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TITLE PAGE

IMPACT OF MICROFINANCE BANK ON THE GROWTH OF SMALL AND MEDIUM SCALE ENTERPRISES (SMEs) IN ILORIN KWARA STATE

BY

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EE/H2013/01430
DEPARTMENT OF ----
SCHOOL OF ---
INSTITUTE OF ---

DECEMBER,2018

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APPROVAL PAGE

This is to certify that the research work, "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" by ---, Reg. No. EE/H2007/01430 submitted in partial fulfillment of the requirement award of a Higher National Diploma on --- has been approved.

By
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Supervisor                                                  Head of Department.
Signature……………….                           Signature……………….        

……………………………….
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External Invigilator

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DEDICATION
This project is dedicated to Almighty God for his protection, kindness, strength over my life throughout the period and also to my --- for his financial support and moral care towards me.Also to my mentor --- for her academic advice she often gives to me. May Almighty God shield them from the peril of this world and bless their entire endeavour Amen.

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ACKNOWLEDGEMENT

The successful completion of this project work could not have been a reality without the encouragement of my --- and other people. My immensely appreciation goes to my humble and able supervisor mr. --- for his kindness in supervising this project.
My warmest gratitude goes to my parents for their moral, spiritual and financial support throughout my study in this institution.
My appreciation goes to some of my lecturers among whom are Mr. ---, and Dr. ---. I also recognize the support of some of the staff of --- among whom are: The General Manager, Deputy General manager, the internal Auditor Mr. --- and the ---. Finally, my appreciation goes to my elder sister ---, my lovely friends mercy ---, ---, --- and many others who were quite helpful.

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The failure of many small-scale businesses in Nigeria is largely due to a shortage of finances for a continued period of time. The microfinance banks serve as a bailor to the financial collapse that would have befallen many of these businesses. This paper looks at the impact of  microfinance credit on the survival of small- and medium-scale businesses in Irepodun Local Government Area (LGA) of Kwara State, Nigeria.
The two functional microfinance banks in the Irepodun LGA were the population/sample for this study. ANOVA was used to test the hypothesis. The findings revealed that microfinance banks
contribute significantly to the survival of small- and medium-scale enterprises in the study area. The study recommends that: repayment periods should be increased and more funds should be released to potential entrepreneurs for enterprise creation and to generate more employment.

 

TABLE OF CONTENTS
Title page…………………………………………………………………………………..i
Certification……………………………………………………………………………….ii
Dedication………………………………………………………………………………...iii
Acknowledgment……………………………………………………………………........iv
Table of contents……………………………………………………………………….…v
Abstract…………………………………………………………………………………...vi

CHAPTER ONE:
Introduction
1.1 Background to the Study ……………………………………………………..……1
1.2 Statement of the Problem …………………………………………………………..6
1.3 Objective of the Study     ……………………………………………………………7
1.4 Research Questions           …………………………………………………………...8
1.5 Research Hypotheses        ……………………………………………………………8
1.6 Significance of the Study …………………………………………………………..9
1.7 Scope of the Study           …………………………………………………………..9
1.8 Limitation of the Study    ……………………………………………………………10
1.9 Definition of Terms          …………………….…………………………………....10

CHAPTER TWO:
 Literature Review
2.1 Introduction………………………………………………………….……………12
2.2 Historical Background of the case study………………………………….….12
2.3 Conceptual framework… ………………………………………………………18
2.4Theoritical ………………………………………………………….…………..21
2.5 Empirical Studies………………………………………………………………22

CHAPTER THREE:
Research Methodology
3.1 Introduction………………………………………………………………………..29
3.2 Research Design………………………………………………………………….29
3.3 Data Collection Methods / Instruments………………………………………….29
3.4 sampling size and population………………………………………….………...30

CHAPTER FOUR:
 Data Analysis and Results
4.1 Introduction……………………………………………………………31
4.2 Data Presentation, Analysis and interpretation………………………33
4.3 Test of Hypotheses……………………………………………………38

CHAPTER FIVE:
Summary, Conclusion and Recommendations.
5.1 summary    ………………………………………………………………………….43
5.2 Conclusion……………………………………………………………………….44
5.3 Recommendations………………………………………………………………45
Bibliography

