Project Topic

EMPOWERING SMALL AND MEDIUM SCALE ENTERPRISES FOR NATIONAL DEVELOPMENT

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 Format: MS word ::   Chapters: 1-5 ::   Pages: 41 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   1026 people found this useful

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CHAPTER ONE

 

 INTRODUCTION

BACKGROUND TO THE STUDY

            Small and Medium Scale Enterprises are sub-sectors of the industrial sector which play crucial roles in socio-political and industrial development (Ahmed, 2006).  Following the adoption of Economic reform programme in Nigeria in 1981, there have been several decisions to switch from capital intensive and large scale industrial projects which was based on the philosophy of import development to Small and Medium Scale Enterprises which have better prospects for developing domestic economy, thereby generating the required goods and services that will propel the economy of Nigeria towards development.  It is based on this premise that Ojo (2009) argued that one of the responses to the challenges of development in developing countries particularly, in Nigeria, is the encouragement of entrepreneurial development scheme.  Despite the abundant natural resources, the country still finds it very difficult to discover her developmental bearing since independence.  Quality and adequate infrastructural provision has remained a nightmare, the real sector among others have witnessed downward performance while unemployment rate is on the increase.  Most of the poor and unemployed Nigerians in order to better their lots have resorted to the establishment of their own businesses.  Consequently, Entrepreneurship is fast becoming a household name in Nigeria.  This is as a result of the fact that the so called white collar jobs that people clamour for are no longer there.  Even, the touted sectors (Banks and companies) known to be the largest employer of labour are on the down-turn following the consolidation crisis and fraudulent practices of the high and mighty in the banking sector.  The companies of course are folding up as a result of erratic power supply, insecurity and persistent increase in interest rate which has led to high cost of production and undermines profit making potentials of companies operating in Nigeria.  As a result of banking sector practices and continuous folding up of companies, a lot of Nigerians are thrown into unemployment which inevitably detriment the economic situation of the country.

            Since the office jobs that people desire are no longer there for the teeming population of the country in general and Edo State in particular, and the few ones that succeeded in getting the jobs are thrown out as a result of the factors identified above, the need for the governments of Edo State and Nigeria and the people to have a rethink on the way-out of this mess became imperative.  Hence, the need for Small and Medium Scale Enterprises (SMEs) became a reality as a means of ensuring self independent, employment creation, import substitution, effective and efficient utilization of local raw materials and contribution to the economic development of our dear nation (Nigeria).  This is against the backdrop of high incidence of poverty in the nation in general and Edo State in particular, which is occasioned by the lack of access to capital, hence the need to reiterate the imperatives of SMEs in economic development of the country.  All the aforestated benefits of Small and Medium Scale Enterprises cannot be achieved without the direct intervention of the government and financial institutions.  Over the years a number of policies have been formulated by the government with a view to developing Small and Medium Scale Enterprises.

STATEMENT OF PROBLEM                                                                                         

            The performance and effectiveness of small and medium scale enterprises as an instrument of economic growth and development in Nigeria has long been under scrutiny.  This intense scrutiny has been against the backdrop of the low performance and inefficiency that characterized small and medium scale enterprises particularly in assessing its role on economic growth and development.  Despite government institutional and polices support to enhancing the capacity of small and medium scale enterprises, small and medium scale enterprises has fallen short of expectations.  This has generated serious concern and skeptism on whether SME can bring about economic growth and national developments in Nigeria.  The concern is even more disturbing when comparing SME in Nigeria with other countries particularly where SME has become harbinger of economic reconstruction and transformation (Ihua, 2009).  In the case of Nigeria, small and medium scale enterprises have performed at very abysmal level.  This low performance has further exacerbated poverty, hunger, unemployment and low standard of living of people in a country whose economics is ailing.

            The current problems of hunger, poverty and unemployment have undermined the capacity of the economy and small and medium scale enterprises are seen as mechanism for intervention to addressing these long term problem of the economy.

