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  • Department: BANKING FINANCE
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The major objective of this study is to ascertain the extent to which the commercial banks play in financing small and medium scale industries in Nigeria using Union Bank Plc, Abakaliki. Instrument of data collection is questionnaire and research question which formed the source of primary data. The method of analysis used is the chi-square. The major findings of this research are that Union Bank Plc has helped to finance small and medium scale industries. The recommendations based on the finding is that in order to reduce the risk in small and medium scale enterprises lending, Central Bank of Nigeria and the government can do more than they are doing currently. It was recommended that guidelines by commercial banks to finance SMEs needs to be flexible to accommodate the small and medium scale enterprises. The research concluded that if the desired objective of using small enterprises as catalysts of development is to be achieved than the role of commercial banks should be mutually supportive.


For both developing and developed countries, small and medium scale firms play important roles in the process of industrialization and economic growth. Apart from increasing per capital income and output , SMEs create employment opportunities, enhance regional economic balance through industrial dispersal and generally promote effective resources utilization considered critical to engineering economic and growth.

        However, the seminal role played by SMEs not withstanding it development is every where constrained by inadequate funding and poor management. The unfavourable macro economic environment has also been identified as one of the major constraints which most times encourage financial institutions to be risk-averse in funding small and medium scale businesses. The manufacturing sector(including micro, small and medium enterprises) is acknowledged to have huge potential for employment generation and wealth creation in any economy, yet in Nigeria, the sector has stagnated and remains relatively small in terms of its contribution to GDP or the gainful employment.

        Activity mix in the sector is also quite limited dominated by import dependent processes and factors. Although there is no reliable data, imprecise indicators show that capacity utilization in the sector has improved perceptibly in the period since 1999, but the sector is still faced with a number of constraint with lack of credit availability as the principal constraint. Credit is the largest element of risk in the books of most banks and failures in the management of credit risk, by weakening individual banks and in some cases, the banking system as a whole, have contributed to many episodes of financial instability. A greater understanding of the nature of credit risk, leading to improved measurement and international financial system vis-à-vis the small and medium enterprises in the long run.

        Generally, the stage of development and, thus the efficiency of the system varies among countries and change overtime in the same country. The more developed and sophisticated financial systems tend to be associated with the nature economics. While underdeveloped financial systems feature in developing economics. As a process, the financial system adjusts to changes in the real economy just as the economy responds to developments in the financial sector. All over the world, size had become an important ingredient for success, the banking sector included.

        In Nigeria every known regime recognizes the importance of promoting SMEs as the basis of economic growth. As a result, several micro-lending institutions were established to enhance the development of SMEs. Such micro credit institutions include the Nigeria Bank for commerce and industry (NBCI), National Bank of Nigerian (PBN) the community banks (CB), and the Nigerian Export and Import Bank (NEXIM), and the liberalization of the banking sector.

        This study attempts to find out how commercial banks finance small and medium scale enterprises taking Union Bank of Nigeria plc as a case study. Union Bank of Nigeria’s rich history can be traced to 1917 when it was first established as colonial bank Dco (Dominion, colonial and overseas) resulting from its acquisition by Barclays Bank. Following Nigeria’s independence and the enactment of the companies act of 1968, the bank was incorporated as Barclays Bank of Nigeria limited(BBNL, est. 1969). Between 1971 and 1979, the bank went through a series of changes including its listing on the NSE and share acquisition transfers driven by the Nigeria enterprises promotion acts (1977 and 1977).

        In 1993, in line with its privatization/commercialization drive, the federal government divested by selling its controlling shares(51.67%) to private investors. Thus, Union Bank became fully owned by Nigerian citizen and organization all within the private sector. During the central bank of Nigeria’s (CBN) banking sector consolidation policy, union bank of Nigeria plc acquired the former universal trust bank plc and broad bank Ltd and absorbed its one time subsidiary, union merchant bank Ltd.

        Following the banking crises in 2009 and the intervention of the CBN via asset management company of Nigeria (AMCON), the bank was recapitalized in 2012 with an injection of $500 million by union global partners limited(UGPL), a consortium of local and international investors. UGPL acquired 65% of the bank’s share holding and in the last quarter of 2014, AMCON’S remaining 20% stake in the bank was acquired by Atlas Mara. In compliance with CBN’S regulation 3, UBN is divesting of all non-core banking subsidiaries, which aligns with our core banking business model. Union bank, united kingdom(UBUK) will remain the only subsidiary of the bank.

        Union ban k of Nigeria plc is a retail and commercial bank with its headquarters located in the central business district of Lagos, Nigeria.

        There is also one branch outside the country in London which serves as a representatives of the bank of Nigeria to carryout its foreign services. The staff strength of the bank is over seven thousand six hundred constituting managerial, senior and junior staff.


One of the main obligation of commercial banks in Nigeria and else where in the maximum contribution to the economic development of the nation others are maximum profitability owned to the shareholders and maximum liquidity owned to the depositors.

        This research work will concentrate on the maximum contribution to the economic development of the nation, i.e through financing SMEs by commercial banks. The analysis of the research problem will thus pose some question like. Do commercial banks finance small and medium scale enterprises adequately, if not what are the limitations.


The following are the objectives of the study.

(1)     To determine the extent to which the lending process of banks relates to attitudes of small scale business owners.

(2)     To examine the role of commercial banks in satifying needs of SMEs in Nigeria taking union bank of Nigeria plc as  a case study.

(3)     To evaluate the extent to which small and medium scale enterprises access loan from Union Bank Plc Abakaliki.


The following are research questions

(1)     How does the attitude of SMEs, business owners relate to the method union bank plc lend money to them.

(2)     Does money lend to small and medium scale business owner by union bank plc enhances profitability in  their business?

(3)     Does union Abakaliki comply with CBN policy in lending to SMEs business owners?


Base on the formulated research question, the hypothesis are:

H0: There is no significant relationship between bank lending to SMEs in Abakaliki and the attitude of the business owners.

H1: There is no significant relationship between lending to SMEs and profitability of the business owners.

H0: Union Bank plc Abakaliki does not comply with the central bank of Nigeria credit guideline as it affects lending to SMEs.

H2: Union bank plc Abakaliki comply with the central bank of Nigeria credit guideline as it affects lending to SMEs.

H0: That financing SMEs by commercial Banks has been a failure in union plc Abakaliki

H3: That financing SMEs by commercial banks has been achieve in union bank plc Abakaliki.


During the 1960’s and early 1970’s most Nigeria engaged in

industrial project did soon subsistence level but now emphasis has shifted to the sophisticated and capital intensive enterprises. Annual policies of the federal ministry of Nigeria in recent years have been to ensure that commercial bank provide needed capital to small and medium scale enterprises to help improve their present state. The study therefore sets out to ascertain the extent to which commercial banks have performed the role and the findings will help make recommendations for future improvement of the present situation.


This research work is intended to examine the financing of SMEs by with emphasis on union bank of Nigeria plc. As seen in the earlier part of this chapter, the importance of SMEs towards economic development of  a nation cannot be over emphasized, the study overs all kinds of industries, production processing, servicing, etc.


One of the major limitation is carrying out this work is time.

There is time constraint in carrying out this research work due to the fact that there are other academic engagements like attending lectures, writing assignment, test, etc. Another limitations of this, is that only UBN PLc is used. The operation in this bank will certainly not represent the genuine situation obtainable in other banks.

        This can be as a result of different policies or the financial capabilities in lending. However, UBN, PLC is chosen because of its financial backing and this represent commercial banks that can fulfil their obligation as seen in the earlier part of the chapter.