The main purpose of this study is to identify the problems and prospects of small and medium enterprise in Enugu East Senatorial Zone. To do this, data were collected from both primary and secondary sources. The main instrument of data collection was the questionnaire.

The data were presented in tables as frequency, distribution in the data analysis, the techniques of percentages frequencies were used. The hypothesis were tested with z-test technique at 5% significance level.

Having analysed the data the following were the major findings;

Most of the operators of small and medium enterprise in Enugu East Senatorial Zone make an average daily turnover of N15,000 and profit of about N15,000 daily.

There has been a phenomenal growth in the dimensions and nature of small and medium enterprise in Enugu East Senatorial Zone.

The growth is mainly on account of people’s desire to be self employed.

The problems of establishing and managing small and medium enterprise include lack of capital, lack of managerial skills, lack of business ideas, high cost of operational facilities, scarcity of accommodation, lack of efficient preservation, system and poor environmental and sanitation.

TABLE OF CONTENTS

Approval Page i

Dedication ii

Acknowledgement iii

Abstract

Table of Contents

CHAPTER ONE

1.1 Background of Study 1

1.2 Statement of the problem 4

1.3 Objective of the Study 6

1.4 Hypothesis 6

CHAPTER TWO

2.0 Literature Review 7

2.1 Conceptual Framework 7

2.2 Theoretical Literature 11

2.2.1Types of Small and Medium Enterprise 15

2.2.2Roles of Small and Medium Enterprise in Enugu State

Metropolis in Job Creation and Poverty Eradication 16

2.2.3Importance of Small and Medium Enterprise in Nigeria 18

2.2.4Problems of Small and Medium Enterprise Enugu East 22

2.2.5 Prospect of Small and Medium Enterprise Enugu East

Senatorial Zone 23

2.2.6 Challenges in Facing Small and Medium Enterprise in

Enugu East Senatorial Zone 25

2.2.7 Small and Medium Enterprise Credit Scheme: Case Study

Of Enugu East Senatorial Zone 26

2.3 Empirical Framework 30

2.3.1Ways of Encouraging Small and Medium Enterprise to

Enhance National Development in Enugu East Senatorial

Zone 35

2.3.2 Government Refund on Small and Medium Scale and

Means of Administration 37

2.3.3Limitation of the Study 38

CHAPTER THREE

Research Methodology 40

3.1 Research Design 40

3.2 Area of Study 40

3.3 Source of Data 40

3.4 Sample Size Determination and Sampling Techniques 41

3.5 Instrument 41

3.6 Data Collection Procedure 42

3.7 Method of Data Analysis 42

CHAPTER FOUR

Data Presentation of Analysis 44

4.1 Analysis and Interpretation of Data 44

4.2 Test Hypothesis 59

CHAPTER FIVE

Summary, Recommendation and Conclusion 63

5.1 Summary of Findings 63

5.2 Conclusion 64

5.3 Recommendation 64

Bibliography 66

Questionnaire 67

LIST OF TABLES

Table 4.1 Administration of Questionnaire 44

Table 4.2 Distribution of Respondents 45

Table 4.3 Age Distribution of Respondents 45

Table 4.4 Marital Distribution of Respondents 46

Table 4.5 Educational Qualification of Respondents 46

Table 4.6 Number of Years in the Business 47

Table 4.7 What Extent Does Enugu East Senatorial Zone

Affect the Operation of Small and Medium Enterprise 48

Table 4.8 Factor Responsible or phenomenal growth of

Small and Medium Enterprise 49

Table 4.9 Responses of Consumers Feelings 50

Table 4.10Nature of Competition 51

Table 4.11 Problems of Setting up Small and Medium Enterprise 52

Table 4.12Problems of Managing Small and Medium Enterprise 54

Table 4.13Future prospects of Small and Medium Enterprise 56

Table 4.14 Distribution of Daily Turnover 57

CHAPTER ONE

1.1 BACKGROUND

In recent years, particularly since the adoption of the economic reform programme in Nigeria in 1986, there has been a decisive switch of emphasis from the grandiose, capital intensive, large scale industrial project based on the philosphy of import substitution to small scale industries with immense potentials for developing domestic linkages for rapid, sustainable industrial development. Apart from their potential for ensuring a self reliant industrialization, in terms of ability to rely largely on local raw materials, small scale enterprises are also in a better position to boost employ raw materials, small and medium enterprise, are also in a better position to boost employment, guarantee a more even distribution of industrial development in the country, including the rural areas, and facilitate the growth of non-oil exports.

