CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Small and Medium Scale Enterprises (SME) are often regarded as the engine of contemporary economic development, since they offer more employment to a significant section of the people in a given country than major corporations, and hence help to alleviate poverty. According to Fatai (2011), the capacity of SMEs has harmed Nigeria's current problems of hunger, poverty, and unemployment. He went on to say that the unfortunate development is SMEs' inability to provide the mechanism that drives economic growth and development, which is the foundation for poverty alleviation. The development of Small and Medium-Sized Enterprises (SMEs) has become extremely important in the development of most third-world countries. No country ever advances without a significant contribution from the economy's Small and Medium Scale Enterprises component. The performance and effectiveness of SMEs as instruments for economic growth and development, with the goal of reducing poverty rates among the population, is being studied. In Nigeria, SMEs have had a particularly bad performance (Ihua, 2009). Their poor performance has exacerbated the county's poverty, unemployment, and low quality of life. SMEs employ 70% of the workforce in the industrial sector and 60% of the workforce in the agricultural sector, but they only produce 10% to 15% of overall industrial output and have a capacity utilization of just over 30%. The lack of cash has made it even more difficult for many businesses to get off the ground.

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