ACCESSIBILITY OF BUSINESS LOANS FOR SMALL AND MEDIUM SCALE ENTERPRISE IN NIGERIA (A CASE STUDY IN UBA BANK KONTAGORA)
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BACKGROUND OF THE STUDY
Small and medium firms, often known as SMEs, provide a significant contribution to the economic growth and vitality of most countries across the world, particularly those in emerging nations (Quartey, Turkson, & Iddrisu, 2017). The small and medium-sized businesses (SMEs) of Nigeria are the primary engines of entrepreneurial innovation, economic expansion, and employment creation (World Bank, 2017). Small and medium-sized businesses (SMEs) are important contributors to job possibilities, wealth growth, the reduction of poverty, and income production (Obi et al., 2018). Small and medium-sized businesses (SMEs) make a substantial contribution to the growth and development of any nation's economy. In addition to lowering poverty and increasing job opportunities, SMEs make a significant contribution to the advancement of industry (Menike, 2015).
According to the World Bank (2016), small and medium-sized enterprises are regarded as the economies' primary source of job creation. Small and medium-sized enterprises (SMEs) face enormous and severe issues around the globe, one of the most famous of which is restricted access to business financing (Aysan, Disli, & Ozturk, 2016).
More than half of all jobs in the globe are provided by small and medium-sized businesses (SMEs), which also contribute to economic growth by lowering unemployment rates and raising standards of living in every nation (Kumar, 2017). According to research conducted by Stouraitis, Mior, Harun, and Kyritsis (2017), the contributions of SMEs to the formation of economies account for fifty percent of the worldwide GDP and sixty percent of international employment.
Moreover, because they employ members of both skilled and unskilled labour forces, SMEs contribute to the improvement of living conditions in their respective nations (Oduntan, 2014). In 2010, small and medium-sized companies (SMEs) accounted for 65% of firms in Nigeria and provided 60% of the country's job opportunities (iaková & Verner, 2015).
The small and medium-sized businesses (SMEs) of Nigeria are the primary engines of entrepreneurial innovation, economic expansion, and employment creation (World Bank, 2017). The official unemployment rate in Nigeria is very high, however it is thought that the unofficial unemployment rate is substantially higher. Furthermore, the official poverty rate in Nigeria is extremely high (Obi et al., 2018). These statistics are the result of limited natural resources as well as a big trade imbalance.
It has been established that the accessibility of financial resources is one of the most important factors in the development, expansion, and achievement of SMEs (Miracle, 2016). The methods of financing that are utilised by SMEs range from initial internal sources, such as the owner-personal manager's savings and retained profits, to informal outside sources, such as financial assistance from family and friends, trade credit, venture capital, and angel financiers, and thence to formal external sources, which are represented by financial intermediaries such as banks, financial institutions, and securities markets (Motilewa, Worlu, Ogbari, & Aka, 2015). The financial growth cycle model that was suggested by Nguyen, (2017) suggests that over the many phases of a company's life cycle, a company's financial demands as well as the numerous financing choices that are open to small and medium-sized enterprises (SMEs) shift. To put it another way, the company has to implement a distinct finance strategy at each step of the growth cycle it is going through. In general, small and medium-sized enterprises (SMEs) in the start-up phase rely heavily on funding sources that come from within the company. This is due to the distinctive characteristics that characterise SMEs during this phase, such as informational opacity, a lack of trading history, and the high risk of failure (McCarthy, Oliver, & Verreynne, 2017).
When starting a new business, one of the most significant issues to take into consideration is whether or not it will be able to obtain business loans. The majority of small and medium-sized businesses (SMEs) rely on loans from financial institutions as their primary source of funding from outside sources. The capacity to obtain credit is contingent on a wide range of variables that are all connected to the workings of businesses and banks. The size of the business is one of the characteristics that may be regarded as differentiating credit terms. Because of the limited information that is transmitted to banks and the asymmetry of the information, it is difficult for small and medium-sized businesses (SMEs) to acquire financing. However, SMEs are essential to the growth of the economy (Nguyen, 2017). On the other hand, gaining access to business loans will be a lot simpler if a company has a stronger financial position and if there is more information accessible about the business. To put it another way, the role that the smaller businesses play in the economy is analogous to that of a lubricating additive (Lamb, 2016).
