THE ROLES AND PROBLEMS OF FINANCIAL INSTITUTIONS TO THE GROWTH OF SMALL SCALE BUSINESS IN NIGERIA. (A CASE STUDY OF UNION BANK OF NIGERIA PLC ENUGU)

THE ROLES AND PROBLEMS OF FINANCIAL INSTITUTIONS TO THE GROWTH OF SMALL SCALE BUSINESS IN NIGERIA. (A CASE STUDY OF UNION BANK OF NIGERIA PLC ENUGU)

CHAPTER ONE

INTRODUCTION

1.1              BACKGROUND OF THE STUDY.

Financial institutions have a very great role to play in the growth of small scale business everywhere in the world but I will limit my discussion to their roles in Nigeria.

Financial institutions could be seen as an institutions which primary function is collecting and giving out funds to individuals, firms, organizations etc. for business purposes.

From the definition of financial institution, or its function, one can see that financial institution could aid the growth of small scale business. How can this be done or achieved? That is the next question that could come to one’s mind. It could be achieved by the financial institutions giving out funds in form of loans, overdraft, grants and aids etc on request from small scale business man or woman.

I will not forget to talk about or explain what a small scale business is. A small scale business could be talked about or explained by different people in different ways.

And in their different views, a lot of factors or things is being considered before calling a business small scale business. What am saying in essence is that, what Mr A calls small scale business might not be what Mr. B calls small scale business. Therefore a small scale is business is being explained by these few people and school of thought. Blott Lawrence 1973 defines small scale business to be any industry which is independently owned and operated and not dominant in its area of operation.

The Committee for Economic Development (C.E.D) of the united States defines small scale business of having at least two of the underlisted characteristics:

(a)                Managers are also owners.

(b)               Area of operation mainly local

(c)                Owner supply capital and

(d)               Small in size within the industry.

1.2       STATEMENT OF THE PROBLEM.

1.                  Small scales industries are capable to source capital easily from Union Bank Plc and this problem prevents entrepreneurs from procurement of machinery and equipment required for production.

2.                  The banks are not helping matters because their condition for giving loans are not easily met and the small scale industry owners are unable to provide their request with well structured and circulated feasibility studies.

3.                  The inability of the banks to support the entrepreneurs through loan and other instruments such as leasing of equipment result in low capital utilization, volume of production, provision of services and sales.

4.                  The loan granted suffers additional problems of high interest rates and the burden creates higher probability of default in repayment of loans.

5.                  The rapid policies of banks contrary to CBN guidelines and the attendant. Lack of collateral securities from the entrepreneurs created additional problems of inability to procure and unitize capital from Union Bank Plc.

1.3       PURPOSE OF THE STUDY

The reason for the study of the roles and problems of financial institutions to the growth of small scale business is that it helps individuals, small scale business owners and all the sundries to be informed of the roles of financial institutions to the economy and at the same time so that they can take an advantage of  the roles and develop themselves, their families and the nation at large. These roles include giving of loans, advances, overdrafts, grants and aids and advisory services. The roles when utilize properly by small scale business owners help in the growth of their businesses.

Financial institutions have some problems they are confronted with too. These problems include borrowers not paying back at stated time, government policies and regulations etc. This problems affect the smooth running of financial institutions because ties up capital that would have been used for further development of the sector. Government regulations or policies also affects also affects financial institutions because, government might make a policy to correct certain abnormalities in the economy. The policy might affect their profit as such it constitutes a problem.

1.4       SCOPE OF THE STUDY.

The research was to determine the roles and problems of financial institutions to the growth of small scale business in Nigeria. The research carried out in-dept study on the operations of financial institutions to the growth of the said industries.

THE ROLES AND PROBLEMS OF FINANCIAL INSTITUTIONS TO THE GROWTH OF SMALL SCALE BUSINESS IN NIGERIA. (A CASE STUDY OF UNION BANK OF NIGERIA PLC ENUGU)