An Examination Of The Challenge Facing Small And Medium Scale Enterprises In Benue State

An Examination Of The Challenge Facing Small And Medium Scale Enterprises In Benue State A Case Study Of Some Selected Smes In Makurdi Metropolis

TABLE OF CONTENTS

Title page       –           –           –           –           –           –           –          –           –           –           i

Declaration                –           –           –           –           –           –           –           –           –           ii

Certification   –           –           –           –           –           –          –           –          –           –           iii

Dedication                  –           –           –           –           –           –           –           –           –           iv

Acknowledgement     –           –           –           –           –           –          –           –           –           v

Table of content        –           –           –           –           –           –          –          –           –           vii

List of tables  –           –           –           –           –           –           –           –           –           –           x

Abstract         –           –           –           –           –           –           –           –          –           –           xi

 

CHAPTER ONE: INTRODUCTION

1.1. Background to the study –           –           –           –          –          –           –           –           1

1.2. Statement of problem   –  –           –           –           –          –          –           –           –           3

1.3. Objectives of the study    –           –           –           –           –          –           –           –           4

1.4. Research questions           –           –           –           –           –            –          –           –           5

1.5. Research hypothesis         –           –           –           –           –           –           –           –           5

1.6. Significance of the study –           –           –           –           –          –           –           –           6

1.7. Scope of the study           –           –           –           –           –           –           –           –           7

1.8. Operational definition of terms   –           –           –           –            –          –           –           7

1.9. Organization of the Study           –           –           –           –           –           –           –           8

 

CHAPTER TWO: LITERATURE REVIEW

2.1.   Introduction                   –           –           –           –           –           –           –           –           9

2.2.   Conceptual Literature                –           –           –           –           —                      –           9

2.2.1. Small business enterprise          –           –           –           –           –           –           –           9

2.2.2.   Problems of small business enterprises           –           –           –           –           –           11

2.2.3.   Structure and Characteristics of the Nigerian SMEs  –           –           –           –           14

2.5.    Reviews of Empirical Studies   –           –           –           –           –           –           –           21

2.4.   Theoretical Review        –           –           –           –           –           –           –           –           30

2.4.1. Theory of the Firm                    –           –           –           –           –           –           –           30

2.4.2 Three Sigma’s Theory of the Business Model                           –           –           –           31

2.4.3. Contingency Management Theory        –           –           –           –           –           –           33

2.4.4. Financial Growth Theory          –           –           –           –           –           –           –           35

2.5. Theoretical Framework                –           –           –           –           –           –           –           35

 

CHAPTER THREE: RESEARCH METHODOLOGY

3.1.   Introduction –     –           –           –           –           –           –           –           –           –           37

3.2.   Research Design –          –           –           –           –           –           –           –           –           37

3.3.   Population of the Study –           –           –           –           –           –           –           –           38

3.4.   Sampling Size    –           –           –           –           –           –           –           –           –           38

3.5.   Sampling Technique       –           –           –           –           –           –           –           –           39

3.6.   Instrument for Data Collection  –           –           –           –           –           –           –           39

3.7.   Method of Data Collection        –           –           –           –           –           –           –           40

3.8.   Validity/Reliability of Instrument         –           –           –           –           –           –           40

3.8.1. Reliability test   –           –           –           –           –           –           –           –           –           41

3.9.    Method of Data Analysis         –           –           –           –           –           –           –           43

 

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1.   Introduction       –           –           –           –           –           –           –           –           –           44

4.2.   Data Presentation/Analysis        –           –           –           –           –           –           –           44

4.3. Testing of hypothesis       –           –           –           –           –           –           –           –           52

4.3.   Discussion of Findings  –           –           –           –           –           –           –           –           57

 

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1.   Introduction       –           –           –           –           –           –           –           –           –           60

5.2.   Summary            –           –           –           –           –           –           –           –           –           60

5.3.   Conclusion         –           –           –           –           –           –           –           –           –           61

5.4.   Recommendations         –           –           –           –           –           –           –           –           62

