owned enterprises, microfinance institutions should revisit its policy to ease the credit access and there should be a room to provide credit without group formation if the customer has an equivalent asset for collateral (Abebe, 2014).
Small and medium enterprises (SMEs) have continued to be a popular phase in the business world, and thus occupy a place of pride in virtually every country. This is because of the significance role SMEs play as the main stay of the economic activities in terms of employment generation, national growth, poverty reduction and economic development of global economies including Nigeria. In town and cities, these businesses employ large percentages of the population. According to Kadiri, (2012) cited in Peterise, (2003), small and medium enterprises (SMEs) both in the formal and informal sectors employ over 60% of the labour force in Nigeria. More so, 70% to 80% of daily necessities in the country are not high tech products, but basic materials produced with little or no automation. Records have shown that small and medium enterprises (SMEs) have in many countries provided the mechanism for stimulating private ownership and entrepreneurial skills, enhancing greater employment opportunities per unit of capital invested and aiding the development of local technology (Sule, 2006: World bank 2005).
Supporting the view above, Ajose, (2010), states that small and medium enterprises (SMEs) are the pivot of economic growth and first point of contact for the business world. SMEs help to mobilse savings for investment and promote the use of local raw materials. They help diversify the economic activity and make significant to exports and trade. Small and medium enterprises (SMEs) are also important for poverty reduction as they tend to employ poor and low-income workers and sometimes, they are the source of employment in rural areas and poor regions.
Furthermore, by producing intermediate products for use in large enterprises, small and medium enterprises (SMEs) contribute to the strengthening of industrial linkages. These explain the increased interest which developing countries have shown in the promotion of small and medium enterprises (SMEs) since 1970s (Ekpenyong and Nyong, 2002). According to Bonga, (2010), many economies have lagged behind in the promotion of small and medium enterprises (SMEs) and have missed the benefits they bring in a nation.
1.2 Statement of The Problem
In Nigeria, the factors working against the development and growth of small and medium enterprises (SMEs) are quite numerous among which are the following: financial constraints are one of the major problems of small and medium enterprises (SMEs). However, the source of the fund is not the major problem but the accessibility is the problem. Most of these enterprises cannot access loans on a long term and short-term basis. Also, lack of infrastructural facilities is a serious impediment to the performance of small and medium enterprises. The problem of infrastructure ranges from inadequate facilities like power supply, access road network, water supply and solid waste management, and business are to provide parallel infrastructures. Of these problems, the problem of water supply has been the most critical in Nigeria. The epileptic power supply has seriously hindered the business environment in Nigeria. Consequently, most business has folded up or cannot operate as a result of erratic power supply. In addition, there is the problem of poor management and low entrepreneurial skills base: lack of trained manpower and low managerial/entrepreneurial skill base constitute a serious clog in the survival of small and medium enterprises. Technical problems/incompetence and lack of essential and required expertise in production, procurement, maintenance, marketing and finance have always led to funds misapplication, wrong and costly decision making. When these problems are eminent, it will hamper the growth and survival of small and medium enterprises (SMEs).
1.3 Objectives of The Study
The study intends to achieve the following objectives:
To examine the challenges of managing Small and Medium Scale Enterprises (SMEs).
To identify factors that contributes to the growth of small and medium enterprises.
To identify the problems encountered by small and medium enterprises in obtaining funds from money deposit bank
To determine Measures that could be adopted to reduce the challenges of managing small and medium enterprises in Nigeria.
Research Questions
What the challenges of managing Small and Medium Scale Enterprises (SMEs)?
What are the factors that contributes to the growth of small and medium enterprises?
What are the problems encountered by small and medium enterprises in obtaining funds from money deposit bank?
What the measures that could be adopted to reduce the challenges of managing small and medium enterprises in Nigeria?
Statement of Hypotheses
As a guide to achieved the objectives of the study, the following hypotheses were formulated:
Ho: Inadequate loan-able fund, Poor record keeping, Provision of acceptable collateral security and Diversion of funds are not the challenges of funding Small and Medium Scale Enterprises (SMEs).
Ho: Provision of infrastructural facilities, financial aid and implementation of favourable government policies are not the factors that contribute to the growth of small and medium enterprises (SMEs).
Ho: Low level of education, Inadequate records keeping, High interest charges by the banks and Lack of collateral are not the problems encountered by small and medium enterprises in obtaining funds from money deposit bank.
Ho: Regular training of owners and managers on best financial management practices, Reduction on interest rate on loans and provision of subsidy/grant to economic active but poor business Are not the measures that could be adopted to reduce the challenges of managing small and medium enterprises in Nigeria.
1.6 Significance of The Study
It is believed that this research work will be beneficial to small and medium scale enterprises as it will enable them to know the strategies that will bring about their growth and survival.
Also, the study will benefit entrepreneurs that are looking forward to start their own businesses.
The study will also enhance the existing small and medium enterprises (SMEs) to identify the challenges limiting their growth and the possible solutions to them.
The study will serve as a useful reference material to other individuals and students seeking related information.
1.7 Scope of the Study
This research work centers on strategies for managing the growth and survival of small and medium enterprises: A case study of selected small and medium enterprises in Ikot Ekpene.
Also include in the scope are:
Four variables as listed in the research question
The use of questionnaire as instrument of data collection
Use of descriptive statistics
Fifty respondents
The use of chi-square statistics
