Effects Of Small Scale Business On The Economic Development

Small Scale Enterprises (SEs) has proved to be a major intervention in resolving the problems of poverty and unemployment in most developing countries. This study examines the impact of SEs on Economic Development of Ekiti State (2006-2013). A survey research design was adopted to obtain data from 150 respondents comprising of traders, artisans, production factories and other small and medium enterprises which were selected using multi stage sampling method across 16 local government areas in Ekiti State. Three Null hypotheses were tested to identify the significant effects of Small Scale Enterprises on poverty reduction, employment generation and improvement in the standard of living in Ekiti State. Data for this study was analysed using Statistical Package for Social Sciences (SPSS) and Chi-square at 0.05 level of significance was used to test the hypotheses. The findings revealed that there is a positive and significant relationship between SEs and poverty reduction, employment generation and improvement in standard of living of people in Ekiti State. Furthermore, the result revealed that there was a 57% increase in the number of SEs in the State between the years 2009-2013. The study concludes that access to capital funding by reduction in the interest rate on loan offered by banks can boost the performance of SEs in Ekiti State and Nigeria at large.

COVER PAGE                                                                                                                       i

TITLE PAGE                                                                                                               ii

APPROVAL/ CERTIFICATION PAGE                                                                                iii

DEDICATION                                                                                                                       iv

ACKNOWLEDGEMENT                                                                                                 v-vi

ABSTRACT                                                                                                                     vii-ix

TABLE OF CONTENT                                                                                                     x-xii

CHAPTER ONE:

1.0      INTRODUCTION                                                                                                      1

• • BACKGROUND OF THE STUDY 1-3

• • STATEMENT OF THE PROBLEM 3-4

• • OBJECTIVE OF THE STUDY 4-5

• • RESEARCH QUESTIONS 5-6

• • SIGNIFICANCE OF THE STUDY 6

• • SCOPE OF THE STUDY 6-7

• • LIMITATION OF THE STUDY 7

CHAPTER TWO

2.0      REVIEW OF THE RELATED LITERATURE                                                            8

2.1      LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK                8-14

2.2      INTERVENTION OF SMALL SCAL ENTERPRISES ON POVERTY ALLEVIATION AND EMPLOYMENT GENERATION IN EKITI STATE                                                 14-17

2.3      GOVERNMENT’S CONTRIBUTIONS TOWARDS FINANCING OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA                                                             17-23

2.4      SHORTFALL OF GOVERNMENT EFFORTS TOWARDS THE GROWTH OF SMES IN NIGERIA                                                                                                                           23-26

• • CONCEPT OF SMALL BUSINESS ENTERPRISES 26-29

• • CONCEPT OF SMALL BUSINESS ENTERPRISES 29-35

• • SMALL SCALE BUSINESS ENTERPRISE CONSTRAINTS 35-40

• • PECULIAR FACTORS THAT IMPEDE GROWTH OF SES 41-44

CHAPTER THREE

3.0      RESEARCH DESIGN AND METHODS

• • RESEARCH DESIGN

• • AREA OF STUDY

• • POPULATION OF STUDY

• • SAMPLING METHOD

• • INSTRUMENT FOR DATA COLLECTION

• • METHODS OF DATA COLLECTION

• • METHODS OF DATA ANALYSIS

CHAPTER FOUR

4.0      DATA PRESENTATION AND ANALYSIS

• • RESULTS AND DISCUSSION OF FINDINGS

CHAPTER FIVE

5.0      SUMMARY, CONCLUSION AND RECOMMENDATIONS.

5.1      SUMMARY OF FINDINGS

5.2      CONCLUSION

5.3      RECOMMENDATIONS

5.4      REFERENCES                                                                                                          

CHAPTER ONE

1.0                                                            INTRODUCTION

The pursuit of economic development has been a major goal of many developing nations of the world. Developing countries are confronted with several problems such as high rate of poverty and unemployment which have continued to hinder the attainment of socio-economic development. For any nation to attain development, industrialization, gainful and meaningful employment are important indices used as a measurement of economic development. This is often depicted by income per capital, equitable distribution of income, the welfare and quality of life enjoyed by the citizen of that nation. Small Scale Enterprise (SE) has proved to be a major tool adopted by the developed nations to attain socio- economic development. In recent time, small scale industrial sector is considered to be the backbone of modern day economy. Historical facts show that prior to the late 19th century, cottage industries, mostly small and medium scale businesses controlled the economy of Europe. The Industrial Revolution changed the status quo and introduced mass production (Thomas, 2001). The twin oil shocks during the 1970s undermined the mass production model, which triggered the unexpected reappraisal of the role and importance of small and medium sized enterprises in the global economy (Wendrell, 2003). In Nigeria, the introduction of SME can be traced back to the year 1945 when the essential paper No. 24 of 1945 on “A Ten year plan of development and welfare of Nigeria 1946 was presented”. Small scale Enterprise was considered an all time necessity at the beginning; which has gained prominence today and is expected to increase its importance in the future (Basil, 2005).