5.5.   Limitations to the Study                        –           –           –           –           –           –           –           63

5.6.   Suggestions for Further Studies                        –           –           –           –           –           –           63

 

REFERENCES        –           –           –           –           –           –           –           –           –           64

 

APPENDIX   –          –           –           –           –           –           –           –           –           –           68

 

 

 

 

LIST OF TABLES

Table 1 Sex of Respondents   –           –           –           –           –           –           –           –           44

Table 2: Category of Business of Respondents          –           –           –           –           –           45

Table 3 Age distribution of Respondents       –           –           –           –           –           –           45

Table 4 Marital status of respondents             –           –           –           –           –           –           46

Table 5: Business experience of Respondents            –           –           –           –           –           46

Table 6: Respondents views on whether Poor financing constitute a major challenge in

the performance of SMEs in Markurdi metropolis    –           –           –           –           47

Table 7: Respondents views on whether inadequate infrastructure constitute a major challenge

in the performance of SMEs in Markurdi metropolis          –           –           –           48

Table 8: Respondents views on whether lack of managerial skills constitute a major challenge

in the performance of SMEs in Markurdi metropolis           –           –           –           49

Table 9: Test of Hypothesis I              –           –           –           –           –           –           –           52

 

Table 10: Test of Hypothesis II          –           –           –           –           –           –           –           54

 

Table 10: Test of Hypothesis II          –           –           –           –           –           –           –           56

 

 

ABSTRACT

This research work empirically explored the challenges facing small and medium scale enterprises (SMEs) in Benue state a case study of some selected SMEs in Makurdi metropolis. The objectives of this study were to determine whether poor financing constitute a major challenge in the performance of SMEs in Markurdi metropolis, ascertain whether inadequate infrastructure constitute a major challenge in the performance of SMEs in Markurdi metropolis, determine whether lack of managerial skills constitute a major challenge in the performance of SMEs in Markurdi metropolis. The scope of the study is Markurdi metropolis in 2020 making use of business owners, theory of the firm was used as a framework. The research design used for this study is survey, the population targeted for this study consists of all business owners.  400 business owners were used as sample size and cluster sampling technique was applied. Instrument used for this study is the questionnaire. Data collected were collected from primary sources. From the analysis of the data, the findings shows that poor financing constitute a major challenge in the performance of SMEs in Markurdi metropolis, inadequate infrastructure constitute a major challenge in the performance of SMEs in Markurdi metropolis, lack of managerial skills constitute a major challenge in the performance of SMEs in Markurdi metropolis. Following the findings, it was recommended that financial institutions should be provided that will aid the performance of SMEs in Markurdi metropolis, infrastructural facilities should be adequately provided, management of SMEs should be adequately skilled in carrying out their activities..

Keywords: small and medium scale business enterprise, challenges, business performance, Benue state.

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

 

1.1. Background to the Study

Small and medium scale business enterprise are no doubt the engine room for economic growth, poverty alleviation, job creation and means of crime reduction. They constitute a large proportion of businesses worldwide and play significant role in any economy. Nigerian government through its economic regulatory agencies have recognized the importance of small and medium scale enterprises in the provision of employment to its citizens.

Small and medium scale business enterprises go through series of obstacles that that inhibit their long-term survival, some of these challenges are high production cost, inability to build competitive advantage and low entrepreneurial innovations (UNCTAD, 2005). Researchers have shown that the rate of failure of small and medium scale business in developing countries is higher than in developed world (Marlow, 2009). In Nigeria, SMEs are faced with lots of challenges that have hampered their growth in recent times. Among these challenges are intermittent power supply, indiscriminate tax levies, low accessibility to loans from financial institutions and inability to keep proper financial records. Oluboba (2010) reports that the main problems facing SMEs which are however unsurmountable are low level of entrepreneurial skills, poor management practices, low access to money and capital markets, low equity participation from the promoters because of insufficient personal savings due to their poverty level, low return on investment, inadequate equity capital, poor infrastructural facilities, high rate of enterprise mortality, shortage of skilled manpower, multiplicity of regulatory agencies and overbearing operating environment, societal and attitudinal problems, integrity and transparency problems, restricted market access, lack of skills in international trade, bureaucracy, lack of access to information given that it is costly, time consuming and complicated at times.

