Problems Of Financing Small Scale Industries
(A Case Study Of Alpha Paper Mill Ltd. Ogidi)
Financing small-scale industries poses a myriad of challenges, significantly impeding their growth and sustainability. Access to adequate capital remains a primary hurdle, with financial institutions often hesitant to extend credit due to perceived higher risk profiles and lack of collateral. Moreover, high interest rates further burden small businesses, constraining their ability to invest in essential resources and expand operations. Additionally, bureaucratic red tape and complex loan application processes exacerbate the problem, deterring entrepreneurs from seeking funding. Furthermore, economic instability and fluctuating market conditions can amplify financing difficulties, as small-scale industries typically lack the resilience to withstand downturns. Addressing these challenges necessitates innovative financing mechanisms, streamlined regulatory frameworks, and targeted support programs to foster the growth of small businesses and stimulate economic development.
This project work was on attempt to investigate the problems of financing small scale industries in Nigeria.
The main objectives were:-
1) To examine the financing of small scale industries in general and Alpha Paper Mill Ltd, Ogidi in particular and an aid to profit maximization and increases in the level of employment.
2) To assess to what extent the government and other financial constitutions have helped through provision of financial assistance to the industry.
3) To provide information and other sources of capital to enable the Alpha Paper Mill to take advantage of it and broaden its capital outlay.
The study were based on the following research questions.
1) To what-extent is it true that inadequate finds hamper the growth and survival of small scale industries in general with particulars references to Alpha paper Mill Ltd, Ogidi?
2) As a small business, does it have financial problems impending its operations and what sources of fund available to them? If not what sources of find that the company should undertak.
3) To what extend would improved capital outlay enhance the business fortunes of Alpha Paper Mills Industry
The researcher therefore made the following recommendations:
1) Government should set-up loan of loan to small scale industries. The need for this has greater urgency show than before of the increasing financial difficulties of small scale business under Structural Adjustment Programme (SAP).
2) Government through the central bank should adopt the policy tah will make it easier for small scale industries to secure loan from commercial banks.
Title Page
Approval Page
Dedication
Acknowledgement
Table of Contents
Abstracts
CHAPTER ONE
1.0 Introduction 1
1.1 Background of the study 1
1.2 Statement of Problem 3
1.3 The objective of the Study 3
1.4 Scope of the Study 4
1.5 Research Questions 4
1.6 Significance of the Study 5
CHAPTER TWO
2.0 Review Of Literature 7
2.1 Definitions of Small Scale Industry 7
2.2 Sources of Financing Small Scale industry 12
2.3 Importance of Small Scale Industry 13
2.4 Problems of Small Scale Industry 13
2.5 Summary of Reviewed Literature 14
CHAPTER THREE
3.0 Methodology 16
3.1 Research Design 16
3.2 Area of Study 16
3.3 Population of the Study 16
3.4 Instrument of Data Collection 17
3.5 Method of Administration 17
3.6 Method of Data Analysis 18
CHAPTER FOUR
4.0 Data presentation and results 19
4.1 Summary of results/findings 24
CHAPTER FIVE
5.0 Discussion conclusion –
implication and recommendation 25
5.1 Discussion of findings 25
5.2 Conclusion 26
5.3 Implications of the Results 27
5.4 Recommendations 27
5.5 Limitations of the Study 28
References 29
Appendix 30
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Finance has been identified as one of the major factors for the development of small scale industries in Nigeria for the establishment of small scale business in Nigeria, the first factor to consider is the socialability and source of fund for setting up the industry. Small scale business is an organization real can be measured by various characteristics and some of these are its sales volume, capital investment, ownership structure and the number of paid employees.
Small scale industry has been given different definitions by people and authorities at different times. However, the levels of capital employed remain a relevant factor for identifying the small scale industry operation.
Based on the general notion in the third National Development plan 1976-1980 a small scale industry means an industrial undertaking involving total investment of up to but not exceeding (N150,000).
Having examined the definition with regard to the concept of small scale business, it is deemed necessary for the proper of this study to provide a basic framework by adopting a more common definitions. Small scale industry could be defined as one which is independency owned and operated. This definition is similar in scope to the one defined above by the authority in that it-emphasizes independent ownership and management and relative small scale size in its area of generation.
Some small scale business start having problems from their very beginning due to amount of capital invested by the owner. This is because immediately the initial capital is used up, the business is finished.
1.2 STATEMENT OF PROBLEMS.
1) Alpha Paper Mill Ltd, Ogidi are not able to take business ventures with high yielding potential because of the numerous problems in obtaining adequate fund.
