THE IMPACT OF MICRO-FINANCE INSTITUTION IN THE PROVISION OF SHORT-TERM LOAN TO SMALL SCALE ENTERPRISES (A STUDY OF EKONDO MICROFINANCE BANKS LIMITED), CALABAR SOUTH LOCAL GOVERNMENT AREA.
Entrepreneurship is the foundation for small scale enterprises. Small scale enterprises are the key for economic growth and development. They constitute the bedrock of many economies by providing the impetus for employment creation and value added activities.
In Nigeria, small scale enterprises play crucial roles in economic growth and development process. For instance, they are responsible for the establishment of a robust industrial sector by stimulating indigenous entrepreneurship and technology. They represent an essential link between primary production and large scale industrialization. Besides, they have enormous opportunities for growth due to their nature. But the worst hit is that most of them exist in rural areas. As such, they face a myraid of problems that limit their positive contribution to the economy, Summarily as Financial constraint, Poor infrastructure, poor management etc. But their major challenge is financial constraint.
To solve their problem of financial constraint, government over the years has put in place a number of economic schemes, programmes and policies. One of them is the rural banking programme (RBP) which was introduced in 1977. Under the progamme, banks were mandated to open a number of rural branches and bring banking services nearer to the rural dwellers. It was hoped that banking habits would be imbibed by the people and savings would also be mobilized. But this scheme was not successful because, it turned out to be costly and unprofitable for commercial banks.
Apart from the rural banking progamme , some development finance institutions were established by government to support and promote SSEs such as Nigeria Agricultural and Cooperative Bank(NACB), the People’s Bank of Nigeria, the Community Banks, Bank of industry (BOI), the Nigeria Export Import Bank (NEXIM) and the Nigeria Agricultural Cooperative and Rural Development Bank(NACRDB). In addition to these includes: The Agricultural Credit Guarantee Scheme (ACGS), Agricultural Credit Support Scheme (ACSS) and Small and Medium Enterprises Equity Investment Scheme (SMEEIS). Also some specialized poverty alleviation agencies were equally set up by government to ameliorate the problem and promote SSEs, such as the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), National Directorate of Employment (NDE) and National Poverty Eradicate Programme (NAPEP). All these institutions did not meet the expectations owing to lack of adequate government commitment and poor management.
Consequently, in December 2005, the microfinance policy, regulatory and supervisory framework for Nigeria was launched. The aim was to provide an appropriate menu of financial services by diverse institutions to meet the need of the poor and low income groups. The policy provides for participation of the deposit money banks, non-governmental organizations, newly licensed microfinance banks in microfinance provision.
Despite these attempts, the small scale entrepreneurs are yet to achieve their optimal potential in the economic equation of the nation. However, the trust of this study is to examine the impact of MFBs in provision of short -term loans to SSBs. Besides, the rate at which MFBs finance SSBs, the types of credit facilities available to SSBs, the maturity structure of such credit facilities, the repayment schedule of such credit facilities, the collateral policies of such credit facilities and the general efficiency level of MFBS in financing SSBs, using Chidera MFB as a case study.
1.1 BACK GROUND OF THE STUDY
In economics, it is usually said that our wants are unlimited but the resources to satisfy them are limited. Even in business, expectations are often high but finance is always scarce or limited to meet them. This shows that paucity of fund is a hard-nut-to crack for every organisation be it profit or non-profit making organisation.
Nigeria’s future rests on its ability to train and fund local entrepreneurs that can nature home-grown firms and encourage innovation, risk taking and local investment. But the under development nature of the SSE sector of the Nigerian economy needs urgent step to put it in good order with the micro finance funding of the SSEs, just as instructed by the CBN. However, one question which still yearns for an answer is how the microfinance banks are performing this duty of financing the SSBs in Nigeria. Hopefully, this will be established and proved beyond every reasonable doubt with clear facts and figures as we progress in this work.
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