            Unfortunately, SME have not been able to propel economic growth and development which are quintessence of mitigating the effect of poverty, hunger, unemployment and low standard of living on the economy.  The challenge of addressing the problem of hunger, poverty and unemployment is even more worrisome when considering the actualization of the millennium development goals by the country in 2015.  If Nigeria is to achieve the millennium development goals by 2015, one of the sure ways is to enhance the capacity of its SMEs.  The core issues identified by the millennium development goal such as hunger, poverty, literacy, maternal and mortality rate would not be achieved unless the problems of SMEs are clearly tackled.

            The challenges and the problem of small and medium scale enterprises are tied to some economic variables and the challenges that generally characterized the nation’s economy.  Some of the challenges and problems include high level of unemployment, high poverty incidence, and low industrialization capacity, lack of finance, inconsistent government policies and inadequate infrastructure and insecurity of the business climate among others.  Nevertheless, the internal characteristics of small and medium scale enterprises too have also interact with some economic variables to undermine the capacity of the economy.  Issues of low level of entrepreneurial skills, poor management practice, inadequate equity capital and lack of information among other problems.

            This study, thus, seeks to look into ways the SMEs in some selected communities in Edo State will be empowered to engender national development.

OBJECTIVES OF THE STUDY

            The overall objective of this study is to determine how small and medium scale enterprises can be used as a catalyst for national socio-political and economic growth and development.  Specific objectives include the following:

  1. To examine the constraints affecting small and medium scale development in Nigeria.
  2. To evaluate the financial services and incentives available to SMEs.

STATEMENT OF HYPOTHESES

            In order to enable the researcher confirm the greatest drawback for SMEs in Nigeria and fully appreciate their respective relevant significance vis-à-vis national development, she has to postulate the following hypotheses:

  1. Ho:      Access to finance/capital does not represent the greatest problem confronting  SMEs in Nigeria.

HR:  Access to finance/capital represents the greatest problem confronting SMEs in Nigeria.

  1. Ho:  Management does not represent the greatest problem facing SMEs in Nigeria.

HR:  Management represents the greatest problem facing SMEs in Nigeria.

  1. Ho:  Infrastructure does not represent the greatest problem facing SMEs in Nigeria.

HR:   Infrastructure represents the greatest problem facing SMEs in Nigeria.

REVIEW OF LITERATURE/THEORETICAL FRAMEWORK

            Small and medium scale enterprises have been long recognized as an instrument of economic growth and development.  This growing recognition has led to the commitment of World Bank group on SMEs sector as core element in its strategy to foster economic growth, employment and poverty alleviation.  In the year 2004 the World Bank group has approved roughly $2.4 billion in support of micro small and medium enterprises (World Bank, 2001, Ayyagari, et al, 2007).  While the importance of small and medium scale enterprises has not been in doubt, unfortunately classifying businesses into large and medium scale is subjective and premised on different value judgment.  Such classification has followed different criteria such as employment, sales or investment for defining small and medium scale enterprises.  According to extant literature the definition vary in different economies but the underlying concept is the same.  Ayaggari et al (2003) and Bucley (1989:1) contend that the “definition of small and medium scale enterprises varies according to context, author and countries”.  In country such as USA, Britain and Canada small scale business is defined in terms of annual turnover and the number of paid employees (Ekpeyong and Nyang, 1992:4).  In Britain for example, small scale business is conceived as that industry with annual turnover of 2 million pound or less with fewer than 200 paid employees.  In the case of Japan it is conceptualized as type of industry, paid up capital and number of employee.

            Consequently, small and medium scale enterprises are defined as those manufacturing with 100 million yen paid up capital and 300 employees.  Those in wholesale trade with 300 million paid up capital with 100 employees while those in retail trade with 100 million paid up capital with 50 employees.  In the case of Nigeria hardly do you see a clear-cut definition that distinguishes between small and medium scale enterprises.  However, the Central Bank of Nigeria in its monetary policies circular No. 22 of 1988 view small scale industry are those enterprises which have annual turnover not exceeding 500,000 naira (CBN, 1988).  Similarly, in 1990 the Federal Government of Nigeria defined small scale enterprises for the purpose of commercial bank loans as those enterprises whose annual turnover does not exceed 500,000 thousand naira and for 5 merchant banks loan those enterprises with capital investment not exceeding 2 million naira (excluding the cost of land) or a minimum of 5 million naira.