For a business to realise its objectives, it depends greatly on the ability of the enterprise to accomplish its key performance indicator in a sustainable manner (Simerly and Mingfanf, 2000; Wan and Yiu, 2009). Government in Nigeria has in the past initiated series of programmes and policies targeted at the small and medium scale business in order to enhance the flow of financial resources to small business enterprises (Oni and Daniya, 2012). The Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) was established in 2003, National Credit Guarantee Scheme was also established in 2003. The Microfinance Policy Regulatory and Supervisory Framework (MPRSF) was launched to address the problem of lack of access to credit by small business operators, the Small Scale Industrial Credit Schemes (SSICS), the Nigeria Industrial Development Bank (NIDB), the World Bank-Assisted SME II loan project, International Financial assistance, National Economic Reconstruction Fund (NERFUND), Bank of Industry (BOI) among others. Although several programmes and policies have been implemented in Nigeria; poverty, unemployment, stunted economic growth are still prevalent in the country (Lawson 2007; Owenubiugie and Igbinedion, 2015; Obadeyi, 2015).

In spite of the major role, significance and contribution of small and medium scale business enterprises to the nation’s economy, small and medium scale business enterprises are still battling with many problems. They are faced with significant challenges that compromises their ability to function and to contribute optimally to the economy. Operations of small and medium scale business enterprises are still bedevilled by a number of problems such as difficulty in accessing credit, short loan repayment period, unwillingness of banks in financing small and medium scale business and high interest rates among others.

In Nigeria, small and medium scale business enterprise constitute about 90% of the industrial sector, they also account for 70% of national industrial employment and 10% of manufacturing output (Ajayi, 2002). Anwatu (2006) opined that 75% of the private sector in Nigeria is dominated by small and medium scale enterprises. Developing the private sector is an engine of growth and creation of wealth and employment in Nigeria.

The performance of small business enterprise in Nigeria falls below expectation (Basil, 2005 and Abiodun, 2011). Thus this study examines the challenges facing small and medium scale enterprises in Benue state.

 

1.2. Statement of the Research Problem

The survival of small and medium scale business enterprise is considered crucial in any economy in solving the problem of poverty, unemployment, crime and ensuring economic growth. There is inadequacy in the performance of small and medium scale business enterprise in performing its role of economic growth, employment creation, poverty alleviation, thus there exist difficulty of small businesses achieving its desired goals.

It is the responsibility of the government to provide employment and security for the people, among other things. However, since the government cannot provide full employment for the people, what it does is provide enabling environment for non-state actors to bridge the gap. These non-state actors include small and medium scale enterprises, among others. The federal government through the CBN introduced Microfinance Policy in 2005, which led to the introduction of Microfinance banks. Today the microfinance banks provide partial financing medium to address the inadequate access to finance confronting SMEs in Nigeria.

It is disheartening to note that government of Nigeria over the years have not been able to adequately help the poor grow small and medium scale business.

From evidence available to us

The Small and Medium Enterprise Equity Investment Scheme (SMEEIS) was introduced. However the scheme did not achieve the desired impact as most MSMEs were not interested in the equity participation for fear of losing control of their enterprises. (Peter Osalor; 2016, Vanguard)

Benue state is richly endowed with natural resources which makes it a land of unlimited opportunities for investors. Presently the state is generally poor with abundant cheap resources urban infrastructure, largely as a result of low level of capital investment and dearth of entrepreneurs.

In Nigeria, the ability of small and medium scale business enterprises to achieve and sustain competitive advantage lies within the availability of suitable strategies that would preserve its operations. It is against this backdrop that the researcher considered an examination of the challenges facing small and medium scale enterprises (SMEs) in Benue state a case study of some selected SMEs in Makurdi metropolis.