Ekiti State which was carved out of the former Ondo State in 1996 has put in place policies and established Enterprise and Economic Development Agencies to encourage promote and coordinate investment activities in the State with a view to stimulating economic growth. One of such developmental strategies is the industrial development and expansion of Small Scale Enterprises (SEs). Past and the present governments of Ekiti State have emphasized the contributions of internal developed economy of the State through the encouragement of SEs. In this present administration in Ekiti state, several meetings have been held with the Nigeria Association of Small Enterprises (NASEs), Ekiti chapter in order to promote the micro, small enterprises in the state.

Nevertheless, despite the efforts and contributions of past and present government towards promoting Small Scale Enterprise (SE) in Ekiti State, the contribution of this sector to the economy still remain relatively small in terms of its impact on Gross Domestic Product (GDP), unemployment and poverty reduction. The rate of unemployment in this state is still high and majority of the population still live in poverty. Ekezie (1995), Bacdom (2004), Iromaka (2006), Aremu, (2010) among others attributed the lack of credit as one the major constraint to the realization of the benefits of Small Scale Enterprise (SE). In the light of the above, this paper attempt to examine the impact of Small Scale Enterprise (SE) on the economic development of Ekiti State, the researcher embarked on the analysis of Small Scale Enterprise (SE) in Ekiti state, between the year 2006 and 2013.

1.1                                           BACKGROUND OF THE STUDY

Most of the world renowned companies and organizations started as a small scale business with skills and efforts they grew up to the conglomerated and multinational companies of today. Small scale business occupies a unique position in the economy of any nature and they are the bedrock of any economic development. They constitute of the cornerstone of any competitive economy and by far outnumber the large scale business. Also, they provide large scale business, more fertile ground for creativity and entrepreneurship. Hence, as a result of easy entry into the market, small scale business spring up all the time keeping the competition environment lively, a phenomenon that leads to productivity gains and real economic growth, apart from the fact that they generate employment opportunities, they are closer to the grass root and so on, ginger rural development. They are less capital intensive and do not require gigantic infrastructure for their operation.

Being part of the economic system, small business entities are faced with numerous problems, particularly funding and many ways these are very different from the financial problems on large concern. However, the principles underlying financial decision are similar irrespective of the size of the business, hence, the basic goal so financial management through acquisition, anticipation and allocation of funds equally apply to small scale business. It is widely known in business circles that small scale business find it difficult to secure funds from financial institutions due to the fact that they have difficulty in meeting the collateral requirement that would qualify them for the financial assistance from the back. This is not withstanding every business whether small or large needs funds. Funds constitute the life blood of any business while other things follow.

Small scale business serves as an engine room for economic development and government recognize the fact that small business is the second largest employers of labor apart from government. Government is also encouraging the establishment of small scale business by forming such bodies like Small Enterprises (SE). Government has also provided monetary incentive for small scale industries. As stated earlier, small scale industries play very important roles in the economic development of any country, state or local government. For instance, in any depressed unemployment is the increase, where the available resources are under-utilized and where raw-material supply to our big industries is inadequate, establishment of small scale business is considered as an alternative means of earning a living and providing raw-materials to our big industries.

1.2                                               OBJECTIVE OF THE STUDY

The main objective of this study is effects of small scale business on the economic development of Nigeria.  But for the successful completion of the study; the researcher intends to achieve the following sub-objectives;

1. 1. To determine the roles which Oluwabukunmi Super Bread as the small scale business have played in economic development of Ekiti State

1. 1. To suggest the future prospect of “Oluwabukunmi Super Bread” in economic development of Ekiti State

1. 1. To determine the problems Oluwabukunmi Super Bread is facing in Ekiti State

1. 1. To ascertain the relationship between small scale business and the economic development in Nigeria

1. 1. Examine the impact of Oluwabukunmi Super Bread on employment generation in Ekiti State and.