2) These financing problems of Alpha Paper Mill hampered all important-objectives of the business, its growth and survival.
3) Alpha paper Mill Ltd has not been able to expand and grow because of lack of sufficient funds for the purpose.
1.3 THE OBJECTIVES OF THE STUDY
This study is basically aimed at the following.
1) To examine the financing of small scale industries in general and Alpha paper Mill ltd Ogidi in particular and an aid to profit maximization and increases in the level of employment.
2) To assess to what extent the government and other financial institution have helped through provision of financial assistance to the industry.
3) To provide information and other sources of capital to enable the Alpha Paper Mill Ltd to take advantage of it and and broaden its capital outlay.
1.4 SCOPE OF THE STUDY
The study will cover the company operations with particulars regard to finding as well as other external sources of funds.
1.5 BASIC RESEARCH QUESTIONS
Here are basic research questions that the study will be based on and they are as follows:-
i) To what extent is it true that adequate funds hamper the growth and survival re-small scale industries in general with a particular reference to Alpha Paper Mill Ltd Ogidi.
ii) As a small business, does it have financial problems impending its operations and what sources of finance are available to them? If not what other sources of fund that the company should undertake.
iii) To t would improved capital outlay enhance the business fortunes of Alpha Paper Mills Industry.
1.6 SIGNIFICANCE OF THE STUDY
Alpha Paper Mill Ltd, Ogidi is chosen for the case study of these financing problems facing small scale industries in Nigeria because it typically represents a small scale industries concern end is likely to be confronted by the financing problems. In view of the above, the significance are to find out:
i. What causes the problems.
ii. How far the company has been aware of the problems and how far it has gone in solving them.
iii. Ways of eliminating the problems.
It is the writers opinion that it will be immense value to the management in particular and in the whole nation in general. It will also provide information for intending small scale industrialists, academicians. Besides, it is to ped that it will induce the government – to re-examine the stage towards its policies and strategies for the development of nations indigenous firms.
Problems Of Financial Small Scale Industries:
Financial problems are common challenges faced by small-scale industries (SSIs) worldwide. These problems can hinder their growth and sustainability. Here are some common financial problems faced by small-scale industries:
Limited Access to Capital: Small-scale industries often struggle to secure sufficient capital to start or expand their businesses. Traditional financial institutions may be hesitant to provide loans to these businesses due to their limited collateral and perceived higher risk.
High-Interest Rates: When SSIs do manage to secure loans, they often face high-interest rates, which can significantly increase their financial burden and reduce profitability.
Working Capital Shortages: Maintaining adequate working capital is essential for day-to-day operations. SSIs may struggle to manage their working capital needs, leading to difficulties in paying suppliers and employees on time.
Lack of Credit Facilities: Small-scale industries may not have access to appropriate credit facilities, such as credit lines or overdrafts, making it challenging to manage cash flow fluctuations.
Inadequate Financial Management: Many SSIs lack the financial expertise to effectively manage their finances, including budgeting, cash flow forecasting, and financial reporting. This can lead to mismanagement and financial instability.
Limited Access to Equity Capital: Raising equity capital through investors or venture capitalists can be challenging for SSIs, as they may not have the track record or growth potential to attract such investments.
Seasonal Variability: Some small-scale industries, especially those in agriculture or tourism, may experience significant seasonal fluctuations in revenue. This can make it difficult to cover year-round expenses.
Competition: SSIs often face stiff competition from larger, more established businesses, which can make it challenging to gain market share and achieve profitability.
Regulatory Compliance Costs: Complying with various regulations, licenses, and permits can be costly for SSIs. Failure to meet these requirements can result in fines and legal issues.
Infrastructure and Technology Constraints: Limited access to modern technology and infrastructure can hinder SSIs’ ability to compete efficiently, resulting in higher production costs and lower profitability.
Supply Chain Disruptions: SSIs are often more vulnerable to supply chain disruptions, such as raw material shortages or transportation issues, which can affect production and revenue.
Debt Overload: Accumulating too much debt can lead to financial distress and even bankruptcy if SSIs are unable to meet their debt obligations.
Market Fluctuations: Economic downturns, changes in consumer preferences, and market volatility can all impact SSIs, making it difficult to maintain stable revenues.
To address these financial challenges, small-scale industries may need to seek financial assistance and advice from government agencies, financial institutions, or business support organizations. They should also focus on improving financial management practices and exploring alternative funding sources, such as grants, crowdfunding, or partnerships, to ensure their long-term viability and growth.