SME Research
-
Upload
donfanuchee -
Category
Documents
-
view
96 -
download
2
description
Transcript of SME Research
Small and Medium Scale Enterprises. A Solution for Reducing the Rate of Unemployment in Nigeria: A
Case Study of Selected businesses in Sabon Gari Local Government Area of Kaduna State.
By
ABDULLAHI IBRAHIM(U08BA2006)
A Project Submitted to the Department of Business Administration,Faculty of Administration, Ahmadu Bello University Zaria
In partial Fulfillment of the requirement for the Award of Bachelor of Science (B. Sc) Degree Business Administration (Marketing)
September, 2011.
1 | P a g e
DECLARATION
I declare that this research project titled “Small and Medium Scale Enterprises: A Solution for Reducing the Rate of Unemployment in Nigeria: A Case Study of Selected businesses in Sabon Gari Local Government Area of Kaduna State.” is my work. It is submitted in partial fulfillment of the requirement for the award of Bachelor of Science (B. Sc) Business Administration with option in Marketing of the Ahmadu Bello University. It has not being submitted for any degree or any examination in any other university.All references in this study have been appropriately and duly acknowledge.
_____________________ _________________ABDULLAHI IBRAHIM DATE
2 | P a g e
CERTIFICATION
This project titled “Small and Medium Scale Enterprises: A Solution for Reducing the Rate of Unemployment in Nigeria: A Case Study of Selected businesses in Sabon Gari Local Government Area of Kaduna State” meets the regulation governing the award of the Degree of Bachelor of Science (B. Sc) Business Administration with option in Marketing of Ahmadu Bello University, and is approved for its contribution to knowledge and literacy presentation.
____________________ ______________Hajia. F. M. Abdullahi Date (Project Supervisor)
____________________ ______________Mallam Aminu Salisu Gumi Date(Project Coordinator)
____________________ ______________Dr. Bello Sabo Date(Head of Department)
3 | P a g e
DEDICATION
This research work is dedicated to All Mighty Allah for giving the strength as well as resources to start and finish this research work in particular and my entire study in general. Also my beloved mother Mrs. Z. O. Abdullahi, more so to my beloved wife Barrister Khadijah Suleiman for her support and love all through my year of study in A. B. U. Zaria. May Allah reward you all (Amin).
4 | P a g e
ACKNOWLEDGEMENT
All praise is due to Allah, May Allah's Peace and Blessings be upon His Final Messenger, his pure family, his noble Companions, and all those who follow them with righteousness until the Day of Judgment.
My profound and inestimable gratitude first of all goes to Almighty Allah Subhanahu Wata’ala for bestowing me life and good health and guiding me through this crucial and fundamental stage in my life. I have to say at his juncture Alhamdulillah.
My sincere appreciation goes to my parent Sheikh M. A. Abdullahi and Mrs. Z. O. Abdullahi for their support, may Allah (SWT) grant you all Aljanna – tul – Firdausi.
To my aunties; Mrs. K. O. Bajeh; Hajara Edegbo; Maimuna; Khadijah; and Uncles Abdulazeez Salawu and Dr. Ahmed Rufai Abdullahi. I say thank you for being there.
To my brothers: Engr. Saddiq Abdullahi, Capt Ismail Abdullahi, Yusuf Abdullahi, and Bashiru Abdullahi. My Cousins: Abdulkarim Abdullahi, Francis Bajeh, Lydia Bajeh and Grace Bajeh. My Sisters; Zainab Abdullahi, Hindatu Abdullahi, UmmulKhair Abdullahi and Late Fatima Abdullahi may her gentle soul rest in peace.
I will not be doing justice to myself if I fail to acknowledge the effort of my humble, vibrant and eloquent supervisor Hajia F. M. Abdullahi for having time to go through my research work despite her tight schedule and engagement.
To my lecturers; Mallam Shafa Yusuf, Zubairu Muhammed, Hajia Safiya, Saulawa Garba, Salisu Umar, Mallam masoud, Mallam Salisu Gummi. Doctors; Sabo Bello, Auwal Yahaya Ahmed, Bala Magaji, Abubakar Mukhtar, John Kizito Yere, A. J. C. Onu, Austin Agom. I say thank you all for making me who I am today May Allah reward you abundantly.
I also owe deep sense of gratitude to my colleagues and my friends for their support in the pursuit of knowledge, who have despite my short comings stood by me and always being a friend in deed: Yabagi, Mohammed (FASA), Zakari (Coachi), Jalloh, Adam, Abdulrahman, Hamza, Philosopher, Anas, Sani Mato, Gimba, Bashiru, Auwal (Captain), Ibn Mudaththir, Imam Shuaib, Suleiman Abubakar, Aliyu N’ntako, A. A. Kamba’a, Asp. A. A. yaqub, Mallam Mijinyawa, Babson, Idris (Boyoo), Aliyu (Chairman), Kabiru (KB theory), Yusuf (Iron Beans), Ibrahim (Omare), Abdulkarim, Ibrahim (Wakeel), Dotun, I say thank you all and may the Almighty bless you.
