COMMERCIAL BANK LENDING TO SMALL AND MEDIUM SCALE ENTERPRISES

 (A CASE STUDY OF UNION BANK OF NIGERIA PLC, ENUGU)

ABSTRACT

Various criteria had been used to define small and medium scale enterprises in different countries of the world.  In Nigeria, small and medium scale enterprises are defined as those in the industrial sector, which exclude general commerce, whose total capital investment does not exceed N2.5 million (including land and working capital or whose maximum turnover is N12.5 million annually).

These enterprises are very essential and important for the economic development of any economy.  They serve as sources of raw materials for the large-scale enterprises, channel of employment and for rural development.  As a result, the monetary authorities through the Central Bank of Nigeria (C.B.N.) credit guideline directed the commercial banks to give a certain percentage of their total assets to the small and medium scale enterprises as credit.

The project aims at examining the extent the commercial bank have completed with the guideline in providing credit to the small and medium scale enterprises, if they have complied, how adequate are the financial assistance and what the impediments on their way are.  At the end suggestions will be made for improving or increasing credit facilities to the sector.

The main source of material of this project is primary sources such as interviews.

Data analysis does not go into statistical theorems and methods but based on simple comprise and percentages.

Bases on the analysis, finding emerged, recommendations for improvement of credit faculties to the small and medium scale enterprises made and finally conclusion drawn.

TABLE OF CONTENTS

Approval page

Dedication

Acknowledgement

Abstract

Table of contents

1.1            Background of the study

1.2            Statement of problem

1.3            Objectives of the study

1.4            Significance of the study

1.5            Hypothesis

1.6            Scope and limitation of the study

1.7            Organisation of work

1.8            Definition of terms

REVIEW OF RELATED LITERATURE

2.1            Introduction

2.2            The Nigerian banking system – an overview

2.3            The central banking

2.4            Commercial banks

2.5            Development banking

2.6            Merchant banking

2.7            The role of small scale industries to economics development

2.8            The definition of small industries

2.9            The financial needs of the small scale enterprises

2.10       The commercial banking industry and the small scale enterprises

RESEARCH DESIGN AND METHODOLOGY

3.1            Sources of data

3.2            Questionnaire design

3.3            Determination of sample size

3.4            Method of investigation

3.5            Validation of measuring instruments

PRESENTATION AND ANALYSIS OF DATA

4.1            Introduction

4.2            Analysis

4.3            Test of hypothesis

FINDINGS, RECOMMENDATION AND CONCLUSION

5.1            Findings

5.2            Recommendations

5.3            Conclusion

Bibliography

Appendix

CHAPTER ONE

So much had been said and written about commercial bank lending to small and medium scale enterprises.  One still wonders why the small and medium scale enterprises are ever faced with the age-old syndrome of inadequate funds.  The presence of the small and medium scale industries are not found in large numbers in very city, towns and villages as one would have thought, at least judging by the preponderance of attention it had been enjoying for long time now.  Yet the problem is regarded as an ever-flagged issue even with out any real practical solution in sight.

Due to the relevance of the small and medium scale enterprises to the rapid economic development of the country, I consider any research into how to proliferate the economy with relevant small and medium scale enterprises very essential to our survival and growth; hence the promoting of this research work.

1.2            STATEMENT OF PROBLEM

The federal and state government has recognized the importance of small and medium scale enterprises (SME) in accelerating the economic development of the nation.  As a result the monetary and fiscal policy guidelines since 1990 had directed commercial and merchant banks to increase their minimum lending limit to the small and medium scale enterprises to 20 percent of their total credit outstanding.  The loan shall be strictly for activities in the industrial sector. Prior to 2004 the prescribed minimum was 16 percent.

Commercial banks have been complying fully with this laudable objective of funding small and medium scale enterprises adequately as directed by the Central Bank of Nigeria. Consequently, many of these small and medium scale enterprises (SME) get “choked” “die” because of inadequate financial support from the commercial banks.

1.3            OBJECTIVES OF THE STUDY

The relevance of the small and medium scale enterprises to the rapid economic development of the country is very fundamental to our survival as a people.  The commercial banks which number up to 120 in the country with branches spread all over the country do not provide adequate credit to the small