            Ogochukwu (2006) contends that in the wake of Second-tier Foreign Exchange Market (SFEM) and Structural Adjustment Programme (SAP) era in 1993, 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 that context, any business or enterprise 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.  In other words a business unit of not less than $240 dollar is characterized as a small scale business in Nigeria.  That may not be the same in other countries, but that classification may be useful in developing countries, because of the low capacity of its small scale industry.

That is why Kozak (2007) argues that we cannot explain SME other than to say they are companies with metric (usually no of employees or annual turnover that fall below certain threshold.  It is these indicators, number of employees and or rate of turn over that tend to define the context within which different countries and economies situate their understanding of small and medium scale enterprises.

            This is to say that, even though SMEs is definable with much or less the same indicator (No of employees, rate of turnover etc) the indicators are not the same in all countries all the time.  In other words while number of employee and rate of turnover are the indicator, the number of employee and total amount of turn over for defining SMEs in different countries are certainly not the same.  For instance, the employee requirements in Britain is 200, with 2 million pound turnover, the same cannot be said of Japan with 100 million Japanese yen as paid up capital and 300 paid employees.  While in Nigeria, the paid employees are usually not considered important, but more importantly is the turnover of 500,000 especially for the purpose of Commercial and Mortgage bank loans.  Balunywa (2010) however affirmed that the number of employee may not be a good indicator, especially where the company is labour intensive.  This is true in country like India, where labour intensive is a policy approach to industrialization.  However, that is not to say that in some cases, trading organization cannot transact big business, but yet employed few employees.  In that case, capital employed may be used as indicator for defining small and medium scale enterprises.

            In countries where the number of employees is an indicator, the number of employee required differs from country to another.  In Uganda the figure of employees for SMEs is between 5-50 (Ngobo, 1995).  In India it is 30 – 100, while in the US is lessthan 500 (Stoner et al, 1996).  In Kenya, 10 or fewer people are called micro business, while 11-50 are referred to small enterprises and 51-100 are called medium enterprises (Kibera and Kibera, 1997).  That is why in the United States of America, small business administration is defined as one that is independently owned and operated, is not dominated in its field and meet up employment or sales standard developed by the agency (Stoner et al, 1996).  This shows the same trend with other countries like Nigeria and Japan except that the exchange value differs in the financial criteria.  In a more general and comprehensive term Ogechukwu (2005) chronicled a general criteria for defining small and medium scale enterprises in different countries.  These include number of employees, annual turnover, local operations, sales volumes, financial strength, managers and owners autonomy, relatively small markets compared to their industries and capital usually supplied by individual or shareholders etc.  There are so many small scale business units in Nigeria which qualifies within this context most of them are in the commercial sector.  However, a common trend in Nigeria today is the gradual classification of service provider, hotels, fast food and restaurants as small and medium scale enterprises.

            As a result of this definitional differences and lack of universal definition, the European Union in 2003 adopted a universally accepted definition of small and medium scale enterprises and micro business as companies with less than 250 employees, with respect to financial criteria, revenues must not exceed 50 million Euro (measure as turn over) or 43 million euro (measure as balance sheet).  In addition, the European Commission specifies term of ownership stating SMEs must be independent with less than 25% being owned by outside interest (European Commission, 2007).  In a report of enterprises association, Macqueen (2004) conceive of SMEs as enterprises employing 10-99 full time employees or with a fixed capital investment of US$1000 – 500,000.

            Small and medium scale enterprises are certainly not transnational company, multinational cooperation, publicly owned enterprises or large facility of any kind.  However, they can depend on business and ownership structure to become a large business unit (Macqueen, 2006), while it can be argued that 80% of the financing of SMEs come from owners, friends and families, businesses can take different forms including private ownership, limited partnership, contract and sub-contracts, cooperatives or associations (Kozak, 2007).  Small and medium scale enterprises have a narrow context within which its operation is carried out.  However, where it is effectively operated it has capacity to sprout the economic growth and national development.