Abdullahi Ibrahim
5 | P a g e
ABSTRACT
In recent years, the plight of Nigerians have moved from bad to worst in the sense that the economy is not favorable – the increasing population is not being catered for by creating jobs or job opportunities for the teaming and willing labor force. The rate of unemployment is at an alarming rate which saw to the establishment of different agencies by different administration simply to solve the problem of unemployment in Nigeria. The purpose of this project is to undertake a scientific study of small and medium scale enterprises as a viable alternative to reducing the rate of unemployment in Nigeria. The study has the objectives of looking at the level of awareness of the concept of SMEs, its impact, prospects, challenges as well as the willingness to establish, grow and expand the enterprises. In this study the method of data collection is basically primary source. Data was collected from the respondents through the use of structured questionnaires. Table and simple percentages, chi-square were used for data presentation and analysis respectively while same chi-square was employed in testing the hypothesis formulated. The findings reveal that there is significant relationship between small and medium scale enterprises and unemployment. Therefore, it is concluded that majority of the enterprises are under utilizing the available resources as well as they are handicapped based on insufficient finance. Therefore, based on the findings of the study, it is recommended that development can be achieve if there is a good working relationship between public – private sector, thus the public – private partnership will enhance speedy development of SMEs and thereby reducing the rate of unemployment in Nigeria.
6 | P a g e
TABLE OF CONTENTTitle pageDeclarationCertificationDedicationAcknowledgementAbstractTable of content
Chapter One: Introduction1.1 Background To The Study1.2 Statement Of The Problem1.3 Objectives Of The Study1.4 Research Questions1.5 Hypotheses Of The Study1.6 Significance Of The Study1.7 Scope Of The Study1.8 Limitations Of The Study1.9 Definition of Terms
Chapter Two: Literature Review2.1 Introduction2.2 Concept of Small and Medium Scale Enterprises2.3 Importance of Small and Medium Scale Enterprises2.4 Financing and Source of Funds for Small and Medium
Scale Enterprises2.5 Prospects and Problems of Small and Medium
Scale Enterprises2.6 Concept of Unemployment2.7 Classification of Unemployment2.8 Causes of Unemployment2.9 The Relationship between Small and Medium
Scale Enterprises and Unemployment.
Chapter Three: Research Methodology3.1 Introduction3.2 Research Design3.3 Population of the Study3.4 Sample Size and Sampling Technique3.5 Data Collection Instrument3.6 Technique of data analyses3.6.1 Chi-square3.6.2 Justification of the technique used
7 | P a g e
Chapter Four: Data Presentation, Analysis and Interpretation.4.1 Introduction4.2 Data Presentation and Analysis4.3 Test of Hypothesis4.4 Discussion of Findings
Chapter Five: Summary, Conclusion and Recommendation5.1 Summary5.2 Conclusion5.3 Recommendation
ReferencesAppendix
8 | P a g e
Chapter One
Introduction
1.1 Background To The Study:
Unemployment is a social menace and as such a country like Nigeria is not
left out in the list of countries battling to eradicate this socially unacceptable
status of unemployment. However, various policies have been enacted by
different presidents and heads of state of Nigeria from the military era to the
present day democracy, all trying to eradicate unemployment.
Gbosi (1997) defined unemployment as a situation in which people who are
willing to work at the prevailing wage rate are unable to find jobs. More so the
International Labor Organization (ILO) defines the unemployed as numbers of
the economically active population who are without work but available for, and
seeking for work, including people who have lost their jobs and those who have
voluntarily left work (World Bank, 1998).
Small and Medium Enterprises (SMEs) as defined by the National Council
of Industries refer to business enterprises whose total costs excluding land is not
more than two hundred million naira (N200, 000,000.00) only. For both
developing and developed countries, small and medium scale firms play
important roles in the process of industrialization and economic growth. Apart
from increasing per capita income and output, SMEs create employment
opportunities, enhance regional economic balance through industrial dispersal
9 | P a g e
and generally promote effective resource utilization considered critical to
engineering economic development and growth. However, the seminal role
played by SMEs notwithstanding its development is everywhere constrained by
inadequate funding and poor management.
However, this study was conceived due to the rate at which the Nigerian
populaces are qualified but do not find job to do, or the job is not befitting their
standard, and the alternative way out is to commit crimes of various degree i.e.
armed robbery, advanced fee fraud etc. therefore one may be tempted to ask
why are the Nigerian graduate not finding jobs to do? Further more the need to
explore untapped resources by establishing businesses that will be responsible
for providing such services to those who want it, has necessitated the need to
undertake this study to examine how setting up of Small and Medium
Enterprises (SMEs) can serve as an alternative measure for reducing the level of
unemployment in Nigeria, because it is a known fact that the rate of
unemployment is growing at an alarming rate yearly. According to the Central
Bank of Nigeria (2003) the national unemployment rate, rose from 4.3% in
1970 to 6.4 % in 1980. Furthermore, the Nigerian Government also placed an
embargo on employment. Specifically total disengagement from the Federal
Civil Service rose from 2,724 in 1980 to 6,294 in 1984 (Odusola, 2001). Owing
to this, the national unemployment rate fluctuated around 6.0%, until 1987
when it rose to 7.1%. It is important to state here, that structural adjustment
program (SAP) adopted in 1986, had serious implications on employment in
10 | P a g e
Nigeria, as unemployment rate declined from 7.1% in 1987, to as low as 1.8%
in 1995, after which it rose to 3.4% in 1996, and hovered between 3.4 and 4.7%
between 1996 and 2000 (Douglason et al, 2006), and currently the
unemployment rate in Nigeria stands at a scary figure of 19.7% (National
Bureau of statistics, 2010)
1.2 Statement Of The Problem:
Over the years, several attempts have been made by the government of
Nigeria at one point or the other to reduce unemployment in Nigeria, these
efforts saw to the establishment of National Directorate of Employment (NDE)
in November 22, 1986, the National Economic Employment and Development
Strategy (NEEDS) in March 2004 etc all to no avail. Thus, this study is aimed at
examining the rate at which small and medium scale enterprises (SMEs) can
serve as a viable alternative in reducing the rate of unemployment in Nigeria,
because all the previous agencies established have not produced significant
result till date.
