ROLES OF COMMERCIAL BANKS IN FINANCING SMALL SCALE INDUSTRIES IN NIGERIA (A CASE STUDY OF UNOIN BANK IDAH OF NIGERIA PLC, IDAH)

ABSTRACT
The topic of dissertation is An appraisal Of Commercial Banks In Financial Small Scale Industry In Nigeria. A case study of Union Bank  of Nigeria plc. The major objective of the study is to ascertain the extent to which Union Bank  of Nigeria plc has helped to financial small scale industries. Instrument of data collection is questionnaires and research questions which formed the source of primary data, while materials from various published articles, textbooks, journals and newspaper formed the secondary data. The method of analysis is the use of  tables, percentages and chi-square . The major finding of the research is that African Development Ban bank of Nigeria plc has helped to financial small scale industries period under review. The recommendation based on the finding is that in order to reduce the risk in small scale industry lending, the central bank of Nigeria and the government can do more than they are doing currently scheme. The study concluded that if the desired objective of using small scale industries as catalysts of development is to be achieved than the role of commercial banks should be mutually supportive.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background to the Study
1.2    Statement of the Problem
1.3    Objectives of the Study
1.4    Statement of Hypothesis
1.5   Significance of the Study
1.6 Scope and Limitation of the Study
1.7    Definition of Key Terms
1.8 Organization of Work
1.9 End of Chapter References
CHAPTER TWO: LITERATURE REVIEW
2.1 Introductions
2.2 An Overview of Union Bank Plc Idah
2.3 Conceptual Issues
2.4   Role and Importance of Scale Industries
2.5   Funding Needs and Sources of Funds for Small Scale Enterprises
2.6    The Predominance Of Small Scale Industries In Nigeria
2.7    Problems Facing Small Scale Enterprise in Nigeria
2.8    Commercial Banking Financing Of Small Scale Enterprise Under The New Central Bank Of Nigerian Directive, And Its Likely Impact
2.9 End of Chapter References
CHAPTER THREE: RESEARCH METHODOLOGY
3.1    Introduction
3.2   Research Design
3.3 Area of the Study
3.4    Source and Method Of Data Collection
3.5    Population of the Study
3.6 Sample and Sampling Techniques
3.7 Validation of the Instrument
3.8  Method of Data Analysis
CHAPTER FOUR:     PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction
4.2 Data Presentation and Analysis
4.3    Test of Hypothesis
CHAPTER FIVE : SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1        Summary of Findings
5.2        Summary of the Study
5.3          Conclusions
5.4      Suggestion for Further Research
5.5        Recommendations
Bibliography
Questionnaire
 
