ASSESSMENT OF THE ROLES OF MICROFINANCE BANKS IN FINANCING SMALL SCALE BUSINESS IN EKITI STATE (A CASE STUDY OF ULAYIN MICROFINANCE BANK) - UNIPROJECTS

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ASSESSMENT OF THE ROLES OF MICROFINANCE BANKS IN FINANCING SMALL SCALE BUSINESS IN EKITI STATE (A CASE STUDY OF ULAYIN MICROFINANCE BANK)



ASSESSMENT OF THE ROLES OF MICROFINANCE BANKS IN FINANCING SMALL SCALE BUSINESS IN EKITI STATE
(A CASE STUDY OF ULAYIN MICROFINANCE BANK)




BY


MATRIC NO: UNAD/BAM5/2008/



BEING A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF BUSINESS ADMINISTRATION, FACULTY OF MANAGEMENT SCIENCES, EKITI STATE UNIVERSITY,  ADO-EKITI, NIGERIA.




IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.SC.) DEGREE IN BUSINESS ADMINISTRATION.


         


CERTIFICATION
This is to certify that this research work was carried out by with MATRIC NO: UNAD/BAM5/2008 of Department of Business Administration, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, under my supervision.





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PROF. OLU                                   DATE
      ( SUPERVISOR)








 
ABSTRACT
          This study focuses majorly on the Assessment of the Roles of Microfinance Banks in Financing Small Scale Business in Ekiti State, making Ulayin Microfinance Bank as a case study. Small scale businesses have unstable and declining profit ability and performance and other are closed even before their anniversary. To improve on profitability and consequent performance and prevent failure, small scale businesses must identify performance drivers focus on improving them the lack access to funds and income opportunities because they operate with inadequate capital and this realize a small profit margin. They need to be the main focus since they are driving forces to economic growth and development. Microfinance bank provides chance to access credit but requires collateral security charge high interest rate and imposes stringent supervision over loan repayment and saving mobilization that most of the owners cannot meet. Traders who manage getting credit continuously perform poorly and spend even the small return in servicing the credit acquired. Despite the activities performed by microfinance bank in financing small scale businesses needs to be of the study.
TABLE OF CONTENT
Title page                                                                             
Certification                                                                                 
Dedication                                                                              
Acknowledgement                                                                           
Abstract                                                                              
Table of content                                                                     
CHAPTER ONE
1.0     Introduction                                                                           
1.1            Background of the Study                                                       
1.2            Statement of the Problem                                                       
1.3            Research Questions                                                      
1.4            Objectives of the Study                                                 
1.5            Significance of the Study                                                        
1.6            Scope of the Study                                                                 
1.7            Limitation of the Study                                                  
1.8            Organization of the Study                                             
1.9            Definition of Terms                                                      
 CHAPTER TWO: LITERATURE REVIEW AND
THEORETICAL FRAMEWORK
2.1     Concept of Micro-Finance Banks                                 
2.2     Traditional Microfinance Institutions                                     
2.3     Challenges Facing Microfinance Institutions                          
2.4     Growth of the Small Scale Businesses in Nigeria         
2.5     Measuring the Performance of Small Scale Business    
2.6     Women’s empowerment and Microfinance
Contrasting Paradigms                                                  22
2.7     Microfinance Activities in Financing
Small Scale Business                                                     
CHAPTER THREE: METHODOLOGY
3.0     Introduction                                                                           
3.1     Research Design                                                           
3.2     Study Population                                                          
3.3     Sample Size and Sampling Procedures                         
3.4     Data Sources, Collection Methods and Collection
          Tools/Instruments                                                                  
3.5     Data Analysis and Data Processing                               
3.6     Ethnical Issues and Considerations                              
3.7     Challenges Encountered in the Field                             
CHAPTER FOUR: PRSENTATION AND ANALYSIS
OF FINDINGS
4.0     Introduction                                                                        
4.1     Background Characteristics of the Respondents       
4.2     Credit and Saving Policies and Terms of
          Microfinance Institutions                                                     
4.3     Performance of Small Scale Business in
          Oja-Oba Market                                                            
4.4     Relationship between Microfinance Activities and
          Small Scale Businesses                                                  
CHAPTER FIVE: SUMMARY, CONCLUSION AND
  RECOMMENDATION
5.1     Summary                                                                      
5.2     Conclusion                                                                    
5.3     Recommendations                                                                  
References                                                                        
Appendix1                                                                     
Questionnaire                                                              
 