1.3 Objectives Of The Study:
The principal objectives of this study are:
1. To examine the level of awareness of the concept of small and medium
scale enterprise (SMEs).
11 | P a g e
2. To evaluate the impact of small and medium scale enterprise (SMEs) on
the reduction of unemployment.
3. To assess the level of willingness to start up a small and medium scale
enterprise (SMEs).
4. To recommend a way forward, if the outcome is positive, and if it is
negative to suggest solutions on how the outcome/findings will be solved.
1.4 Research Questions:
In this study, the researcher deems it necessary to address the research
problems empirically and the following questions were raised.
1. Are individuals aware of the concept small and medium scale enterprises
(SMEs)?
2. Are they willing to involve or start up small and medium scale enterprises
(SMEs)?
3. Is the government granting loan to those who are willing to start up small
and medium scale enterprises (SMEs)?
4. Does a small and medium scale enterprise (SMEs) have any impact on
the reduction of unemployment in Nigeria?
1.5 Hypotheses Of The Study:
Due to the research questions above, the following hypotheses are
formulated. The hypothesis for this study is stated in a null form;
12 | P a g e
H0: Small and medium scale enterprise (SMEs) has no significant effect on
unemployment rate.
1.6 Significance Of The Study:
1. The issues of high rate of unemployment compared to other countries of
the world is alarming, thus, this study will be relevant in tackling such
problems faced in trying to reduce unemployment in Nigeria and as such
if the recommendations are followed, it will fill a gap in the field of
knowledge.
2. It will provide a blue print on how to reduce unemployment, based on the
findings of the study.
1.7 Scope Of The Study:
This research work is mainly based on examining whether small and
medium scale enterprise (SMEs) is a viable option in reducing the rate in
Nigeria, a study of sabon gari local government are of Kaduna state.
Due to limited data, insufficient time and also financial constraints, it is
impossible to extend this study to other local government areas of Nigeria,
knowing fully well that a thorough research work of this nature requires a huge
financial input, which cannot be carried out by a student of my status. For this
reasons, the research work had to be restricted to sabon gari local government
13 | P a g e
area of Kaduna state, where selected small and medium scale enterprises will be
used for this study.
More so, the researcher will also be examining the trend of activities of
small and medium scale enterprises (SMEs) from the year 2000 to date.
However, the researcher is hoping that the recommendation of this study
will be utilized in other local government areas of Nigeria if the need arises, but
this is not to say that the recommendation can be generalized.
1.8 Limitations Of The Study:
This study has faced so many limitations such as;
Unwillingness to respond: during the study period, most of the
respondents were not willing to respond, simply because of some reasons
best known to them. But based on my guess, I think they do not want to
divulge any information concerning their businesses simply because they
do not know what the information requested will be used for.
Inaccessibility to respondent: when questionnaires were distributed to
respective respondents, the researcher noticed that some of the enterprises
visited had employees present, but in some the employees available at the
said period were not in the capacity to answer the question on the
questionnaire.
Insufficient data: the study was faced with problem of insufficient data
i.e. the data available were not up to date – therefore the researcher had to
14 | P a g e
carry out personal survey to update the data to an appreciable extent
before using it for the study.
Low level of education: the researcher experience the problem of low
level of education on the part of some of the respondents, thus making it
uneasy for the respondents to answer some of the question on their own,
thereby the respondent will either answer the question improperly or will
refuse to answer the question.
Indifferent attitude towards research: some of the respondent never took
the administered questionnaire seriously, thereby constituting one or
more problem to the study i.e. untimely respond and return of the
questionnaire as well as bad facial attitude towards the researcher when
he wants to administer the questionnaire to the respondent.
1.9 Definition of Terms:
Unemployment: a state of joblessness, which could be intentional or
unintentional
Micro Enterprise: A firm, whose total cost including working capital but
excluding cost of land is not more than ten million naira (N10,000,000)
and/or with a labour size of not more than thirty (30) full-time workers
and/or a turnover of less than two million naira (N2,000,000) only.
Small Enterprise: An enterprise whose total cost including working
capital but excluding cost of land is between ten million naira
15 | P a g e
(N10,000,000) and one hundred million naira (N100,000,000) and/or a
workforce between eleven (11) and seventy (70) full-time staff and/or
with a turnover of not more than ten million naira (N10,000,000) in a
year.
Medium Enterprise: A company with total cost including working capital
but excluding cost of land of more than one hundred million naira (N100,
000,000) but less than three hundred million naira (N300, 000,000)
and/or a staff strength of between seventy-one (71) and two hundred
(200) full-time workers and/or with an annual turnover of not more than
twenty million naira (N20, 000,000) only.
Large Enterprise: Any enterprise whose total cost including working
capital but excluding cost of land is above three hundred million naira
(N300,000,000) and/or a labour force of over two hundred (200) workers
and/or an annual turnover of more than twenty million naira
(N20,000,000) only.
NASME: Nigerian Association of Small and Medium Enterprises, which
is an umbrella association of all SMEs
MAN: Manufacturers Association of Nigeria is the official association of
manufacturing companies in Nigeria
DFIs: Development Finance Institutions are companies involved in
project and development finance such as the Bank of Industry (BOI)
16 | P a g e
SMEs: Small and Medium Enterprises are those firms, which satisfy the
definitions given above.