 

 

Overview of Small and Medium Scale Enterprises

            According to allbusiness.com (2010), the abbreviation SMEs occurs commonly in the European Union and in International Organizations such as the World Bank, the United Nations and the World Trade Organization.  Also the term Small and Medium Scale Businesses (SMEs) is predominantly used in the United States of America.  The European Union states traditionally have their own definition of what constitutes SMEs.  For instance, the traditional definition in Germany Limits Small and Medium Scale Enterprises to two hundred and fifty (250) employees while in Belgium, it is limited to one hundred (100) employees.  Recently, the European Union has standardize the concept by categorizing enterprises with less than ten (10) employees as ‘micro’, those with fewer than fifty (50) employees as ‘Small’ and those with fewer than two hundred and fifty (250) employees as “medium”.  In the United States of America, any business with fewer than one hundred (100) employees is classified as “small” while medium scale business refers to a business with fewer than five hundred (500) employees.

            In India, micro and small enterprises play a pivotal role in the overall industrial economy of the country.  It is estimated that in terms of value, the sector account for about 39% of the manufacturing output and about 33% of the total export of the country.  Also in South Africa, the term Small, Medium and Micro Enterprises (SMMEs) is usually used, while in Nigeria, the term Small and Medium Scale Enterprises (SMEs) is generally used.  From the foregoing, it can be deduced that Small and Medium Scale Enterprises are enterprises that have the capacity to employ at most five hundred (500) employees at a time and it has been proved to be the back bone of every economy.  The brain behind every successful Small and Medium Scale Enterprise is entrepreneurship which in the words of Olagunju (2004) is an undertaking in which one is involved in the task of creating and managing an enterprise for a purpose.  The purpose as further stated may be personal, social or developmental.  One who is involved in this task is called an entrepreneur.  Also, a line between an entrepreneur and business owners must be drawn.  While business owners establish and manage their own enterprise for personal gains, entrepreneurs exploit ideas that create a business that benefit them, the society and act as developmental weapon.

The Growth of SMEs and the Contributive Scheme in Nigeria

            Jimodu (1998), Kayode (2001) and Hassan (2003) mentioned various schemes that have contributed to the growth of Small and Medium Scale Enterprises in Nigeria. The Industries Credit Scheme (ICS) was introduced in 1971 as a revolving grant by the Federal and State governments in Nigeria to assist in meeting the credit needs of SMEs on a relatively more liberal condition than in private leading institutions.

The Nigeria Bank for Commerce and Industry (NBCI)

            The Nigeria Bank for Commerce and Industry was established jointly by the Federal government of Nigeria and the Central Bank of Nigeria (CBN) in 1978 as the apex institution for financing small and medium scale enterprises.  The rationale for establishing the bank was to bring financial discipline to bear and to hopefully ensure a more efficient utilization of scarce financial resources for the development of viable small and medium scale enterprises.  Bank was also vested with the power to administer the Federal Ministry of Commerce and Industry’s special funds for small and medium scale enterprises under a soft loan agreement.

The Central Bank of Nigeria Special Credit Programme for Small and Medium Scale Enterprises (SMEs)

            The Central Bank of Nigeria is the principal agent for implementing government financial and monetary policies and has over the year introduced a number of schemes for promoting improved access to credit for industrial development particularly in small and medium scale enterprises.  The thrust of the schemes according to Bullion and CBN (1992) can be grouped into three in line with Central Bank guidelines for small and medium scale enterprises under the bank’s monetary policy guidelines of 1988.

  1. Credit guideline in respect of loans to Small and Medium Scale Industries.  In 1970, the Central Bank of Nigeria expanded its credit guidelines to incorporate small and medium scale enterprises with effect from January 1971.  With the directive, at least 10% of bank loans and advances were allocated to small and medium scale enterprises.
  2. In April 1980, loans and advances available to small and medium scale enterprises rose from 10% to 20% in January, 1991.  It was also clearly stated that stringent penalties await those who disregard the directive.
  3. Central Bank rural banking programme started in Nigeria in 1977 when the first phase (1977 – 1980) was introduced.  The essence of this programme is to reduce the problems of poor access to credit by rural sector operators of Small and Medium Scale Enterprises.  At the initial stage, a total of two hundred (200) rural branches were to be established and at that time, there were only twenty-one (21) commercial banks in the country.