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
The successive development plans of Nigeria have laid emphasis on the attainment of self reliance.  The need for this national objective is because much is expected from individuals from the view point of providing employment opportunities self reliance in basic food and material production high per capital income, foreign exchange earnings and the production of industrial raw materials. Okporobie (2006:10) observes that Nigeria small scale industries continued to decline despite the so called priority given to the sector However, the discovery by the central bank  that this policy was not enough by itself led to the central bank request with effect from 1970/80 that all commercial bank must reserve a proportion of the minimum credit allocation to indigenous borrowers for small scale Nigeria enterprises.  The target prescribed in 1979 was ten percent (10%) which subsequently raised to sixteen percent (16%). Even though available data showed that performance of commercial banks against this directive has been disappointing. The central bank intends to  spare no effort in ensuring that banks fully couple without compromising the smooth functioning of the nation banning system. He observed also, that without the development of small scale industries in Nigeria, the nations quest for industrialization will certainly remain forever at stake. It is the opinion of the researcher that future development in our industrialization must address the basic issues of creating linkages without the economy to begin to produce real inputs to our manufacturing activities .
Priority attention must therefore be given to these industries for which domestic inputs could easily be produced.  This will bring about  agro-allied industries like food processing and other by-products.
The objective should be to maximize the value added in their processing and manufacturing as final goods immediately inputs.
Nzewi and Oze (2005:56) observed that empirical evidence indicates that strong producer incentives to small scale industrialists are necessary not also only to meet the food requirement but also to  provide growing input supplies and demand as a foundation for sustained industrial growth.
The present economic constraint may well turn out to be a blessing in disguise to our industrialization effect particularly for dynamic manufacturing sector.  For instance, the market determinate exchange rate through seeing with its result and high cost of imported inputs may serve as an impetus for industrialist to intensify their search for local substitutes.
 Ekenyong and Nyong (2012) observed that small scale enterprises are regarded an organic part of a viable structure for the attainment meaningful economy development in developing economic like Nigeria.
They are significantly more cost effective in bringing about development than large enterprises because of the perceived linkage and multiplier effects which small scale enterprises have on the performance of the economy and economic growth in general.
Osayameh (2009) observes that the strength that make small scale enterprises more amendable for assistance areas as follows.
1.     Personal commitment of the proprietor whose life savings usually form the start up capital.
 2.    Low initial capital out lay requirement
3.     Ease of entry and exit and prevalence of just minimal legal constraints
4.     Amenability to business advisory services because of their small size which makes than more responsive to improvement suggestions.
 Olashore (2007) Observes that the four main sources of enterprises financing open to small scale industry in Nigeria are.
i.      Formal financial institutions such as commercial banks merchant banks, insurance companies and the development bank.
ii.      Informal financial landlords, credit and savings associations “esus” friends and relations personal savings and .
iii.     Other financial scheme, NERFUND NEXIM
in 2001, there was an introduction of small and medium industries equity investment scheme (SMIEIS) in which N359 million was set aside to date by banks under small medium industries equity investment scheme.
Through African Development Bank bank small and medium scale enterprises (SMES) department, the bank has remain ed in fore front of SMES financing nations was extended to the SMES as at 31st March 2004.
Small scale industry is any industry not exceeding N750,000 including working capital  but excluding cost of land.
It is also defined by center for industrial research and development of Obafemi  Awolowo university Ile Ife as  those industries whose total assets in plant, equipment and working capital do not exceed N250,000 with not more than 50 employees.

1.2    STATEMENT OF THE PROBLEM
The problem of credit to small scale industries may not necessarily be as a result of financing insufficiency but rather for some other reasons among which are.
i.      Insufficient preparation on the part of small scale entrepreneurs in their request for credit assistance.
ii.      Information gaps as to range of funding institutions and scope of services available in these institution
iii.     Moreover, servicing of small business accounts is relatively experience, risky and difficult to monitor with low turn over of account.
However, the parishioners in the sector small scale industry do not display competence in preparing justification for their project.  It is are to see most of them coming up with cash flow projections, projected balance sheets, among others.  They are based on personal rudimentary in formation and speculation.  At times when they seek the advice of consultants, the outcome that are made figures project based on assumptions which are most of their time unrealistic.
As a result such proposals are out rightly rejected by banks.
There are suitable when credit demands in this sector are not in compliance in this government monetary policy and credit guidelines which must be adhered to by banks.
The researcher identifies these problem and considers it necessary to carry our study on them.

1.3    OBJECTIVES OF THE STUDY
The main objectives of the study is to ascertain the extent to which the African Development Bank of Nigeria plc has helped to finance small scale industries.
Others include:
a. To identify the problems encountered by small scale industrialists in obtaining finance from African Development Bank bank of Nigeria plc.
b. To evaluate various measures introduced to boost industrial production and its financing and how this has affected realization of the set goals.
c. To determine the causing changes in small scale industrial financing by African Development Bank of Nigeria plc.
d. To make suggestion and recommendations based on the data generated by the study.

1.4    RESEARCH QUESTIONS
The critical appraisal to give answers to the following questions.
a.     To what extent has  African Development Bank of Nigeria plc helped to finance small scale industries?
b.     What are the problems encountered by the small scale industrialists in obtaining finance from African Development Bank if Nigeria plc?
c.      what are the various measures introduced to boost industrial production and its  financing and how this has affected the realization of the set goals?
d.     What are the causes of changes in small scale industrial financing by African Development Bank of Nigeria plc?
e.     Does any linear relationship exist between lending to small scale industries and economic recovery and self reliance on the economy?