CHAPTER ONE
1.0     INTRODUCTION
1.1     BACKGROUND OF THE STUDY
          The role of small scale business as an engine to economic growth has garnered considerable public attention. They have significantly low revenues and most have closed even before their first anniversary. (Balunywa, 1995). Despite of uncertainties and risk in business, many are born, operate with just minimal gains to maintain business with no growth. Small scale business uses credit/loan from Micro Finance Institution (MFI) to finance their operation and others use the credit to set up business performance (profit and scale growth) is still small.
          Micro Finance Institutions are organized and operate by NGOs with initial capitalization from donors with interest in growth and development of Small Scale Business (SSBs) that cannot obtain such from formal financial institutions like banks due to the characteristics exhibited by such businesses (Ledger Wood, 1999). They are intended to eradicate poverty through operating different activities. Micro Finance Banks lend to individuals or group of individual at acceptable interest rates. These are a number of beneficiaries from the activities of Micro Finance Institutions (MFIs); these include traders from Oja Oba in Ado – Ekiti. Most of them finance their business operations using borrowed funds from Microfinance bank.
          However, owners of small scale business like traders in the market are not satisfied with the activities of microfinance institutions, they continuously complain about the unfair terms and conditions given by microfinance bank. Newspapers have reported that this has been experienced by traders and got fear that if nothing is done to regulate this, there will be even more room for failure (New Vision 24th June, 2005).
          This explains why microfinance is highly regulated and supervised. The main objectives of microfinance bank or institution are to eradicate poverty and raise the standards of living of people as well as general sufficient employment (Kiying, 2000). Microfinance institution, household with low incomes and small scale businesses.
          The critical aspect to consider is how the clients of microfinance institutions benefit from the microfinance activities and the study is basically profound on the theme of empowering the poor through enhancing performance of small scale businesses (Rhymes, 1994). The major clients are women (MFPED, 2000: Wright et al, 1999). Despite the crucial role of the women entrepreneurs have low business performance compared to their male counterparts (Kanji, 2006) and this is caused by factors which normally affect entrepreneurial performance. Such factors include: lack of credit, saving, education or training and social capital (Shane, 2003).
1.2     STATEMENT OF THE PROBLEM
          Small scale businesses have unstable and declining profit ability and performance and other are closed even before their anniversary (Arkurtoo, 2005 and Balungwa, 1995).
To improve on profitability and consequent performance and prevent failure, small scale businesses must identify performance drivers focus on improving them the lack access to funds and income opportunities because they operate with inadequate capital and this realize a small profit margin. They need to be the main focus since they are driving forces to economic growth and development (Harris and Gibson, 2006 and others).
          Microfinance bank provides chance to access credit but requires collateral security charge high interest rate and imposes stringent supervision over loan repayment and saving mobilization that most of the owners cannot meet (MSED, 1999). Traders who manage getting credit continuously perform poorly and spend even the small return in servicing the credit acquired. Despite the activities performed by microfinance bank in financing small scale businesses needs to be of the study.
1.3     RESEARCH QUESTIONS
          The following questions were raised for the study.
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1.4     OBJECTIVES OF THE STUDY
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1.5     SIGNIFICANCE OF THE STUDY
          The research finding would be important to owners of micro business as they decide on how to expand and set up business especially with matters of capital and liquidity in this challenging business environment with staff competition and hard survival.
          Academicians who wish to undertake further research on the subject will also find the literature arising from study to be of great value since it has also added value on the existing literature. The study could enable the researcher to gain more skills in research which could be explained at a future data for similar activities.
1.6     SCOPE OF THE STUDY
          The study focuses on the assessment of the roles of microfinance bank in financing small scale business in Ekiti State while holding other factors constant. Microfinance bank activities considered in the study are credit (loan, size and use), training (management and skills), saving and deposit taking.
          The opportunity at hand faced by the business, attitude to risk and intention to entrepreneur must be considered in the study. the aspect of performance will cover return/profit, output, investment, employment and sustainability.
1.7     LIMITATION OF THE STUDY
          Like in any other human activities, the sturdy has its limitations and constraints. High cost of materials and increase in transportation fare, scarce financial resources have constituted a constraint to the study.
          Time considerations and distance involved in collecting the primary data is another limitation of the study. This is because the time leg between the end of course work and the submission of the project is greatly inadequate constituted a constraint on the researcher as some respondents gave inaccurate information or failed to return their questionnaires.
1.8     ORGANIZATION OF THE STUDY
          The study is divided into five chapters. Chapter one gives the general introduction to the study, statement of the problem, objective of the study, research questions, significance of the study, definition terms.
          Chapter two is for literature review which highlights the overview of microfinance institution, contribution of microfinance banks toward small scale business, concept of microfinance bank in financing small scale enterprises.
          Chapter three highlights the methodology adopted in carrying out the research work, that is, the field work, population of the study, sample size and sampling procedure, method of sourcing data and the real analysis of the collected data are carried out in chapter four. Chapter five drops the conclusion, summary and recommendations along with references.
1.9     DEFINITION OF TERMS
i.                        Small scale Business: A business in which the managers are the owners, area of operation mainly local, owners supply capital and small in size within the industry.
ii.                        Loan: This is financial assistance rendered by financial institution to borrowers. It is payable and collateral is required before a financial institution can grant the loan.
iii.                        Microfinance: Is a form of financial services for entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of financial services to such clients are:
a.     Relationship: Based banking for individual entrepreneurs and small businesses
b.     Group-based models, where several entrepreneurs come together to apply for loan and other services as a group.
iv.                        Entrepreneur: This is the one who conceives the idea of a business, runs the business, bears the risk and enjoys profit or loss.
v.                        Bank: A financial institution that keeps custody of valuables such as money, gold, jewelries, etc. for customers. They charge customers for their services.
vi.                        Manager: One who adopt a process for running the affairs of a business.

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