In Nigeria, the definition of small and medium enterprises also varies from time to time and according to institutions, for instance, the Central Bank of Nigeria’s (CBN) monetary policy circular No:27 of 1988 define small scale enterprises (excluding general commerce) as enterprises in which total investment (including land and working capital) did not exceed #500,000 and or the annual turn-over did not exceed #5.0 million.

Medium enterprise (excluding general commerce) as enterprises in which total investment and not exceed #1,000,0000 (1 million) and the annual turnover did not exceed #1.2 million. Small scale enterprises is one of the modern strategies underdevelop countries are employing to break into the “league” of developed countries. Fasua (2006:85) categorized business that fall under small scale as follows firewood supply, plantain production, restaurant services, small scale poultry raising, operating a nursery for children, home laundry services and host of others. Business grouped under medium scale according to fasusa are ; soap production, hair/body cream production, chemical production, commercial poultry, profession appractes (law, accountancy, education) food and beverage production among others.

Consequently, both the federal and state governments and recently, local governments, have stepped up efforts to promote the development of small scale enterprises through increased incentive scheme, including enhanced budgetary allocations for technical, assistance programmes. New lending schemes and credits institutions for technical assistance programme New lending schemes and credit institutions such as the National Economic Reconstruction found (NERFOUND), World Bank-assisted small-scale enterprises loan scheme (SMES), Nigeria Export and Import Bank (NEXIM), the people’s Bank of Nigeria (PBN) and the Community Bank have also emerged at both the national and local levels to boost the flow of development finance of small scale enterprises which have so far depended largely on personal funds and credit. From informal sources for both their investments and working capital.

Unfortunately, all these formal credit scheme have not been able to adequately redress the fundamental problems which have constrained small scale enterprises access to credit. The low credit rating of this class of enterprises, is attributable largely to their weak capital, base, high mortality rate, low productivity and shortage of managerial skills. Indeed, the problem of weak capital base, high mortality rate, low productivity and shortage of managerial skills. Indeed, the problems, of weak capital base, and poor access to finance appear to have developed into some vicious circle, leading to slow growth, stagnation and even rapid demise of the small scale enterprises. The impact of all existing credit scheme interms of providing funds for meaningful and sustained development among the small scale enterprise, had medium enterprise to serve the expected role of catalyst for rapid industrial development, there is need for a more innovative strategy for improved access to development finance for the small and medium enterprise that would address their inability to provide collateral securities for loans formal credit institutions.

1.2 Statement of the problem

Small and medium enterprise are mostly in managed by owners and relations. The financing in most cases in normally provided by the owners. The owners fail to realize the importance of external source of capital in order affect expansion in the business. In most cases, the by the owner, members of the family and friends in most cases.

In another development, small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful. All the result to inadequate capital available to the sector and thus lead to poor financing. This is the bane of most cottage industries in Nigeria. About 80% of small and medium enterprises are stifled because of this problem of poor financing and other problems associated with it (Chukwuemeka, 2006). The problems that emanated from poor financing include:

a) Lack of competent management which is the consequence of inability of owners to employ the services of experts.

b) Use of obsolete equipment and methods of production because of owner’s inability to access new technology.

c) Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry.

Inspite of the different measures since 1960 to increase industrialization, small medium enterprises are still facing hard conditions. This is as a result of some constraining factors.

1) The high cost of available raw materials affects the prices of good food. This only has adverse affect on the turnover of the enterprise but also on the profitability.

2) To what extent has the finance house strict conditions affected the development of small scale.

3) Does poor financing actually affect small and medium business operation.

1.3 Objectives of the study