1.5   STATEMENT OF HYPOTHESIS
Ho: There is no linear relationship between lending to small scale industries and economic recovery and self-reliance of the economy.
Hi: There is linear relationship between lending to small scale industries and economic recovery and self-reliance of the economy.
Ho: There is no relationship between African Development Bank of Nigeria plc lending to small scale industries and the attitude of this customers
Hi: There is relationship between African Development Bank of Nigeria plc lending to small scale industries and the attitude of this customers

1.6    SCOPE AND LIMITATION OF THE STUDY
1.6.1 Scope of the Study
The scope of the study is an appraisal of commercial banks in financing small scale industries in Nigeria. A case study of African Development Bank of Nigeria plc.  It does not cover the role of commercial banks in financing medium and large scale industries.
1.6.1 Limitation of the Study
The limitation of this study include:
i.    Time constrain
ii.    Financial constrain

1.7    SIGNIFICANCE OF THE STUDY
This study will highlight problems associated with the role of commercial banks in financing small scale industry in Nigeria.
It  will give information on the possible areas for improvement.
Furthermore, the study will help commercial banks to assess and appraisal their role in financing small scale  industry in Nigeria.
Moreover, suggestions and recommendations made in this paper will help policy makers formulate new economic policies maintain or modify the existing one.
It will equally serve as a guideline to researchers who may wish too decide with this study in the future.
It will also help small scale entrepreneurs to make sufficient preparation in their request for credit assistance.
It will guide the entrepreneurs in making credits demands that are compliance with government monetary policy.
The last but not the least it will help the entrepreneurs to displayed competence in preparing justification for their project. It is rear to see most of them coming up with cash projections, projected balance sheets.
1.9    DEFINITION OF KEY TERMS
Small scale industry:  Any industry with capital not exceeding N750,000 including capital but excluding cost of land.
It is also defined by center for industrial research and development of Obafemi Awolowo University Ile Ife as those industries whose total assess in plant equipment and working capital do not exceed N250,000 with not more than 50 employees.
 Commercial Bank: A financial institution that acquires deposit from savings surplus unit and give out loans to savings deficit units.
Industrial Development Center:    Provide management, technical, consultancy and extension services for the small scale.
Indigenization Decree: A decree that stipulates that most business become, at least 60 percent owned by Nigerians.
Sole Proprietorship: Is a business owned and conducted by one person presumably assisted by one or more persons for intakes wife and children. SS/CS small scale industry credit scheme.

1.10 Organization of Work
The research work is divided into five chapters, chapter one is the introduction to the work and comprises statement of problems, objectives of the study, research question, significant of the study etc.
Chapter two comprises of the review of literatures of other materials used by the researcher. Chapter three covers research method which includes, research design, area of the study, population, sample, source and method of data collection. Data was analyzed in chapter four while summary of findings and conclusion was draw with recommendation was made in chapter five.

1.11  END  OF CHAPTER REFERENCES

Adebusuyi B.S (2007): “Performance Evaluation of Small Medium Enterprises     
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Anyanwu C.M (2002): “Financing and Promoting Small Scale Industries in
Nigeria” Another Approach Paper Presented to the sub-committee of the Banker’s Committee on Financing of Small Scale Industries.
Anyanwu C.M (2001): Financing and Promoting Small Scale Industries:
Concept, Issues and Prospect,” Paper Presented at the Workshop on SME Financing, Organized by the Chartered Institute of Bankers of Nigeria.
Babajide A.K. (2002): “Funding of SME: Sourcing of Funds and Problem
Limiting Access.” Paper Presented at the 4th Partners Forum of the Public Practice Section of the Institute of Chartered Accountants of Nigeria (ICAN).
 Babajide K (2000): “Banks and Funding of Small Scale Enterprises.” Business Time, May 15. Central Bank of Nigeria (2002/2003): “Monetary and Trade policy Circular”.
Central Bank of Nigeria (2001): “Industrialization in Nigeria, Financing and
Promoting of Small Scale Industries (SSIs) Non-oil Export.