SMEDAN: Small and Medium Enterprises Development Agency of
Nigeria
BOI: Bank of Industry, which provides medium to long-term loans to
enterprises
CBN: Central Bank of Nigeria, the apex bank in Nigeria, which
supervises other banks
NACRDB: Nigerian Agricultural Cooperative and Rural Development
Bank
NEEDS: National Economic Empowerment and Development Strategy
SEEDS: State Economic Empowerment and Development Strategy
NDE: National Directorate of Employment
MSME: Micro, Small and Medium Enterprises
NGO: Non-governmental Organization
SRS: Simple Random Sampling
17 | P a g e
Chapter Two
Literature Review
2.1 Introduction:
The term small and medium scale enterprises (SMEs) occurs commonly
in the European Union and in international organizations, such as the World
Bank, the United Nations and the world trade organization (WTO). The term
small and medium business (SMBs) is also predominantly used in the USA.
European Union Member States traditionally have their own definition of what
constitutes an small and medium scale enterprises (SMEs), for example the
traditional definition in Germany had a limit of 250 employees, while, for
example, in Belgium it could have been 100. But now the European Union has
started to standardize the concept. Its current definition categorizes companies
with fewer than 10 employees as "micro", those with fewer than 50 employees
as "small", and those with fewer than 250 as "medium". By contrast, in the
United States, while small business is defined by the number of employees, it
often refers to those with fewer than 100 employees, while medium-sized
business often refers to those with fewer than 500 employees. In most
economies, smaller enterprises are much greater in number. In the European
Union, small and medium scale enterprises (SMEs) comprise approximately
99% of all firms and employ between them about 65 million people in many
18 | P a g e
sectors, SMEs are also responsible for driving innovation and competition.
Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.
In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal
role in the overall industrial economy of the country. It is estimated that in
terms of value, the sector accounts for about 39% of the manufacturing output
and around 33% of the total export of the country. Further, in recent years the
MSE sector has consistently registered higher growth rate compared to the
overall industrial sector. The major advantage of the sector is its employment
potential at low capital cost. As per available statistics, this sector employs an
estimated 31 million persons spread over 12.8 million enterprises and the labor
intensity in the MSE sector is estimated to be almost 4 times higher than the
large enterprises.
In South Africa the term is SMME for Small, Medium and Micro
Enterprises. Elsewhere in Africa, MSME is used for Micro, Small and Medium
Enterprises.
Industry in Canada defines a small business as one that has fewer than
100 employees (if the business is a goods-producing business) or fewer than 50
employees (if the business is a service-based business), and a medium-sized
business as fewer than 500.
19 | P a g e
2.2 Concept of Small and Medium Scale Enterprise:
A small business is a business that is privately owned and operated, with
a small number of employees and relatively low volume of sales. Small
businesses are normally privately owned corporations, partnerships, or sole
proprietorships. The legal definition of "small" varies by country and by
industry, ranging from fewer than 15 employees under the Australian Fair Work
Act 2009, 50 employees in the European Union, and fewer than 500 employees
to qualify for many U.S. Small Business Administration programs. Small
businesses can also be classified according to other methods such as sales,
assets, or net profits. Small businesses are common in many countries,
depending on the economic system in operation. Typical examples include:
convenience stores, other small shops (such as a bakery or delicatessen),
hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses,
photographers, small-scale manufacturing, and online business, such as web
design and programming, etc.
There is no single, uniformly acceptable, definition of a small firm
(Storey, 1994). Firms differ in their levels of capitalization, sales and
employment. Hence, definitions which employ measures of size (number of
employees, turnover, profitability, net worth, etc.) when applied to one sector
could lead to all firms being classified as small, while the same size definition
when applied to a different sector could lead to a different result.
20 | P a g e
The first attempt to overcome this definition problem was by the Bolton
Committee (1971) when they formulated an “economic” and a “statistical”
definition. Under the economic definition, a firm is regarded as small if it meets
the following three criteria:
i. It has a relatively small share of their market place;
ii. It is managed by owners or part owners in a personalized way, and not
through the medium of a formalized management structure;
iii. It is independent, in the sense of not forming part of a large enterprise.
The Committee also devised a “statistical” definition to be used in three
main areas:
i. Quantifying the size of the small firm sector and its contribution to GDP,
employment, exports etc.;
ii. Comparing the extent to which the small firm sector’s economic
contribution has changed over time;
iii. Applying the statistical definition in a cross country comparison of the
small firms’ economic contribution.
Thus, the Bolton Committee employed different definitions of the small
firm to different sectors. Table 2 below indicates the various sectorial
definitions:
21 | P a g e
Table 2: The Bolton Committee Definitions of a small firm
Sector
Manufacturing
Construction
Mining & Quarrying
Retailing
Miscellaneous
Services
Motor Trades
Wholesale Trades
Road Transport
Catering
Definition
200 employees or less
25 employees or less
25 employees or less
Turnover of 50,000 pounds or less
Turnover of 50,000 pounds or less
Turnover of 50,000 pounds or less
Turnover of 100,000 pounds or less
Turnover of 200,000 pounds or less
Five Vehicles or less
All excluding multiples and Brewery – managed
houses
Source: The Bolton Committee (1971)
Criticism of the Bolton Committee’s “Economic” Definition
A number of weaknesses can be identified with the Bolton Committee’s
“economic” and `statistical’ definitions. First, the economic definition which
states that a small business is managed by its owners or part owners in a
personalized way, and not through the medium of a formal management
structure, is incompatible with its statistical definition of small manufacturing
firms which could have up to 200 employees. As firm size increases, owners no
longer make principal decisions but devolve responsibility to a team of
22 | P a g e
managers. For example, it is unlikely for a firm with hundred employees to be
managed in a personalized way, suggesting that the `economic’ and `statistical’
definitions are incompatible.
