Small and Medium Enterprises in Zaria Local Government Access Equity Investment Scheme.
CHAPTER ONE
1.1 Introduction The role and importance Small and Medium Enterprises play in the development of nation has been well documented and beyond doubt now that any emergent economy must have a viral and sustained SME subsector which are critical to the development of an economy. The significant roles SMEs play in development is acknowledged universally. Even in countries such as the United States. Small and Medium Industries Equity Investment Scheme (SMIEIS), are enterprises with a total capital employed not less than N1.5 million, but not exceeding N200 million, including working capital, but excluding cost of land and/or with a staff strength of not less than 10 and not more than 300. This definition is adopted in this study, because it is generally used by all banks for the purpose of financing the MSMEs sector. The small and medium enterprises all over the world play important roles in the process of industrialization and economic growth. As Ogujiuba et al (2004) observe, apart from increasing per capita income and output, SMEs creates employment opportunities, enhance regional economic balance through industrial dispersals and generally promote effective resource utilization considered critical to engineering economic development and growth. There are indications in Nigeria that the SMEs account for about 70 percent of industrial employment and well over 50 per cent of the gross domestic product, (Adebusuyi, 1997 and Odeyemi 2003). The important roles of SMEs, notwithstanding, the enterprises face serious difficulties when trying to obtain loans, especially from the formal (Bank) financial institutions. Thus, the obvious question is: why banks do not expand SMEs portfolio? Basically, small and medium enterprises in Nigeria are expected to raise funds from two main sources: Equity and debt. The sources of equity (sometimes called internal funds) include owners’ saving and ploughed back profits. Funds from external source (debt) can be
1.1 Introduction The role and importance Small and Medium Enterprises play in the development of nation has been well documented and beyond doubt now that any emergent economy must have a viral and sustained SME subsector which are critical to the development of an economy. The significant roles SMEs play in development is acknowledged universally. Even in countries such as the United States. Small and Medium Industries Equity Investment Scheme (SMIEIS), are enterprises with a total capital employed not less than N1.5 million, but not exceeding N200 million, including working capital, but excluding cost of land and/or with a staff strength of not less than 10 and not more than 300. This definition is adopted in this study, because it is generally used by all banks for the purpose of financing the MSMEs sector. The small and medium enterprises all over the world play important roles in the process of industrialization and economic growth. As Ogujiuba et al (2004) observe, apart from increasing per capita income and output, SMEs creates employment opportunities, enhance regional economic balance through industrial dispersals and generally promote effective resource utilization considered critical to engineering economic development and growth. There are indications in Nigeria that the SMEs account for about 70 percent of industrial employment and well over 50 per cent of the gross domestic product, (Adebusuyi, 1997 and Odeyemi 2003). The important roles of SMEs, notwithstanding, the enterprises face serious difficulties when trying to obtain loans, especially from the formal (Bank) financial institutions. Thus, the obvious question is: why banks do not expand SMEs portfolio? Basically, small and medium enterprises in Nigeria are expected to raise funds from two main sources: Equity and debt. The sources of equity (sometimes called internal funds) include owners’ saving and ploughed back profits. Funds from external source (debt) can be