The impact of commercial banks loan on small scale business performance in Lagos State: A case study of selected business enterprise in Lagos Mainland Local Government Area. The main thrust of this topic is to investigate the impact of commercial Banks loan on small and medium scale enterprise. Specifically, the study was designed to investigate how commercial banks can help to harness the performance and profitability of small and medium scale enterprises as well as the nation as a whole, find out how to ensure that some of the policies of the government are fully implemented, examine the effect of SMEs on the economic growth in Nigeria amongst others, ascertain if the development of SMEs can address the issue of unemployment to a reasonable extent. Find out problems affecting the growth of SMEs and probable solutions to them. Seven research questions and two hypotheses were formulated to guide the investigations. Relevant literature books were reviewed. The study design was through survey research; questionnaire and personal interview as measuring instruments. Data collected were analyzed using simple percentages and Chi-square Statistics. The major findings of the study were that “There is no significant effect between commercial Banks loan and the performance of small and medium scale enterprise. Also Government, Government policies do not affect the operation of SMEs. The study was concluded by recommending that proper feasibility study of the business should be done before embarking on it. More so, intending entrepreneurs should be willing to take the advice from the professionals and his banks so as to achieve the aim and objective of the enterprise.

TABLE OF CONTENTS

Title page i

Approval ii

Dedication iii

Acknowledgement iv

Abstract v

Table of Contents vi

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study 1

1.2 Statement of the Problem 5

1.3 Objective of the Study 7

1.4 Research Questions 8

1.5 Research Hypothesis 9

1.6 Scope of the Study 10

1.7 Significance of the Study 10

1.8 Definition of Terms 11

Reference 13

CHAPTER TWO: REVIEW OF RELATED LITERATURE14

2.1 Theoretical Framework 14

2.2 Importance of Small-Scale Enterprises/ Business 17

2.3 Problems of Small Scale Industries in Nigeria 20

2.4 Survival Strategies for Small Scale Business in Nigeria 24

References 29

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY 31

3.1 Research Design 31

3.2 Population of the Study 33

3.3 Sample and Sampling Technique 34

3.4 Instruments of Data Collection 34

3.5 Method of Data Collection 35

3.6 Method of Data Analysis 35

3.7 Data Analysis Techniques 36

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 38

4.1 Data Presentation and Analysis 38

4.2 Respondents’ Characteristics and Classification 40

4.3 Analysis of Respondents Personal Data 41

CHAPTER FIVE: SUMMARY OF FINDINGS,

CONCLUSION AND RECOMMENDATIONS 59

5.1 Summary of Findings 59

5.2 Conclusion 60

5.3 Recommendations 61

5.4 Limitations and Suggestions for Further Studies 63

Bibliography 65

Questionnaire 68

CHAPTER ONE

INTRODUCTION

1.1 Background Of the Study

Until the early 1960s, many economists viewed the continued existence of small- scale industries in less developed countries as justified buy low initial capital outlay and lesser technical/ administrative experience. It was often argued that with economic growth, the small, traditional type of enterprise would, in one sector after another, be superseded by modern forms of large – scale production. In order to ensure an orderly transition, small industries were seen to deserve support, but mainly in sectors were modern methods could not be immediately applied.

In the mid- 1960s, a new approach to small to medium- scale enterprise ( SME ) development began to emerge due to a number of factors. First, there was growing concern over low employment elasticity of modern, large- scale production. It was claimed that even more optimal policies, this form of industrial organization was unable to absorb a significant proportion of the rapidly expanding labour force (Chenery et al; ILO, 1973:7).

Second, there was widespread recognition that the benefits of economic growth were not being faintly distributed, and that the use of large- scale, capital- intensive techniques was partly to blame (Chebery et al.; 1974: 23). Third, empirical diagnosis showed that the most causes of poverty were not confined to unemployment, and that most of the poor employed in a large variety of small- scale, low- productivity activities. Thus, it was thought that one way to alleviate poverty could be to increase the productivity of those engaged in small- scale production ( Aftab and Rahim, 1989:41-42 ).

This suggested a new role for small industries, or what has come to be labeled “the urban informal sector”. Small, labour- intensive industries were seen not only to increase the living standards of the poor. They were also thought to be capable of providing a new dynamic of economic growth. The objective was not just to stop the retreat, but to promote the small- scale sector (Schmitz, 1982; Aftab and 1989:41-42).

This change in approach was accompanied by a shift of focus towards a “rurally orientated smallholder” ( ROSH) industrialization strategy, well articulated in Oshima ( 1962: 21), UNDP (1974:8), Kilby (1975:12), Acharya (1981:33), Daniel et al, (1985:2) and Olofin (1990:19), among others.

While the World Bank (1989:11-12) and others have tended to favour ROSH implementation strategy by assigning the major role to the private sector, there are those who favour its implementation by assigning a major role to government (Olofin, 1990:31). Assigning the major role to the private sector has its appeal in the fact that the private sector has the resources needed to implement the strategy.

But the proponents of assigning the role to the government are aware that in many developing economies, government is the major move of the economy with only a small and sometimes weak private sector. Thus, they argue that assigning such an important role to the private sector would not work. Besides, for the strategy to produce an optimal effect on the well-being of the people, the social environment has to be considered – something the private sector may be willing to do.

Kilby (1969:6) sees SMEs as a quasi sponge for urban employment and a provider of inexpensive consumer goods with little or no import content, serving an important pressure-releasing and welfare-augmenting function. SMEs also contribute to long-run industrial growth by producing an increasing number of firms that grow up and out of the small scale sector. The emergence of wholly modern small/medium-scale Nigerian industries is likely to be a pre-requisite for any enduring industrialization.

However, despite government efforts in Nigeria to promote SMEs, not much progress seems to have been achieved, judging by SME performance. This study examines survey data in order to evaluate the impact of commercial bank loans on small and medium scale business performance.