Another shortcoming of the Bolton Committee’s economic definition is
that it considers small firms to be operating in a perfectly competitive market.
However, the idea of perfect competition may not apply here; many small firms
occupy ‘niches’ and provide a highly specialized service or product in a
geographically isolated area and do not perceive any clear competition
(Wynarczyk et al, 1993; Storey, 1994).
Alternatively, Wynarczyk et al (1993) identified the characteristics of the
small firm other than size. They argued that there are three ways of
differentiating between small and large firms. The small firm has to deal with:
i. Uncertainty associated with being a price taker;
ii. Limited customer and product base;
iii. Uncertainty associated with greater diversity of objectives as compared
with large firms.
As Storey (1994) stated, there are three key distinguishing features
between large and small firms. Firstly, the greater external uncertainty of the
environment in which the small firm operates and the greater internal
consistency of its motivations and actions.
Secondly, they have a different role in innovation; small firms are able to
produce something marginally different, in terms of product or service; this
23 | P a g e
differs from the standardized product or service provided by large firms. A third
area of distinction between small and large firms is the greater likelihood of
evolution and change in the smaller firm; small firms which become large
undergo a number of stage changes.
Criticism of the Bolton Committee’s “Statistical” Definition:
i. No single definition or criteria was used for “smallness”, (number of
employees, turnover, ownership and assets were used instead)
ii. Three different upper limits of turnover were specified for the different
sectors and two different upper limits were identified for number of
employees. This makes the definition complex to allow for cross country
comparison.
iii. Comparing monetary units over time requires construction of index
numbers to take account of price changes. Moreover, currency
fluctuations make international comparison more difficult.
iv. The definition considered the small firm sector to be homogeneous;
however, firms may grow from small to medium and in some cases to
large.
It was against this background that the European Commission (EC)
coined the term ‘Small and Medium Enterprises (SME)’. The SME sector is
made up of three components:
i. Firms with 0 to 9 employees - Micro enterprises
ii. Firm with 10 to 99 employees - Small enterprises
24 | P a g e
iii. Firm with 100 to 499 employees - Medium enterprises.
Thus, the SME sector is comprised of enterprises (except agric, hunting,
forestry and fishing) which employ less than 500 workers. In effect, the EC
definitions are based solely on employment rather than a multiplicity of criteria.
Secondly, the use of 100 employees as the small firm’s upper limit is more
appropriate given the increase in productivity over the last two decades (Storey,
1994).
Finally, the EC definition did not assume the SME group is homogenous,
that is, the definition makes a distinction between micro, small, and medium-
sized enterprises.
However, the EC definition is too all-embracing for a number of
countries. Researchers would have to use definitions for small firms which are
more appropriate to their particular `target’ group (an operational definition). It
must be emphasized that debates on definitions turn out to be sterile unless size
is a factor which influences performance. For instance, the relationship between
size and performance matters when assessing the impact of a credit program on
a targeted group (Storey, 1994).
Alternative Definitions:
i. World Bank (1976), state that a firm with fixed assets (excluding land)
less than US$ 250,000 in value is small scale enterprise.
25 | P a g e
ii. Grindle et al (1989), opined that a small scale enterprise is a firm with
less than or equal to 25 permanent members and with fixed assets
(excluding land) worth up to US$ 50,000.
iii. United State Agency for International Development (1990) views a firm
as small scale enterprise with less than 50 employees and at least half the
output is sold (also refer to Mead, 1994).
iv. United Nations Industrial Development Organization definition for
Developing Countries:
- Large scale enterprise is a firm with 100 and above workers.
- Medium scale enterprise is a firm with 20 - 99 workers.
- Small scale enterprise is a firm with 5 - 19 workers,
- Micro scale enterprise is a firm with less than 5 workers (Elaian, K.
1996),
v. United Nations Industrial Development Organization definition for
Industrialized Countries:
- Large scale enterprise is a firm with 500 and above workers.
- Medium scale enterprise is a firm with 100 - 499 workers.
- Small scale enterprise is a firm with less than or equal to 99 workers,
(Elaian, K. 1996),
Further more, Steel and Webster (1990), Osei et al (1993) are of the opinion that
in defining Small Scale Enterprises as it is obtainable in Ghana used an
employment cut off point of 30 employees to indicate Small Scale Enterprises.
26 | P a g e
However, the latter disaggregated small scale enterprises into 3 categories
namely:
- Small scale enterprise is a firm employing between 10 and 29
employees.
- Very small scale enterprise is a firm employing between 6 - 9 people
- Micro scale enterprise is a firm employing less than 6 people
In the case of Malawi, the official definition of enterprise sizes dates back to
1992.
The definition is based on three criteria, namely:
i. The level of capital investment,
ii. The number of employees
iii. The rate of turnover.
An enterprise is defined as small scale if it satisfies any two of the following
three criteria, that is, it has a capital investment of US$2,000 - US$55,000,
employing 5 - 20 people and with a turnover of up to US$110,000 (using 1992
official exchange rate). For manufacturing enterprises, capital investment is
taken to mean the cost of plant and machinery, including working capital and
the cost of land and buildings. It may be observed that since this official
definition was given in 1992, the economic situation in the country has changed
drastically, with the value of the kwacha falling from an official rate of MK3.60
to US$1 in 1992 to MK15.30 to US$1 in 1996 and to MK43.15 as of January
27 | P a g e
1999. The implication is that the existing official definition is out of date and
needs to be revised.
