The Contribution of Financial Institutions in Nigeria to the Growth of Manufacturing Industry
CHAPTER ONE
OBJECTIVES OF THE STUDY
The general objective is to examine the contribution of Financial institutions in the growth of Manufacturing sector in Oyo metropolis. Apart from the general objective, the research work also aimed at the following objectives:
- To find out extent to which financial institutions have supported the manufacturing industry
- To find out the extent to which the Manufacturing sector benefited from the credit scheme designed for them by financial institutions.
- To find out if the small scale business are making good use of their advances.
- To find out if the loan given by Financial institutions have improved the general performance of small scale business.
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter deals with the review of literature associated with the study in order to understand concepts and theories relevant to the study. The chapter is structured to include the conceptual review, theoretical review.
Conceptual Framework
Concept of Financial
Financial is defined as the provision of thrift, credit and other financial services and products in very small amounts to the poor to enable them to raise their income levels and improve their standard of living (Eluhaiwe, 2010). Financial is the act of providing a whole range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises. Financial is the practice of offering small and short-term loans to entrepreneurs who otherwise would not have access to capital to begin a small business or other income generating activities (Oyedokun, 2015). Canadians International Development Agency (CIDA, 2010), defined Financial as the provision of very small loans for the micro enterprise, agriculture, education and consumption purposes as well as insurance facilities and other financial product such as insurance services, housing and pension funds. Khandker (2003) defined Financial as “successful opening of economic opportunities for the poor, increasing access to resources and contribution to their confidence and well-being”.
Financial refers to the provision of financial services tailored to the requirements of low income people like micro-entrepreneurs, particularly the delivery of small loans, the provision of small loans, receipt of small savings deposits and easy payment services required by micro-entrepreneurs and other poor people (Makorere, 2014). Financial is a term that refers to the delivery of financial services to customers who are omitted from the conventional financial system because of their low economic status (United Nation, 2006).financial is the delivery of financial services to low-income workers and extremely poor self-employed people (Otero, 2000). Financial is defined as the provision of thrift, credit and other financial services in little amounts to the underprivileged to allow enable them to increase their levels of income and enhance their standard of living.
According to Ojo (2014), Financial are described as small scale financial services that are granted to informal small business operators in other to take part in any other creative or distributive activities. Financial denotes small-scale business or credit services; which are made available to people operating selected business; running small enterprises in which goods are manufactured, reprocessed, repaired or exchanged in rural as well as urban area. As said by Rolando (2002), Financial is a suitable way of assisting entrepreneur. The central Bank of Nigeria (CBN) in its “Regulatory and supervisory Guidelines for Financial Banks (MFBs)” defines MFBs as companies licensed to carry on the business of providing financial services such as savings, loans, domestic loans, transfer and other financial services that are needed by the economically active poor and entrepreneurs to set up and establish their business.
CHAPTER THREE
RESEARCH METHODOLOGY
Area of Study
The study area for this research work is Ibadan South-West Local Government. The components of the Local Government covers between Challenge, Oluyole, Oke ado, Abgeni, through Oke-Are to Mokola, Ina lende and Dubge. Other components are areas from Beere Round about to Foko, Molete, Felele and up to Lagos-Ibadan expressway areas.
Research Design and Sources of Data
In this study the research design used is the survey method. It is used because the study involves getting people’s views on the roles of Financial institution and small scale business performance. Under this design, the study will be limited to cross sectional descriptive (Explanatory) design which according to Asika (2011) is geared towards collecting data to answer research questions or explain the relationship among variables. The independent variable to this study is credit advancement of SME? While change in performance of manufacturing sector, is the independent variable.
In this research both primary and secondary data were used. The primary data are collected through the administration of questionnaires and organized in two sections, section A and B. The first section (A) is designed to collect data on the respondent, characteristics and nature of business. The second section (B) seeks to gather information to facilitate the measurement of the operations of financial institutions on the performance of manufacturing sector in Ibadan-West local Government.
Study Population and Determination of Sample Size
The population of this studies consist of five financial institutions in Ibadan south west namely, Seedvest Financial Bank with 40 staffs, Crest Financial Bank with 45 staffs and AB Financial Bank with 41 staffs
There by giving a total population of 126 staff of financial institutions in Ibadan metropolis area under study. The sample size chosen for this study is Ninety five (95) staff of the three financial banks that form the population of the study.