CHAPTER ONE
INTRODUCTION
1.1     Background of the Study
Micro financing is the provision of financial services to poor and low income households without access to formal financial institutions (Conroy, 2003). Microfinance is described also as banking for the poor. They are different from commercial banks because, they have limited banking services directed primarily to a designated catchments area or group. The small and medium enterprises contributions to economic growth and development have been recognized globally, Nigeria inclusive.
Rolando (2010) describes microfinance as a good way of supporting entrepreneurs. It provides poor borrowers with access to sustainable livelihood through zero or very low interest loans. However, Jegede (2011) observed that entrepreneurs prefer personal saving and cooperative credits to microfinance banks and commercial banks fund citing reasons of non-accessibility, prohibitive collaterals and high interest rates barriers. The dismal performance of the conventional finance sectors triggered the advocating of micro financing by policy makers, practitioners, and international organizations as a tool for poverty reduction according to Mejeha and Nwachuckwu (2008).
Ofoegbu, Akanbi and Joseph (2013) agree that SMEs are the panacea for the economic development of many developing countries including Nigeria. Small and medium enterprises are believed to be the engine room for the development of any economy, because they form the bulk of business activities in a growing economy like that of Nigeria. This is manifested in the following ways, Employment generation, Rural development, Economic growth and Industrialization, Better Utilization of Indigenous Resources. is to direct attention of purveying credit to Small Scale Enterprises.
Kilby (1969) Sees SMEs as a quasi-sponge for urban employment and a provider of inexpensive consumer goods with little or no import content, serving an important pressure-releasing and welfare-augmenting function. SMEs also contribute to long-run industrial growth by producing an increasing number of firms that grow up and out of the small-sector. Most previous studies throughout African treat the information sector as essentially homogenous in its characteristics (Morris and Pitt, 1995; Bewayo, 1995; Ekpenyong & Nyong; 1992).
In Nigeria, the Microfinance Banking concept is an extension of the old community banking system. Lemo (2007) described Micro finance banking as one of the prime strategies for achieving millennium Development Goals (MDGs), particularly targets that relate to poverty eradication, gender equality and the empowerment of the disadvantaged groups. Akanji (2006) identified three features of microfinance making it different from other financial products as smallness of Loans advanced and or savings collected, absence of asset based collaterals and simplicity of operations.
Recent research suggests that government policy should be more narrowly targeted to subsectors within the informal sector (Parker & Torres, 1994). This study examines survey data in order to evaluate the characteristics of small-scale manufacturers that make it more difficult for them to be profitable and the particular problems that they face which may have contributed to their poor performance.
Since her independent in 1960, Nigeria has been trying to meet the yearnings and aspirations of her teeming population, especially in the area of provision of employment. Unfortunately, not much has been achieved in this respect. Given the importance of 'small' and 'very small' enterprise in the creation of employment, this study seeks to evaluate the financing of microenterprises in Lagos State of Nigeria by identifying the problems of financing very small enterprises (VSE's).
However, the growth of the country's economy has not been without problems. For instance, Omopariola (1978) notes three successive phases can be discerned in the economic history of Nigeria. The first phase, dating back to 1900, "was the peasant economy characterized by static, agrarian and subsistence product" and a "high birth rate which was equally matched by high death rate" (P.15 resulting in a low population growth rate. The second phase, which occurred in the middle of the nineteenth century, was' a dynamic export-oriented economy” Omopariola (1978) reiterated further that during this economic phase, "Nigeria had a steady growth in her economy which was stimulated primarily by agricultural exports during the first three decades of the twentieth century." (Ibid, p.16) the economic, starting from the collapse of international trade during the world economic crisis grinded to a halt in its growth in 1929 and remained more or less stagnant until 1945. Form 1954 until the outbreak of the war of unity (civil war) in 1967 and up to the end of the war in 1970, "Nigeria experienced steady economic growth" (Ibid, P. 16).
The third Phase, which has its roots in 1960 when the country attained political independence from the British colonialists, has been described as the indigenized economy. This is still the phase under which the Nigerian economy is characterized.
A business whether small or big, simple or complex, private or public, etc is created to provide competitive prices. Business in Nigeria has been classified as small, medium and large. However, a small scale industry can be defined by the criteria of project costs, capital, cost turnover by the employee, etc. the federal and state ministries of industry and commerce have adopted the criterion of value of installed fixed capital to determine what a small scale industry is, in this respect, the value has varied from N60,000 in 1972, N159, 000 in 1975, N250,000 in 1979, N500,000 in 1986, to a fixed investment of not more than N2,000,000 (Two Million Naira) in 1992. This figure is exclusive of a building and subject to government determination and land prevailing objectives of public policy. In the wake of SFEM, and SAP, this value has now been reviewed and subsequently, increased to five million naira. Since this happened, there may be a need to classify the small scale industry into MICRO and SUPER MICRO business, with a view to providing adequate incentives and protection for the former.
In the meantime, any business or enterprises below the upper limit of N250,000 and whose annual turnover exceeds that of a cottage industry currently put at N5,000 per annum is a small scale industry. The National Directorate of Employment (NDE) concept of a small scale industry has been fixed to a maximum of N35, 000. Contributed significantly to the growth of the Gross Domestic Product (GDP), employment generation and exports. The sector now includes not only SSI units but also small scale services and business enterprise (SSSBEs) and is thus referred to as the small enterprises sectors.  In Nigeria, one of the greatest obstacles that Small and Medium Enterprises (SMEs) have to grapple with is access to funds. This is further compounded by the fact that even where credit facilities are available, they may not be able to muster the required collateral to access such.
This situation has led invariably to many of them closing shop, resulting in the loss of thousands of unskilled, semi and skilled jobs across the country. Microfinance emerged as a noble substitute for informal credit and an effective and powerful instrument for poverty reduction among people, who are economically active, but financially constrained and vulnerable in various countries. Microfinance covers a broad range of financial services including loans, deposits and payment services and insurance to the poor and low-income households and their micro enterprises. Microfinance institutions have shown a significant contribution towards the poor in rural, semi urban or urban areas for enabling them to raise their income level and living standards in various countries (Sunitha, 2010).  The main objective of this research work is to investigate the roles of microfinance bank in small and medium enterprises growth in Nigeria.