The legal definition of "small" varies by country and by industry. In the
United States the Small Business Administration establishes small business size
standards on an industry-by-industry basis, but generally specifies a small
business as having fewer than 500 employees for manufacturing businesses and
less than $7 million in annual receipts for most nonmanufacturing businesses.
The definition can vary by circumstance – for example, a small business having
fewer than 25 full-time equivalent employees with average annual wages below
$50,000 qualifies for a tax credit under the healthcare reform bill Patient
Protection and Affordable Care Act, in the USA.
In addition to number of employees, other methods used to classify small
companies include annual sales (turnover), value of assets and net profit
(balance sheet), alone or in a mixed definition. These criteria are followed by
the European Union, for instance (headcount, turnover and balance sheet totals).
Small businesses are usually not dominant in their field of operation.
2.3 Importance of Small and Medium Scale Enterprises
A small business can be started at a very low cost and on a part-time
basis. Small business is also well suited to internet marketing because it can
easily serve specialized niches, something that would have been more difficult
prior to the internet revolution which began in the late 1990s. Adapting to
28 | P a g e
change is crucial in business and particularly small business; not being tied to
any bureaucratic inertia, it is typically easier to respond to the marketplace
quickly. Small business proprietors tend to be intimate with their customers and
clients which results in greater accountability and maturity.
Independence is another advantage of owning a small business. Freedom
to operate independently is a reward for small business owners. In addition,
many people desire to make their own decisions, take their own risks, and reap
the rewards of their efforts. Small business owners have the satisfaction of
making their own decisions within the constraints imposed by economic and
other environmental factors. However, entrepreneurs have to work very long
hours and understand that ultimately their customers are their bosses. Several
organizations, in the Nigeria, also provide help for the small business sector,
such as the Internal Revenue Service's, commercial banks.
In developing countries, the role of SMEs is even more important since
SMEs often offer the only realistic prospects for creating additional
employment and thus reducing poverty and enhancing the quality of lives. A
healthy SME sub-sector is a sine qua non for inclusive and socially sustainable
development even though institutions that provide support services where
available are often limited in capacity and coverage in developing economies.
Basil (2005)
Exports by SMEs usually range between 30 and 50 percent of total
industrial exports in developed and developing countries. In tune with the latest
29 | P a g e
developments in the world economy and the attendant globalization effects, the
role of SMEs going forward is bound to be even greater and more pervasive,
with a demonstrable impact on the emerging world trading order. Basil (2005)
Furthermore, SMEs reduces the amount of jobless individual who might
be tempted to committing one form of crime or another just to earn a living.
2.4 Financing and Source of Funds for Small and Medium Scale
Enterprises
In recognition of the crucial roles played by SMEs with respect to
economic growth and development, succeeding governments in Nigeria had
various initiatives aimed at promoting the cause of SMEs in the country. The
most tangible among the different incentive packages that varied with almost
every change in government leadership was the focus on enhancing the
financial opportunities for the SMEs. Some of the support institutions and
opportunities created by the government to enable SMEs access funding in the
past 30 years include:
i. Small Scale Industries Credit Scheme (SSICS) 1971
ii. Nigerian Bank for Commerce and Industries (NBCI) 1973
iii. Nigerian Industrial Development Bank (NIDB) 1964
iv. SME Apex Unit of Central Bank (1989)
v. National Economic Reconstruction Fund (NERFUND) 1989
30 | P a g e
vi. The African Development Bank/ Export Stimulation Loan
(ADB/ESL) 1989
vii. Nigerian Export Import Bank (NEXIM)
viii. National Directorate of Employment (NDE) 1986
ix. Industrial Development Coordinating Centre (IDDC)
x. Community Banks
xi. People’s Bank
xii. Family Economic Advancement Program (FEAP)
xiii. State Ministry of Industry SME Schemes
xiv. Small and Medium Industries Equity Investment Scheme (SMIEIS)
xv. Bank of Industry (BOI)
xvi. Small and Medium Enterprises Developing Agency of Nigeria
(SMEDAN)
xvii. Credit Guarantee Scheme for SMEs (underway)
The above well-intentioned institutions designed to provide succor to SMEs
notwithstanding the sub-sector is yet to find its bearing in the murky waters of
Nigeria’s business environment. These account for the government’s recent
introduction of the last three support schemes i.e. BOI, SMEDAN and the
Credit Guarantee Scheme, discussions on which have reached an advanced
stage and the Bankers Committee’s decision to institutionalize small and
medium industries equity investments scheme (SMIEIS). It is expected that the
Credit Guarantee Scheme would enhance and facilitate easy access to credits by
31 | P a g e
the SMEs while SMIEIS would boost access to equity financing while
SMEDAN would provide other needed non-financial support and leverage for
the SMEs to thrive successfully. Basil (2005)
Small businesses use several sources available for start-up capital:
i. Self-financing by the owner through cash, equity loan on his or her home,
and or other assets.
ii. Loans from friends or relatives
iii. Grants from private foundations
iv. Personal Savings
v. Private stock issue
vi. Forming partnerships.
vii. Angel Investors
viii. Banks
ix. SME finance , including Collateral based lending and Venture capital,
given sufficiently sound business venture plans
Some small businesses are further financed through credit card debt - usually a
poor choice, given that the interest rate on credit cards is often several times the
rate that would be paid on a line of credit or bank loan. Many owners seek a
32 | P a g e
bank loan in the name of their business, however banks will usually insist on a
personal guarantee by the business owner. Wikipedia Encyclopedia (2011)
More so, here are some other financing options available to small and
medium scale enterprises as opined by Jim Ovia (2001)
i. Banks and SME entrepreneurs particularly IT engineers to go into
partnerships. Nigerian banks are prepared to disburse 10% of their Profit
before Tax (PBT) by way of equity participation.