By the end of June, 1980, a total of one hundred and eighty-eight (188) of such proposed branches were established.  The second phase of the programme took off in January, 1981 to December 1984 during which two hundred and sixty six (266) rural branches were established and between 1985 to 1986.  As more pressure came from the Central Bank additional nineteen (19) branches were established.  The third phase was cumulated to push the number of branches to seven hundred and fifty-six (756) at the end of 1988.

World Bank Facilities for Small and Medium Scale Enterprises

            In order to further promote the growth of small and medium scale enterprises in Nigeria, the federal government of Nigeria also negotiated additional financial assistance from the World Bank to complement other sources of funds available to small and medium scale enterprises.

            This resulted into a loan of $270 million which was managed directly by small and medium scale enterprises apex unit within the Central Bank.

            Also the establishment and recapitalization of Micro Finance Banks further ease the provision of funds for Small and Medium Scale Enterprises particularly in villages.  Objectives for which micro finance banks scheme was established include the following according to Ana (2008):

  1. To enhance service delivery by micro finance institutions to Micro, Small and Medium Scale Enterprises (MSMEs).  To contribute to rural transformation.
  2. To make financial services accessible to a large segment of potentially productive Nigerians which otherwise would have little or no access to financial services.
  3. To promote linkage programmes between universal banks specialized in financial institutions and micro finance banks.
  4. To reduce unemployment and increase social mobility.
  5. To enhance the implementation of the national economic empowerment and development strategy (NEEDS).

Before the full take-off of micro finance institutions entrepreneurs of small and medium scale enterprises did not have easy access to formal financial institutions to raise capital and it was on that note that Ubon (2003), stated that one of the major hindrances to Small and Medium Scale Enterprises’ development in Nigeria is finance.  Micro finance is therefore primarily adopted as a means to overcome the acute problem of finance faced by small and medium scale enterprises.

Review of Past Reforms Aimed at Rural Development since late 1970s

            Successive governments in Nigeria were faced with the challenges of adverse international economic environment created by oil shocks and deteriorating terms of trade.  Several programmes formulated to ameliorate Nigeria’s economic problems according to Ogwumike (1995) include:

  1. Operation Feed the Nation (OFN)

This programme was introduced by General Olusegun Obasanjo in 1976 following the chronic inability of the agricultural sector of the economy to satisfy the food need of the nation.  The programme was able to create awareness on self-reliance in food production among the Nigerian people.

 

  1. National Director of Employment (NDE)

The directorate was established by decree on the 24th October, 1986 and it commenced full operation in January 1987 with the primary aim of promoting skill acquisition, self employment and labour intensive work scheme.  The scheme was targeted at school leavers, apprentice, graduates etc.  The programme was to address four (4) major areas as itemized below:

  • Small Scale Enterprises programme
  • Vocational skill development programme
  • Rural employment promotion programme
  • Special public work programme

Funding of the directorate between 1987 – 1989 rose from N70 million to N193.31 million.  It was reported also to have declined to N176.82 million and to N100 million in 1994 and to N132.90 million in 1995.

  1. The Family Support Programme (FSP)

This programme was set up by late General Sani Abacha in 1993.  This was alongside Family Economic Advancement Programme (FEAP).  Both programmes were aimed at granting soft loan or credit to the Nigerian families to enable them engage in small scale businesses that will enhance their living standard.

  1. The National Poverty Eradication Programme (NAPEP)

Ike (1996) explained that before the introduction of National Poverty Eradication Programme (NAPEP), a temporary Poverty Alteration Programme (PEP) in year 2000 was put in place to cushion the effect of terrible economic hardship faced by large number of unemployed people in the country.  The intent was to provide monthly stipends to 200,000 unemployed people across the country so that they could start up small businesses and be self-reliant.  The programme was to be structured to benefit three categories of people, namely:

  • Skilled unemployed
  • Unskilled and semi-skilled unemployed
  • Unskilled and uneducated

The skilled unemployed people were provided with a micro-credit to enable them establish any viable venture.  The second category were trained for a period of 3 – 12 months or attached to a relevant construction and manufacturing companies for a period of 2 years to enable them acquire additional skills after which they will be provided with micro credit to enable start-up businesses of their own.  The third and final category were to either acquire formal education through Universal Basic Education (UBE) or be provided with permanent menial jobs in the areas of agriculture, road maintenance, tree planting, etc.