1. 1. Examine the impact of Oluwabukunmi Super Bread in improving the standard of living in Ekiti State.

1.3                                          STATEMENT OF THE PROBLEM

There is no doubt that small scale enterprises are the principal catalyst of entrepreneurship and it constitute the real fabric of nation’s economy. And to say that the present and future economic advancement of this out great country- Nigeria lies in the dynamics and growth of the Small Scale (SE) is not an overstatement.

At least, this is the unanimous opinion of an economic conference at the instance of the three bodies; Nigeria Institute of Social and Economic Research (NISER), the national Association of Industries (NASSI) and the Fredrick Albert Foundation in Lagos in 1989. In other words, SEs constitute a vital force to economic growth and development (Onuoha 1994:1). Economic development is a nation wise problem which the small scale industries are capable of solving effectively these includes:

1 Development of raw materials

2         Sourcing of raw materials

3         Providing training places for workers and students on industrial attachment.

4         Problems of capital for large establishment

5         Problems of unemployment

6         Under-utilization of scare resources

7         Lack of linkage effect among several factors in the economy

8         Lack of provision of import substitution good

In the light of the above mentioned problems, the fact that small scale business are vital for economic development of any country, state or local government and numerous problems which small scale business are capable of solving motivated me to research or write on this topic.

1.4                                             LIMITATION OF THE STUDY

1. 1. There are numerous small scale businesses in ado ekiti local government area but there is slow pace of industrial development.

1. 1. This research intends to find out why there are numerous small-scale businesses and yet slow pace of industrial development.

1.5                                                RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

• • H₀– Small Scale Enterprise is not significantly related to poverty reduction in Ekiti State.

• • H₀ – Small Scale Enterprises have no significant impact on employment generation in Ekiti

• • H₀ – Small Scale Enterprises does not improve the standard of living of the people in Ekiti State.

1.6                                           SIGNIFICANCE OF THE STUDY

This study is very beneficial to groups of people such as:

1. The small scale entrepreneur as it will help them to know how to solve the economic problems.

2. 2. Student of business studies of higher institutions of learning as this will serve as reference work and guide for further research work.

2. 2. The state government as this will enable them to know the roles in which the small business played in the development of the state.

2. 2. The state government will through this study know the problems facing the small scale business and the suggested solutions

1.7                                 SCOPE AND LIMITATION OF THE STUDY

The study covers effects of small scale business on the economic development of Nigeria. The researcher encounters some constrain which limited the scope of the study;

1. 1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study

1. 1. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1. 1. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.8                                                  DEFINITION OF TERMS

Small scale business: This is a type of business that is owned by one or few persons with direct owner influence in the decision making and having a relatively small share of the market and low capital requirement.

Entrepreneur: This is an individual who notices opportunities and take action to mobile necessary resources to produce new improved goods in the environment for a targeted market.

Capital: This is the amount of money required to carry out a particular venture and pay all the financial obligation of the business.

Development: This is the process or the ability to make something to be advance or organize for the benefit of all sundry.

Entrepreneur: According to Gilfford Pinchot 919985) entrepreneur is defined as an entrepreneur within an already established organization.

Business failure: Baumbark (1992:31) defined business failure as a situation where available capital is insufficient to pay all obligations of the business.

Innovation: According to Inegberebor (1989), innovation involves creative response to an investment opportunity by developing a new product, new technology or modification of the existing ones to meet the expectations of the consuming public.

Motivation: Stephen P. Robbins (2010), defines motivation as the willingness to exert high levels of effort toward organizational goals, conditioned by the effort and ability to satisfy some individual need.

Marketing:Kolter (1980:9) defines marketing as getting the right goods and service to the right people at the place at the right time at the price with right communication and promotion.

Management: According to Fedrick Winslow Taylor (1947) Management is knowing exactly what you want men to do and then their seeing that they do it in the best and cheapest way.

Directing: According to Joseph Massie (1994) Directing concerns the total manner in which a manager influences the action of his subordinates. It is the final action of manager in getting others to act after all preparations have been completed.

Controlling: Haiman (1985) defined controlling as the process of checking to determine whether or not, proper progress is being made towards the objective and goals and acting if necessary to correct any deviation.

Leadership: According to Mcshare (2009), leadership is the process of motivating, influencing and directly others in the organization to work productively in pursuit of organization goals.

Environment: Kazmi (2002) described the environment as the aggregate of all conditions, events and influences that surrounds and affect it.

1.9                              ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.