ii. International Finance Committee – World Bank is prepared to support
SMEs in Nigeria. International Finance Committee had already
committed $10 million in its initiative to develop SMEs in Nigeria.
iii. African Development Bank (ADB) is in a good position to assist SMEs in
Nigeria.
iv. Various specialized banks set up by the government in the past to support
SMEs have now been merged into one big financial institution – Nigeria
Agricultural Cooperative & Rural Development Bank [NACRDB].
v. A National Industrial Bank with proposed paid-up capital of N50 billion
was also recently announced by the government.
vi. Nigerian Export and Import Bank (NEXIM) also finance SMEs
2.5 Prospects and Problems of Small and Medium Scale Enterprises
The SMEs operating in Nigeria are not shielded or immune from the
typical problems and constraints of SMEs in other developed countries. Almost
33 | P a g e
every country assists her SMEs largely because of the crucial inherent role they
play in the economic growth and development. The assistance is usually in the
form of facilities and supportive services than on protection and subsidies.
Other services provided by some governments include commercial
finance, venture capital, information training and retraining, Research and
Development (R&D) support, infrastructure and tax incentives. Some of these
facilities are provided through local authorities and industry associations at
times with the involvement of non-governmental organizations (NGOs).
Small businesses often face a variety of problems related to their size. A
frequent cause of bankruptcy is undercapitalization. This is often a result of
poor planning rather than economic conditions - it is common rule of thumb that
the entrepreneur should have access to a sum of money at least equal to the
projected revenue for the first year of business in addition to his anticipated
expenses. For example, if the prospective owner thinks that he will generate
$100,000 in revenues in the first year with $150,000 in start-up expenses, then
he should have no less than $250,000 available. Failure to provide this level of
funding for the company could leave the owner liable for all of the company's
debt should he end up in bankruptcy court, under the theory of
undercapitalization.
In addition to ensuring that the business has enough capital, the small
business owner must also be mindful of contribution margin (sales minus
variable costs). To break even, the business must be able to reach a level of
34 | P a g e
sales where the contribution margin equals fixed costs. When they first start out,
many small business owners under price their products to a point where even at
their maximum capacity, it would be impossible to break even. Cost controls or
price increases often resolve this problem.
In the United States, some of the largest concerns of small business
owners are insurance costs (such as liability and health), rising energy costs and
taxes. Also in the United Kingdom and Australia, small business owners tend to
be more concerned with excessive governmental red tape.
Another problem for many small businesses is termed the
'Entrepreneurial Myth' or E-Myth. The mythic assumption is that an expert in a
given technical field will also be expert at running that kind of business.
Additional business management skills are needed to keep a business running
smoothly.
Certification and trust: Building trust with new customers can be a
difficult task for a new and establishing business. Some organizations like the
Better Business Bureau and the International Charter now offer Small Business
Certification, which certifies the quality of the services and goods produced and
can encourage new and larger customers. These services may require a few
hours of work, but a certification may reassure potential customers.
Business Networks and Advocacy Groups: Small businesses often join or
come together to form organizations to advocate for their causes or to achieve
economies of scale that larger businesses benefit from, such as the opportunity
35 | P a g e
to buy cheaper health insurance in bulk. These organizations include local or
regional groups such as Chambers of Commerce, as well as national or
international industry-specific organizations. Such groups often serve a dual
purpose, as business networks to provide marketing and connect members to
potential sales leads and suppliers, and also as advocacy groups, bringing
together many small businesses to provide a stronger voice in regional or
national politics.
Finding new customers is the major challenge for Small business owners.
Small businesses typically find themselves strapped for time but in order to
create a continual stream of new business, they must work on marketing their
business every day.
The overhead cost of operating SMEs, such as energy, transportation and
delivery services etc, also pose difficulty for SMEs to survive in the competitive
market environment.
However, despite the problems discussed above, SMEs are exposed to
numerous prospects that can be viewed from these point state below.
Common marketing techniques for small business include networking,
word of mouth, customer referrals, yellow pages directories, television, radio,
outdoor (roadside billboards), print, email marketing, and internet, although
electronic media like TV can be quite expensive and is normally intended to
create awareness of a product or service. But many small business owners find
internet marketing more affordable for example Google, Yahoo, eBay, Amazon
36 | P a g e
etc. Successful online small business marketers are also adept at utilizing the
most relevant keywords in their site content. Advertising on niche sites can also
be effective, but with the long tail of the internet, it can be time intensive to
advertise on enough sites to garner an effective reach.
More so, creating a business Web site has become increasingly affordable
with many do-it-yourself programs now available for beginners. A Web site can
provide significant marketing exposure for small businesses when marketed
through the Internet and other channels.
Social media has proven to be very useful in gaining additional exposure
for many small businesses. Many small business owners use Facebook and
Twitter as a way to reach out to their loyal customers to give them news about
specials of the day or special coupons and generate repeat business. The
relational nature of social media, along with its immediacy and 24-hour
presence lend intimacy to the relationship small businesses can have with their
customers, while making it more efficient for them to communicate with greater
numbers. Facebook ads are also a very cost-effective way for small businesses
to reach a targeted audience with a very specific message.
In addition to the social networking sites, blogs have become a highly
effective way for small businesses to position themselves as experts on issues
that are important to their customers. This can be done with a proprietary blog
and/or by using a back link strategy wherein the marketer comments on other
blogs and leaves a link to the small business' own Web site.