It was reported in Tell Newspaper by Musa (2002) that the National Poverty Eradication Programme (NAPEP) was designed to eradicate poverty absolutely among Nigerians through strategies that provide for the participation of all registered political parties, traditional rulers and community leaders.

  1. The Youth Empowerment Scheme (YES)

This scheme was exclusively designed to empower youths economically and it consists of three (3) programmes as follows:

  1. Capacity Acquisition Programme (CAP)
  2. Mandatory attachment Programme (MAP), and
  3. Credit Delivery Programme (CDP)

The Capacity Acquisition Programme (CAP) is to enable participants acquire skills and vocational capabilities while Mandatory Attachment Programme (MAP) is to assist graduates who have completed their mandatory National Youth Service Corps (NYSC) and who are yet to secure full-time employment.  The Credit Delivery Programme (CDP) on the other hand is to provide micro-credit empowerment scheme and was to achieve the following objectives:

  1. National Employment Rate 3%
  2. Graduate self-employment rate 50%
  3. Non-graduate self-employment rate 60%
  4. Skill acquisition rate for school leavers 60%
  5. Establishment of local resources-based college industries per local government area, five (5) units per year.
  6. Annual growth rate replacement of traditional methods of production with improved technology in agricultural sector 15%
  7. Annual growth rate of development of relevant technologies 15%
  1. National Economic Reconstruction Fund (NERFUND)

Sequel to the introduction of Structural Adjustment Programme (SAP) in 1986 and the subsequent devaluation of currency, coupled with sharp rise in interest rate, many small and medium scale enterprises found it difficult to obtain loan to finance their investment.  To bridge the gap, the federal government in 1990 set up the National Economic Reconstruction Fund to provide relatively long-term loans (5 – 10 years) to small and medium scale enterprises at a very low interest rate.

 

  1. Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN)

Oni (2009) explained that the Small and Medium Enterprises Development Agency of Nigeria was established by the SMEDAN Act of 2003 to promote the development of Micro, Small and Medium Scale Enterprises (MSMEs) sector of the Nigerian economy.  The agency position itself as a one-stop shop for MSMEs and Development.  According to SMEDAN news bulleting of 15 September, 2011 which was powered by crafty syntax, the Agency has industrial development centers in twenty-two (22) states of the federation which include; Bauchi, Ogun, Lagos, Sokoto, Niger, Edo, Ondo, Kano, Abuja, Katsina, Enugu, Oyo, Yola, Jos, Ogoja, Port-Harcourt, Kwara, Kaduna, Osun, Borno, Benue and Imo states respectively.

 

  1. Small and Medium Industries Equity Investment Scheme (SMIEIS)

Inegbenebor (2006) opined that the SMIEIS is the latest of the schemes designed to tackle the problems of financing Small and Medium Industries in Nigeria which requires all banks to reserve 10 percent of their pre-tax profit for equity investment in SMEs.  SMIEIS which is the recent development in SMEs financing was initiated by bankers committee of Nigerian Banks and was approved on the 21st December, 1999.  According to the bankers committee, SMIEIS was a response to the then president Obasanjo’s concern and policy measure for promoting Small and Medium Scale Enterprises as a vehicle for rapid industrialization.  In ensuring strict compliance with the objectives of SMIES, Ayodele (2005), reported in This-Day Newspaper that the Central Bank of Nigeria has thrown a debt of about N4.5 billion into accounts of Banks that have failed to invest their funds set aside for SMIEIS.  Despite this stringent measure by the Central Bank, Bamisile (2006) still argued that financial institutions have not been able to address the gap in terms of credit, savings and other financial services required by Small and Medium Scale Enterprises in Nigeria.

THEORETICAL FRAMEWORK

            In view of the scope of this study, the community empowerment theory is suitable for analyzing empowering community and small and medium scale enterprises for national development.

Community Empowerment Theory

            The use of the term and the idea behind community development can be traced to the British notion for their colonies, especially the era preceding granting of political independence to their initially colonized territories.  Community development was defined in one of United Kingdom publication as: active participation, and if possible, on the initiative of the community, but if this initiative is not forthcoming spontaneously, but the use of techniques for arousing and stimulating it in order to achieve its active and enthusiastic response to the movement (Colonial Office 1958:2 cited in Smith, 2006).