1.2     Statement of the Problem
Access to finance remains a dominant constraint to small scale enterprises in Nigeria. There have been credit constraints pertaining to working capital and raw materials. Aryeetey et al. (1994) reported that 68% of SMEs surveyed mentioned credits as a major constraint of financing their businesses. This stems from the fact that SMEs have limited access to capital markets, in part because the high cost of borrowing, and rigidities of interest rates has also made financing of small scale enterprises very difficult in Nigeria. Most SMEs also lack the necessary collateral to obtain loans from financial institutions, therefore resulting in SMEs not often obtaining long-term finance to finance and expand their businesses.
The microfinance banks (MFBs) promoted by the federal Government of Nigeria was meant to purview credits entrepreneurs who owned small and medium Scale Enterprises because of their limited access to sources of finance. Small and Medium Scale Enterprise faces a lot of problems in obtaining finance from conventional finance banks because of cost of finance, collateral security and the bureaucracy involve in accessing loans; the high interest rate etc. In addition, these entrepreneurs are predominantly made up of illiterate who cannot understand all the paper involve in applying for loan. These problems and more necessitated the emergence of the MFBs.
Besides other constraints on finance, most owners and managers of small scale enterprises in Nigeria are faced with lack of technical knowhow, skilled labour, managerial competence in handling business enterprises and also lack of business ideas. As a result, their growth prospect remains stagnant. There is also the problem of having access to modern technology since most firms use old machinery, and have problems with finding replacements parts to purchase. Microfinance institutions in Nigeria have proven to be powerful tool inclusive economic growth especially in the area of Small Scale Enterprise development and employment as well. Initiatives are aimed at providing soft loans to individuals and small scale enterprises, even though a microfinance institution in Nigeria is actually in the stage of infancy, the sector has proven itself to show positive in its growth in Nigeria. This institution also aims at helping SMEs to expand their business up to a point of becoming viable ones. But the issue is to ascertain if the microfinance’s having any impact of the development of SMEs in Nigeria and to answer the question which is to addressed which Assessment. This assessment is used to determine the extent to which microfinance institutions are attaining their objectives their objectives towards the development of Small Scale Enterprises in Nigeria.