 

1.3. Objectives of the study

The aim of this study was to examine the challenges facing small and medium scale enterprises (SMEs) in Benue state a case study of some selected SMEs in Makurdi metropolis. The specific objectives are to:

1. determine whether poor financing constitute a major challenge in the performance of SMEs in Markurdi metropolis.
2. ascertain whether inadequate infrastructure constitute a major challenge in the performance of SMEs in Markurdi metropolis.
3. determine whether lack of managerial skills constitute a major challenge in the performance of SMEs in Markurdi metropolis.

 

1.4. Research Questions

This study will be guided by the following research questions:

1. Does poor financing constitute a major challenge in the performance of SMEs in Markurdi metropolis?
2. Does inadequate infrastructure constitute a major challenge in the performance of SMEs in Markurdi metropolis?
3. Does lack of managerial skills constitute a major challenge in the performance of SMEs in Markurdi metropolis?

 

1.5 Research Hypotheses

The study is guided by the following hypotheses:

1. H₀: Poor financing does not constitute a major challenge in the

performance of SMEs in Markurdi metropolis.

2. H₀: Inadequate infrastructure do not constitute a major challenge in the

performance of SMEs in Markurdi metropolis.

3. H₀: Lack of managerial skills does not constitute a major challenge in

the performance of SMEs in Markurdi metropolis.

 

1.6. Significance of the Study

The critical nature of small and medium scale business to the success or growth of any country is given. Empirically, this study is carried out to examine the challenges facing small and medium scale enterprises (SMEs) in Benue state a case study of some selected SMEs in Makurdi metropolis so as to ameliorate the problem of low productivity faced by small and medium scale businesses.

This study will be important to small and medium scale business as it will help guide it on how it should operate. It will teach it the importance of business survival and the necessary guide of attaining expansion of business. It will also help owners of small and medium scale businesses get maximum value from the business.

This study will be of utmost importance to investors, government and the researchers because it will provide policy recommendations to the various Nigeria stakeholders taking adequate measures in small and medium scale enterprise for rapid capacity investment.  It is hoped that the exploration of small and medium scale business in Benue state will provide a broad view of the operations of small and medium scale businesses to investors and government. It will contribute to existing literature on the subject matter by investigating empirically the challenges faced by small and medium scale business enterprises of the country. This study will be of benefit to;

The Academia: members of the academia will find the study relevant as it will also form basis for further research and a reference tool for academic works.

Government: this study will reveal to the government happenings in small and medium scale business enterprises. Formulation and implementation of policies based on this findings would ensure development in the area.

Investors: this study shall also be valuable to the investors especially those who may have research interest as it shall guide their private investment decisions.

 

1.7. Scope of the Study

This study is intended to examine the challenges facing small and medium scale enterprises (SMEs) in Benue state in 2020 using owners of small and medium scale businesses in Markurdi metropolis; Benue state, Nigeria.

 

1.8. Operational Definition of Terms

The following terms have been defined operationally.

• Small and medium-sized business enterprise: small and medium-sized business enterprise is an enterprise marked by limited number of employees and a limited flow of finances and materials. Here it implies SMEs in Markurdi metropolis.
• Business performance: efficiency and effectiveness of an organization reflected in the business objectives set by management. Here it implies the performance of SMEs in Markurdi metropolis.
• Challenges: challenges in this context constitute the problems SMEs in Markudi metropolis encounter during operations.

 

1.9. Organization of the Study

This study is divided into five chapters. Chapter one is introduction which consists of the background to the study, statement of problem, research questions, research  hypotheses,  objectives  of  the study, the  significance  of  the  study,   the scope  and  limitations  of  the  study  and  finally the  organization of the study. Chapter two deals with the literature review which consists of the conceptual literature, theoretical literature, empirical literature, theoretical framework. Chapter three gives the research methodology including research design, population of study, sample size, sampling technique, method of data collection, instrument of data analysis, method of data analysis, validity/reliability of instrument.  Chapter four is presentation and analysis of data, discussion of findings. Chapter five gives the summary, conclusion and recommendations.

CHAPTER TWO

LITERATURE REVIEW

 

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