            Three key elements have been identified as inherent in community development:

  • A concern with social and economic development
  • The fostering and capacity of local cooperation and self-help; and
  • The use of expertise and methods drawn from outside the local community.

Community development was seen as empowering self-help, mutual support, the building up of neighbourhood capacity for problem-solving and self-representation, and the promotion of collective action to bring a community’s preferences to the attention of political decision-makers (Smith, 2006).

            Strengthening people’s capacity to determine their values and priorities, and to act on these, is the basis of development.  Capacity building is an approach to development rather than a set of discrete or pre-packaged interventions.  So while there are certain basic capacities (social, economic, political and practical) on which development depends. Community empowerment theory seeks to support organizations working for sustainable social justice (Eade, 1997:3).

            A research carried out by Laverack and Wallestein (2001) provides clarification through the identification and interpretation of nine organizational areas of influence on community empowerment in a programme content: (i) participation; (ii) leadership; (iii) problem assessment; (iv) organizational structures; (v) resource mobilization; (vi) linking to others; (vii) asking why; (viii) programme management; and (x) the role of outside agents.

            It is only by being able to organize and mobilize oneself that individuals, groups and communities will achieve the social and political changes necessary to redress their powerlessness.  This remains the domain of community empowerment as a political activity, which enables people to take control of their lives.

METHODOLOGY

Research Design

            A purposive or convenience sampling will be employed in the selection of the sample for the study.  Thus, the descriptive survey design will be used in this study.

Population of Study

            Given the nationwide spread of the SMEs and the potential salutary impact a vibrant SME sub-sector is expected to have on the national economic growth and development, absolute care and effort will be exercised in the selection of the population and sample for this study.  The researcher will adopt all the banks and all the active SMEs registered with the various Associations and Chambers of Commerce operating within Edo South Senatorial District of Edo State.

Sample Size/Sampling Technique

            A purposive or convenience sampling method will be employed in selecting the sample of 21 SMEs and 7 banks that will be used in the study.  Out of the 7 banks, 4 will be micro-finance banks while 3 will be commercial banks.

 

 

Sources of Data Collection

            For the purpose of this study, primary and secondary data will form the nucleus of data collection.

Instruments of Data Collection

            The instruments that will be used in the collection and gathering of data include questionnaires, personal interviews, and library and desk research.

Techniques of Data Analysis

            The chi-square and simple percentages will be employed in the analysis of the data that will be collected in this research, as the researcher deemed it the most appropriate given its versatility and considering the nature of the data that will be collected.

Scope of the Study

            The scope of this study encompasses all SMEs operating in Nigeria.  But for the purpose of this study, it will be limited to SMEs operating in some selected communities located within Edo South Senatorial District of Nigeria.  This is informed by the vastness of the operations and coverage areas of SMEs in Nigeria.

Significance of Study

            This study will help beam the searchlight on the need to gear effort towards empowering SMEs in Nigeria.  It will also help to expose the problems and challenges facing SMEs in the country.  Again, it will also serve as an impetus to other researchers who are interested in carrying research in the areas of SMEs in Nigeria.

DEFINITION OF TERMS

Empowerment:        This study accepts empowerment as a multi dimensional social process that helps people gain control over their own lives.  It is a process that fosters power in people for use in their own lives, their communities and in their society, by acting on issues they define as important.

National Development:      National development is the ability of a country or countries to improve the social welfare of the people e.g. by providing social amenities like quality education, potable water, transportation, infrastructure, medical care, etc.

Community Development:           Community development is the process of helping community strengthen itself and develop towards realizing full potentials.

Small and Medium Scale Enterprises:    Refers to industries which are organized on a small scale and produce goods with the help of small machines, hired labour and power.

Validity and Reliability of Instruments

            Reliability and validity of data will be fortified by allowing experts in statistical analysis to make useful inputs on the research instruments.  This will therefore, ensures that the questionnaires constructs and the interview schedules are consistent with the variables raised in the hypotheses.

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