CHAPTER ONE

10 INTRODUCTIONS

From observation, I have come to the understanding of one general thing in mind set of people (i.e.) whenever the word “small” is mention, the minds of people race to something or a picture not big, less important, not up to standard in nature. This is the same in business, once small scale industry is being mention; people looked down on it, yet forget to understand that every big thing starts small.

However, studies of modern economics have shown that it is difficult to maintain a balance and sustainable economic growth by depending only on large business organization. Small and large businesses are known to contribute significantly in building a solid and vital economic base in both developed and developing countries. Over the years, studies of management have often concentrated on large organization with strict formed and impersonal relationship. The reason for this obviously includes the high prevalent risk resulting from huge capital investment and large-scale operation. In Nigeria, the term small-scale business has got several definitions. The reason is that different countries are at different level of developrnient, operating within different economic conditions.

According to bank of Commerce and Industry (NBC), small-scale business is a firm whose assets does not exceed N750,000.OO, while Central Bank of Nigeria defines small-scale enterprise as a firm whose assets does not exceed N 25 Million annually.

Therefore, we will examine the uniqueness and the level of Commercial Bank credit to small-scale industries, and then find out how adequate this credit has been in solving the financial problems of small-scale industries.

1.1 BACKGROUND OF STUDY

Osubor and Okafor (2006) a Commercial Bank may be defined as a financial institution which deals in money and credit and which some of which are repayable on demand by cheques. Commercial Banks are limited habitability companies established for profit as owned by shareholders. Commercial banks are the nations most important financial institution. They are unique on the performance of service and are distinguished.

Due to the type of economic we find ourselves, the kind of leadership we have and lack of trust among each other, Commercial Banks are now known for their restrictive credit policy. This policy has made it rather impossible f -al ca1 industrial foobiajn kins, which they require Tor their expansion and growth of their business and economy. In a situation where loans are approved, the problem may either be that the amount is not adequate or that the time of disbursement of loan is not consistent with the time the loan is needed.

Commercial Bank lending on small-scale industries have not been adequately faced. This is because of their high interest rate on bank loans, their requirement for collateral security and their understanding towards small-scale business.

1.2 STATEMENT OF PROBLEMS

Just as human being are face with challenges every day, likewise business and organizations will attempts of modernization of many primary industries1 standard of operation have moved into the capital intensive stage for new industries to be able to go into operation they need reasonable capital. There comes the Commercial Bank.

The application of Commercial Banks lending policies has denied the small-scale industries the opportunity of using bank facilities for their growth. These problems hindered the development of small-scale business in Nigeria they include:

The willingness of Commercial Banks in lending to the small-scale business.

Lack of trust in small-scale business owners.

> The inadequate assets base for securing loan and advances from banks.

1.3 OBJECTIVES OF THE STUDY

Due to the type of economic we find ourselves, the kind of leadership we have and lack of trust among each other, Commercial Banks are now known for their restrictive credit policy. This policy has made it rather Impossible for small-scale Industry to obtain loans, which they require for their expansion and growth of their business and economy. In a situation where loans are approved, the problem may either be that the amount Is not adequate or that the time of disbursement of loan is not consistent with the time the loan is needed. Therefore, the reason of this work Is to find out:

To which level of Commercial Bank credit to small- scale industries.

To the adequacy or inadequacy of Commercial Banks credit to small-scale industries. To which extent is the Commercial Bank credit to small-scale Industries. To offer solution and recommendation where necessary.

1.4 RESEARCH QUESTIONS

–      What are the main thing that brought about the uniqueness of the Commercial Bank? i.e. the Impact of lending to small business.

–      What role can we say, the Commercial Bank has played In the growth of small-scale industries? ) Is there any differently encountered by small-scale business in obtaining loans from Commercial Bank?

–      Development of this small-scale Industry, are they playing any role in the growth of the economy.

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