1.3     Objective of the Study
The main objective of the study was to assess the impact of microfinance bank on the growth of small and medium scale enterprises (SMEs) in Nigeria. (A case study of selected Microfinance Banks in Ilorin metropolis). Specifically:

• to determine the effects of Microfinance Bank on  Small and Medium Scale Enterprises (SMEs) in Ilorin metropolis
• to assess the impact of Microfinance banks on Small and Medium Scale Enterprise (SMEs) improvement in welfare in Ilorin metropolis
• to examine the effect of Microfinance Banks on Small and Medium scale enterprise (SMEs) economic development in Ilorin metropolis
• to determine the relationship between microfinance bank loan and SME growth?
•  Research Questions

what is the effect of  micro finance bank  on  Small and Medium Scale
Enterprises (SMEs) in Ilorin metropolis?

• Does Microfinance Banks have any impact on Small and Medium
• Scale Enterprise (SMEs) improvement in welfare in Ilorin Metropolis?
• What is the effect of Microfinance Banks on Small and Medium Scale  Enterprise (SMEs) economic development in Ilorin Metropolis?
• What is the relationship between microfinance bank loan and SME growth.

1.5     Research Hypotheses
HO₁: Microfinance Banks have no significant effect on Small and Medium Scale Enterprises (SMEs) in Ilorin metropolis.
HO₂: Microfinance Banks have no significant impact on Small and Medium (SMEs) improvement in welfare in Ilorin metropolis.
HO₃: Microfinance Banks have no significant effect on Small and Medium Scale Enterprises (SMEs) economic development in Ilorin metropolis
HO4: there is no any relationship between microfinance bank loan and SMEs
growth.

1.6     Significance of the Study/Justification for the Study
Findings from this research work will reveal the gap in finance small and medium scale business in Nigeria with of view of sensitizing the government on the need for adequate finance to enhance growth and development.
Result from this study will educate the general public on the impact of manufacturing industries on the development of small and medium scale enterprises in Nigeria.
This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7     Scope of the Study
This study will cover the operations of microfinance banks and SMEs in Ilorin metropolis with a view of identifying their contribution of MFBs towards the development of small and medium scale enterprise in Ilorin Metropolis.

1.8     Limitation of the Study
Financial Constraint- Insufficient fund impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher simultaneously engage in this study with other academic work. This consequently  cut down on the time devoted for the research work.

1.9     Definition of Terms
Microfinance Bank: is a type of banking services that is provided to unemployed or low-income individuals, or groups who otherwise have no financial access to financial services.
Financial institution: is a company engage in the business of dealing with monetary transactions, such as deposits, loans, investments and currency exchange.
Bank: a financial institution licensed to received deposits and make loans.
Small and Medium Scale Enterprises: are non-subsidiary, independent firms which employ fewer than a given number of employees.
Economics: is a social science chiefly with description and analysis of the production, distribution, and consumption of goods and services.
Entrepreneurs: This is refers to the proprietor or owner of a privately owned business enterprise. The entrepreneur employs his capital in the business, manage the business resources and takes the risk of business alone.
Development: An event constituting a new stage in a changing situation.
GDP (Gross Domestic Product): It is the value of goods domestically produced in a country.

Growth: An increase in size, number, value or strength.

1.10                                                    PLAN OF THE STUDY
This project work stems on communication as an important tool for the development of an institution. This study is basically divided into five (5) chapters.
CHAPTER ONE: Takes on the introduction of the subject matter. If consists of the super significance and definition of terms of the study.
CHAPTER TWO: This is the literature review this entails the works that had been done on this particular topic which was done by other researchers.
CHAPTER THREE: Will talk about the Methodist that the researcher adopted in getting necessary materials or information that will facilitate the success of the research work.
CHAPTER FOUR: Explain how the researcher was able to analysis and present the data he got for his work while the chapter:
CHAPTER FIVE: Brings everything to conclusion the researcher does his summary and give necessary recommendation where needed.

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CHAPTER TWO: The chapter one of this work has been displayed above. The complete chapter two of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" is also available. Order full work to download. Chapter two of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" consists of the literature review. In this chapter all the related work on "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" was reviewed.

CHAPTER THREE: The complete chapter three of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" is available. Order full work to download. Chapter three of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" consists of the methodology. In this chapter all the method used in carrying out this work was discussed.

CHAPTER FOUR: The complete chapter four of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" is available. Order full work to download. Chapter four of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" consists of all the test conducted during the work and the result gotten after the whole work

CHAPTER FIVE: The complete chapter five of design and construction of a "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" is available. Order full work to download. Chapter five of "impact of microfinance bank on the growth of small and medium scale enterprises (smes) in ilorin kwara state" consist of conclusion, recommendation and references.

 

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