THE IMPACT OF SMALL AND MEDIUM ENTERPRISES FINANCING ON POVERTY REDUCTION IN NIGERIA

Abstract

This study was on the impact of small and medium enterprises financing on poverty reduction in Nigeria. Three objectives were formulated which include:  To ascertain whether SME development affect Poverty Alleviation, to ascertain how SME reduce poverty in Nigeria and to ascertain whether SME create job employment. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from SMEs in Lagos state. Hypothesis was tested using Chi-Square statistical tool (SPSS).

Chapter one

Introduction

1.1Background of the study

Small and Medium Enterprises (SMEs) occupy a place of pride in virtually every country or state. Because of the significant roles SMEs play in the growth and development of various economies, SMEs have aptly been referred to as “the engine of growth” and “catalysts for socio-economic transformation of any country”. SMEs represents a veritable vehicle for the achievement of national economic objectives of employment generation and poverty reduction at low investment cost as well as the development of entrepreneurial capabilities including indigenous technology. Other intrinsic benefits of vibrant SMEs include access to the infrastructural facilities occasioned by the existence of such SMEs in their surroundings, the stimulation of economic activities such as suppliers of various items and distributive trades for items produced and or needed by the SMEs, stemming from rural urban migration, enhancement of standard of living of the employees of SMEs and their dependants as well as those who are directly or indirectly associated with them. Supporting these facts, Ajose (2010) states that, SMEs are the pivot of economic growth and first point of contact for the business world

SMEs have played and continued to play significant roles in the growth, development and industrialization of many economies the world over. In the case of Nigeria, SMEs have performed below expectation due to a combination of problems which ranges from attitude and habits of SMEs themselves through environmental related factors, instability of governments and frequent government policy changes. The supportive business environment for SMEs is still weak in Nigeria. The SME support programmes are poorly coordinated and lack the necessary coverage to reach all sectors of the small business community. Almost all Microfinance Institutions (MFIs) are supposed to cater for those enterprises with credit lending. However, project lending and risk capital for SMEs is virtually unavailable. The private equity and venture capital funds established in Nigeria are few and cater primarily for the needs of expansion of established business and privatized companies

However, as Hallberg (2000) observes, government assistance strategies in both developed and developing countries often try to achieve a combination of equity objectives (alleviating poverty and addressing social, ethnic and gender inequalities) and efficiency objectives (raising the productivity and profitability of firms). Likewise, Ojo (2003) argues that all these SME assistance programmes have failed to promote the development of SMEs. This was echoed by Tumkella (2003) who observes that all these programmes could not achieve expected desires due largely to abuses, poor project evaluation and monitoring as well as moral hazards involved in using public funds for the purpose of promoting private sector enterprises

Statement of the problem

Generally, the Small and Medium Enterprises (SMEs) has become very popular entity in Nigeria due to their important role they play in terms of reducing unemployment rate among people. Concern with employment creation and with the welfare of the least advantaged can therefore lead to policies to raise labor standards and employment levels and stability in this sector on microeconomics and distributional grounds (Anyanwu, 2004). This has been reinforced in the past by the not always sustainable notion that these firms are in general, efficient users of labor inputs at a micro economic level. CBN (2007) provide a useful critical review of this line of reasoning. Another set of argument hinges upon notions of market failure. The government of Nigeria has undertaken various measures and programmes to establish and sustain the SMEs in order to contribute towards poverty reduction. This action has caused many people to formulate and engage in SMEs.

Objective of the study

The objectives of the study are;

1. To ascertain whether SME development affect Poverty Alleviation
2. To ascertain how SME reduce poverty in Nigeria
3. To ascertain whether SME create job employment

Research hypotheses

The following research hypotheses will be formulated;

H0: SME development affects do not Poverty Alleviation

H1: SME development affects Poverty Alleviation

H0: SME do not create job employment

H2: SME create job employment

Significance of the study

The study will be very significant to students and policy makers. The study will give a clear insight on the impact of small and medium enterprises financing on poverty reduction in Nigeria. The study will also serve as a reference to other researcher that will embark on the related topic

Scope and limitation of the study

The scope of the study covers the impact of small and medium enterprises financing on poverty reduction in Nigeria. the study will be limited to SME in Lagos state

Limitations/constraints are inevitable in carrying out a research work of this nature. However, in the course of this research, the following constraints were encountered thus:

1. Non-availability of enough resources (finance): A work of this nature is very tasking financially, money had to be spent at various stages of the research such resources which may aid proper carrying out of the study were not adequately available.

Time factor: The time used in carrying out the research work is relatively not enough to bring the best information out of it. However, I hope that the little that is contained in this study will go a long way in solving many greater problems.

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