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FINANCING SMALL SCALE INDUSTRIES IN NIGERIA, PROBLEMS AND PROSPECT (A STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA)

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ABSTRACT

The purpose of this research work is to identify the various source of financing small scale industries in Ughelli North local government Area of delta State and the same time reveal the likely problems which the small scale investors may face in the course of trying to secure capital for their industries. The study unnecessary thing at this area of mass retrenchment when many people are learning the public sector everyday and morning to private sector, because it helps to bring to the awareness of these people in the various source of financing their industries or businesses. This is very necessary as we know that capital is very vital for the growth and development of many business activities. After thorough review of relevant literature, structure questionnaire were used to collect conclusion were drawn from the analysis and the following finding were made. Employees lack on the job training and small scale industries provide job opportunity for rural people.

          Small scale industries experience acute shortage finance because they do not know the avenue open for them to secure capital.

Bank feel reluctant to grant loans to small scale industries because of those who enjoyed such services in the past fail to repay such loans. In the light of the above findings, recommendation and suggestion were made, it was suggested that the government should as a matter of urgency involve a new financial system which the small ventures should be made to obtain loans and they should try by all means to see that small firms are given adequate protection which is very important for the growth.

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Small scale industries have been known to have added immensely to the economic development of most cities essentially in Nigeria which is on e of the developing countries.

          However, there is no universally agreed definition of the word ‘small scale industry’ from place to place here in Nigeria, small scale industry may be seen as a processing manufacturing or service enterprise whose capital investment does not exceed N250,000 in equipment and machinery only.

Again, small scale industries may be regarded as one of large industry. In Nigeria small scale industries from the main industrial subsector and have greatly transformed the economic future of Nigeria over a period of time.

In Ughelli North local government area of Delta state a few small scale industries exist as the basis for industrial development of the area, many factors have being responsible for assistance of these small scale industries commonest amongst which is the little capital or financial needed to run such a business venture. It becomes important therefore at these point to find solution to the issue of the services of finance to the small scale industries on loans from individual, savings, loans from relatives, ploughing back profit among these also importance is to ascertain that small scale industries, suffer from inadequate finance, a problem resulting from their inability to acquire credit from banks and other financial institutions. Lack of managerial competence and inefficiency has also prevented small scale industries from success in capital formation.

          With the development, the state and federal government have made determinable effort to revamp the economy by paying more attention to small industries because of their value.

Finally, it is the intention of this study to carefully examine the failure of financing small scale industries and to identify the problem and prospects of such industries.

1.2   STATEMENT OF THE PROBLEM

Very many of our industry in this country lack funds not because they are not credit worthy, not because they are not credit or collateral security, nor their projects is not viable but because they do not know the right source to go to.

          Many of the small scale industries in Ughelli north local government suffer from miss – allocation of capital.

Banks doubt the credit worthiness of the small scale industries and hence they find it difficult to obtain loans from the bank. Many of these industries, many investors direct the funds obtained for business purpose into private use thereby making the business suffer.

          For the purpose of this study, we are going to focus our attention on the large number of business client in Ughelli north local government area of Delta state.

What personal problems do they encounter?

What financial problem do they encounter?

Does loan obtained actually used entirely for the business?

          Generally, studies have shown small scale industries in many West Africa setting are besieged with problems of lack of fund, lack of skilled manpower and manage rid ability, problem of population difficulties, workers, and negative surrey into ready marker.

Also a large number of owners of the very small business have had only elementary education; a few have moderate but specula progress.

          A few small scale industries on the other hand were naturally business minded and were lucky to come from relatively with families, harmful got money by success of various types of grumbling and this success made the difference between business collapse and sound growing project.

          Many of them operate ad ridiculous low over and efficiency is just only able to keep their heads above water,success for most of this establishment rest mainly on sound financial support and management.

A basic requirement for the successful operating of any business is to balance commitment against resources when business commitment are not matched by resources there is problem it can therefore be seen that the problem of undercapitalization facing many Nigeria especially Ughelli North local government of Delta state is that owed industries establishment need urgent part of their industrialization programme.

1.3   OBJECTIVE OF THE STUDY

This study intends to examine the problems and prospects of financing small scale industries in Ughelli specifically; the aims of this study are;

1.     To examine the finance of small scale industries in ughelli north local government area.

2.     The personal problem they encounter.

3.     To identify the problems which these industries encounter in trying to finance the industry.

4.     Find out any special problem to militate against the prosperity of small scale industries.

5.     Examine if there is any production infinities on their need.

6.     Recommend possible solutions to the problem facing small scale industries in Ughelli North local government of Delta state.

1.4 RESEARCH HYPOTHESIS

This study based on the following research hypothesis;

H0: Lack of adequate financing options is closely associated with business failure and slow growth of small scale enterprise in the local government.

H1: Lack of adequate financing options has association with business failure and also slow growth of small scale enterprises in the said local government area.

H0: There is no association between small scale business expansion, growth and government incentive.

H1: There is association between small scale business expansion, growth and government incentive.

1.5 SIGNIFICANCE OF THE STUDY

The importance of this study cannot be over emphasized. This is so because at this point in time many people are losing their jobs everyday and hence moving to industries. The result of this study will be used for effective, counselling of both the prospective and existing investors, bringing to the awareness of the small scale investors the available resource of capital for these industries, making the prospective investors know the possible problem they guard against them and minimizing if not eliminating the incident of failure by small scale industries.

1.6 SCOPE OF THE STUDY

The scope of this study covers the problems and prospects of financing small scale industries in Ughelli north local government of Delta state.

1.7 LIMITATION OF THS STUDY

One of the major limitations of this study is time which the work is expected to be ready. And the validity of the research result which was limited to the allowance of information supplied by respondents.

1.8 DEFINITION OF TERMS

Banks: Bank is a financial institution which deals in money worth and safe keeping of property and important documents.

Capital: Money invested in a business in part of wealth produced in the past which instead of being used kept for production of further wealth.

Collateral security: these are tangible goods or property which a customer must provide before he can obtain a bank loan so that bank can recover its money by selling those tangible goods or property.

Finance: it is concerned with the raising and management of fund by business firms.

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