1.2 STATEMENT OF THE PROBLEM
The primary barrier to the expansion of businesses in Nigeria is the small and medium-sized enterprises' (SMEs') lack of access to business loans (Lamb, 2016). Small and medium-sized businesses (SMEs) make up the majority of Nigeria's commercial and financial companies, just as they do everywhere else in the globe. Small and medium-sized businesses make up around 68% of all companies in Nigeria (Hussein & Baharudin, 2016). The difficulty of small and medium-sized enterprises (SMEs) to support themselves financially has contributed to Nigeria's unemployment rate, which has risen over the last decade, as well as the country's poverty rate, which is more than 20% (iaková & Verner, 2015). The widespread problem in the business world was that there was insufficient access to business loans, which had a detrimental impact on the viability of SMEs and economic growth. The unique issue with Nigerian small and medium-sized enterprises (SMEs) is their inabilities to acquire business loans.
Recent study has focused a significant amount of emphasis on the challenge of providing enough access to business loans for SMEs. This subject is of particular interest to academics.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study include:
1. To determine the SMEs loan accessibility from UBA bank Kontagora.
2. To determine the extent to which loan schemes have contributed to accessibility of fund to SMEs in Nigeria.
3. To determine the impact of financing in the survival and growth of SMEs in the Nigeria business environment.
1.4 RESEARCH HYPOTHESES
On the basis of the problems of this study, the objectives of this study and the research questions, the following hypotheses are therefore formulated for testing:
Hypothesis One
H0: UBA bank Kantagora loan facilities are accessible to SMEs in Nigeria.
H1: UBA bank Kantagora loan facilities are not accessible to SMEs in Nigeria.
Hypothesis Two
H0: The extent to which loan schemes have contributed to accessibility of fund to SMEs in Nigeria is low.
H1: The extent to which loan schemes have contributed to accessibility of fund to SMEs in Nigeria is high.
1.5 SIGNIFICANCE OF THE STUDY
The significance of the study include:
1. The result of the study are useful to the federal government in improving its policies on credit accessibility to SMEs.
2. It will also assist the organized private sector in improving their credit delivery system to ensure their accessibility to SMEs.
3. The findings would help owners of SMEs identify factors responsible for their inability to have access to credits from both the organized private sector and the various government credit.
4. The study will serve as a reference material for future research work.
1.6 SCOPE AND DELIMITATION OF THE STUDY
Since finance, time factor and manpower resources were not sufficient to conduct a large-scale survey of credit accessibility of SMEs, the study is delimited to the accessibility of business loans for small and medium scale enterprise in Nigeria using UBA Bank, Kontagora as a case study.
Since all the SMES in Nigeria operate under the same economic conditions and tackle identical problems, the results of the study will be used to generalize their financial problems.
This research study is limited to the use of administered questionnaire and also restricted to a sample size of 100 incorporated SMEs drawn within the scope of study.
1.7 DEFINITION OF TERMS
Capital Investment: Acquisition of plants for production purposes.
Commercialization: Conversion of a non profit-making public establishment to a profit-making and self sustaining enterprise.
Credit Facilities: Various external source of funds e.g. loan, debt factoring, customer financing etc.
Credit Schemes: Programmes put in place by government through which external funds can be obtained with ease.
Diversification: Spreading of investments to reduce risk and or to be more competitive.
Entrepreneur: A person who conceptualize a business enterprises or opportunities establishes it, and nurse it to survival and growth.
Equity Financing: Investing fund in a business enterprise by taking up its shares capital. Funding through part ownership.
External Funds: funds obtainable from organized private financial institutions and government loan schemes, other than personal funds (savings).
Financial Funds: funds
Financial Window: Sources (organized private sector and government institutional funds and credit schemes) through which external funds can be obtained.
Liquidate: To close down a business and use any money thus made to pay it's debt.
Moratorium: The time frame to repay an externally sourced fund.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows; Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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