IMPACT OF DEPOSIT MONEY BANKS ON THE GROWTH OF MICRO ENTREPRISES IN BIDA LOCAL GOVERNMENT AREA, NIGER STATE

IMPACT OF DEPOSIT MONEY BANKS ON THE GROWTH OF MICRO ENTREPRISES IN BIDA LOCAL GOVERNMENT AREA, NIGER STATE

Background to the study

Small and medium-scale enterprises (SMEs) are viewed as tools for alleviating poverty in Nigeria and enhancing the country's economy.

Economic development is a long-term process in which an economy's actual national income grows. Economic development also refers to poor nations achieving higher levels of real per capita income and better living circumstances for their citizens. For affluent nations, maintaining progress is a challenge, but for impoverished countries, speeding growth is an even greater challenge (Ojo, 2010). The importance of finance in economic growth has long been recognized in the literature. Financial intermediation through the banking system, it is said, plays a critical role in economic development by influencing savings allocation, hence enhancing productivity, technical progress, and the rate of economic growth (Sanusi, 2011).

For both developing and developed countries, micro, small and medium scale firms play important roles in the process of industrialization and economic growth. Apart from increasing per capita income and output, MSMEs create employment opportunities, enhance regional economic balance through industrial dispersal and generally promote effective resource utilization considered critical to engineering economic development and growth (Sule, 1986; Udechukwu, 2003). Micro, small and medium enterprises (MSMEs) are companies whose headcount or turnover falls below certain limits. The definitions change over time and depend, to a large extent, on a country’s level of development. Thus, what is considered small in a developed country like the USA could actually be classified as large in a developing country like Nigeria. However, the definition of MSMEs in Nigeria as contained in the National Policy on Micro, Small and Medium Enterprises (SMEDAN, 2007) is adopted in this study (Table 1), because it is in line with the definition in other developing countries like Indonesia (Timberg, 2000) as well as in the European Union (EU) (European Commission, 2007).

Since Nigeria's independence in 1960, the government has pursued a number of measures aimed at accelerating growth. The government resorted to using national economic plans to regulate the economy. Small businesses and entrepreneurship have received less attention as important components of economic development and growth. Until 1986, when the structural adjustment plan (SAP) was implemented, government policies continued to display a strong bias for major enterprises. The program acknowledged the growing significance of entrepreneurship in laying a firm basis for the nation's growth and wealth creation. Following economic policies and programs recognized the importance of entrepreneurship and small-scale businesses in the economy in a variety of ways. Currently, policy ideas are represented in national and state documents on economic empowerment and development.

Governments at all levels are more concerned about Nigerians' economic empowerment and the need to alleviate poverty, have given entrepreneurship and the resultant small and medium scale enterprises a rising visibility and attention in the country. A lot of interest has also been kindled for the study and understanding of the roles of SME’s in the country, especially in employment generation and poverty reduction. There is a rising growth particularly in the less developed countries (LDCs) on small and medium enterprises (SME) for achieving industrial development because of the numerous advantages SMEs have over large-scale industrial establishment.

The banking system is critical for any nation since it is the hub of any economy's socioeconomic growth. Terungwa,  (2016). This means that commercial banks have an active developmental role in the economy, such as moving funds from surpluses to deficit spending units. In Nigeria, commercial banks are seen as the primary source of funding for SMEs and entrepreneurs. Finance has been recognized as a vital part in the growth and development of SMEs, according to Akabueze (2007). For example, the establishment and effective operation of any industrial firm, large or little, would need the availability of cash for capitalization, working capital, and rehabilitation, as well as the formation of new investments. Policymakers in both the public and private sectors have been particularly interested in providing money to the industrial sector, particularly to SMEs. It is common knowledge that businesses rely on a range of funding sources. External and internal, institutional and informal sources are among them (Aruwa, 2009).

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