CHAPTER FOUR
DATA ANALYSIS, FINDINGS AND DISCUSSION
This chapter presents and analyzes data gathered from both primary and secondary sources. This chapter contains the percentages of responses to relevant questions which will enable the researcher to test the staled hypotheses. The primary data were derived from two main soirees, the managers and staff of financial institutions and on the other the managers Kaduna state metropolis. The chapter also contains the summary
FINDING OF THE STUDY
A total number of Ninety five (95) questionnaires were issued to the selected staff of Financial Institutions; only eighteen (90) was successful and completely returned These Nineties are treated as the total required and used in analyzing the data.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
Chapter one shows that the growth and development of any country is substantially dependent on the growth and dynamism of its manufacturing sector driven largely factors which include; favorable government policy and incentives, technical assistance, and financial assistance. The absence of these factors heralded the institutionalization of several Financial institutions to meet the increasing number of Manufacturing sector and support poor households. This chapter further formal/traditional and informal/modern Financial institutions. Again this chapter explains that the Financial has emerged as an effective strategy for poverty reduction across developing countries as well as a strategy for achieving Millennium Development Goals. It concludes that the Financial institutions have been performing below capacity but the additional liquidity provided by thefinancial bank, it is expected that the Financial policy objectives will be realized.
CONCLUSION
This study has assessed and observed that the transaction relationship between the Financial Institutions and small business in Ibadan metropolis. The extent to which the manufacturing sector should benefit from the loan scheme has not reached the optional potential as some manufacturing sector are still unable to access these loans due to reasons which include: Inadequate knowledge on the part of small scale entrepreneurs on improved lending conditions of financial institutions. In the cause of this study, the researcher deduced that a good number of small scale entrepreneurs are indifference about accessing these loans because they assume that the lending conditions of financial institutions are similar to that of commercial Banks which is cumbersome and therefore prefer to raise funds through other sources.
They feel that the financial institutions are unable to meet their needs considering the nature of their business and lending conditions are flexible to meet those needs.
The number of beneficiaries of the credit schemes can be increased in Ibadan south west if there are complete and updated records of increasing number of manufacturing sector.
It was also discovered that small scale business serves as a backbone for economic development not only for developing but for the developed countries. Therefore there is need for Government at all levels to make people aware of how to source fund through various institutions and ministries.
From the finding, it has shown that the loan given to Manufacturing sector has improved the performance and conditions of Manufacturing sector in Oyo State, thereby reducing rural and urban migration and assuring the attainment of self-reliance.
RECOMMENDATIONS
Information Dissemination and Involvement of Clients: Apart from the publications designed by the central Bank of Nigeria, the financial Institutions should expand their channels of promotion and improve their methods of marketing to genuinely meet the need of those small and medium Enterprises rather than interested in the commission attached. Secondly, according to Iganiga (2008), clients should not be seen as faceless customers of formal financial institution who are identified by their account number, clients of financial institutions should be seen as partners. They should be constantly engaged. Some FMIs provide institutional structure for client’s participation in government and management of the institutions.
Develop Innovate Products: financial institutions must recognize that (i) credit needs of clients are diverse and (ii) there are always emerging needs. Clients should be constantly engaged to determine the trends of .their requirements. Tested strategies include market research, clients exist and assessment exercises (Olaitan, 2005).
Proper Documentation: The Oyo State ministry of commerce & coperatives should frequently update the records of registered businesses as categorize them according to their sizes. This will enhance further studies carried out by other researchers as inadequate information may also limit adequate planning and monitoring.
Training: should be given to staff of manufacturing sector in other to develop their skills and become expert in the area of operation.
Regular and Prompt Payment of Debt: It has been noted that default in repayment brings about hindrance to the disbursement of loans to manufacturing sector. Beneficiaries of loans should ensure regular and prompt payment of debt. This will encourage the state to consider more applications and review existing ones.
PROPOSAL FOR FURTHER STUDIES
The study has accessed the relationship between the role of financial institution and the small scale business performance in Ibadan South West LGA, in Nigeria.
For adequate generalization of investigations, the Sample size could be increased. For future researchers, the area of study can be extending to foods and beverages small scale industries.
REFERENCES
- Adelaja, M. A (2010): Understanding the Peculiar Characteristics of Financial Clients in Nigeria. CBN Proceedings of Seminar in Financial Policy, Regulatory and supervisory Framework for Nigeria.
- AdefSon. D. (2003); Small Industries in Developing Countries. Staff Working Papers No. 518 The World Bank, Washington D.C.
- Anyawu, C. M. (2009): Financial Institution in Nigeria: Policy, Practice, and potentials. Paper Presentation at the G24 workshop on ―Constrains to Growth in Sub Sahara Africa‖, Pretoria, South Africa.
- Asika, N. (2011) Research Methodology in the Behavioral Sciences. Longman Lagos.
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- CBN (2010): Financial Policy, Regulatory and Supervisory Framework fo; Nigeria. Abuja, Nigeria.
- Consultative group to assist the Poor. (2008). What is Financial?
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