37 | P a g e
A solid public relations strategy that utilizes speaking engagements, press
releases, feature stories, events and sponsorships can also be a very cost-
effective way to build a loyal following for a small business.
Franchise businesses: Franchising is a way for small business owners to
benefit from the economies of scale of the big corporation (franchiser).
McDonald's restaurants, TrueValue hardware stores, and NAPA Auto Parts
stores are examples of a franchise. The small business owner can leverage a
strong brand name and purchasing power of the larger company while keeping
their own investment affordable. However, some franchisees conclude that they
suffer the "worst of both worlds" feeling they are too restricted by corporate
mandates and lack true independence. However, in some chains, such as the
aforementioned TrueValue and NAPA, franchises may have their own name
alongside the franchise's name. Wikipedia Encyclopedia (2011)
2.6 Concept of Unemployment
The International Labor Organization (ILO) defines the unemployed as
numbers of the economically active population who are without work but
available for and seeking work, including people who have lost their jobs and
those who have voluntarily left work (World Bank, 1998). Although there
seems to be convergence on this concept, its applications have been bedeviled
with series of problems across countries. First, most published unemployment
rates are recorded open unemployment. People's attitude on this varies from
country to country. While this may be high in developed countries and where
38 | P a g e
government is committed to resolving unemployment problems, it is likely to be
very low in countries with the opposite attributes.
Furthermore, according to the ILO, youth unemployment rate has
increased over time to reach an estimated 14.4% worldwide in 2003, leaving
88million youth unemployed.
Okigbo (1991) also points out the problem arising from the concept of
labor force. In most countries, particularly Nigeria, people below the age of
15years and those above the age of 55years who are actively engaged in
economic activities are usually excluded from labor statistical surveys. All these
factors have the tendency to result in underestimation of unemployment thereby
making international comparison very difficult. Factors such as the
preponderance of full housewives (but who are willing to be engaged in paid
job) and unpaid family workers also contribute significantly to the
underestimation of unemployment.
2.7 Classification of Unemployment
Economist used to classify unemployment as frictional, structural,
cyclical or classical forms of unemployment.
i. Frictional Unemployment: it is the irreducible minimum level of
unemployment in a dynamic society. It includes those whose physical or
mental state has made them to be unemployed i.e. it occurs when the
mode of production changes for instance, more machinery may be
39 | P a g e
introduced in the industry to increase productivity. These may
replace labor and lead to retrenchment or downsizing of labor strength.
ii. Structural Unemployment: refers to a state of joblessness arising from a
mismatch of skills and job opportunities when the pattern of demand and
production changes. For instance, a skilled welder may have worked for
25years in ship building but is made redundant at 50years when the
industry contracts in the face of foreign competition. That worker
may have to retrain in a new skill which is more in demand in today’s
economy. But firms may be reluctant to take on and train an older
worker, such worker becomes a victim of structural unemployment.
iii. Cyclical Unemployment: occurs during the depression or recession stage
of the business or trade cycle. During a depression, demand is at low ebb.
To accommodate such low demand, some firms may re-adjust their levels
of production. This may lead to the laying-off of some workers, or the
factors of production may be used below capacity.
iv. Classical unemployment: describes the unemployment created when the
wage is deliberately maintained above the level at which the labor supply
and labor demand schedules intersect. It can be caused either by the
exercise of trade union power or by minimum wage legislation which
enforces a wage in excess of the equilibrium wage rate. (Anyanwuocha,
2006 and Begg, 2000)
40 | P a g e
2.8 Causes of Unemployment:
Here are some possible causes of unemployment;
i. Inadequate educational curricula and poor educational planning: the
educational system as inherited from the colonial era was grammar-
oriented. Until recently, the school curricula emphasized the art subject.
Again, the educational system is theoretically oriented. For this reason,
the system of education does not equip school leavers with those practical
skills required for earning a living. Many of them see education as a
means of freeing themselves from working on the land. Therefore, they
seek for white collar jobs in urban centers, knowing full well that jobs in
these areas are limited.
ii. Low level of education: many youths do not attend school beyond
primary and secondary schools. This could be as a result of widespread
poverty and the low value place on education by some people. These
young school leavers enter the labor market to look for jobs, therefore
there is a high percentage of young people who are unemployed because
they do not possess the required skills. Since they are too young and ill-
equipped to work, they remain unemployed.
iii. Differential wage-structure and greater attractiveness of urban: the higher
wage structure and social amenities which are obtainable in urban centers
act as pull-factors. Many people migrate from rural areas to the urban
centers to look for jobs because they are attracted by the higher incomes
41 | P a g e
and a more comfortable way of living due to the presence of electricity,
pipe-borne water, cinemas, parks, hospitals etc. unfortunately, the job
opportunities there are not enough to absorb all those who migrate to the
towns. Therefore many of them remain unemployed.
iv. Use of capital-intensive methods of production: the technique of
production in modern industry which tends to emphasize a greater use of
capital than of labor encourages labor unemployment. Many of the
machines which are used in industry are imported and are do not require
to many labor to operate, thus they are highly labor-saving, therefore
making unskilled and semi-skilled labor redundant.
v. Slow rate of economic growth: the economy of some African countries
has been growing at a very slow rate compared with the rapidly
increasing population. As a result, there are a large number of
unemployed persons since insufficient job opportunities are generated in
the economy.
vi. Immobility of labor: occupational and geographical immobility of labor
compound the problem of unemployment. Immobility of labor arises
from factors such as tribalism and ethnic consciousness, the
unattractiveness of rural areas due to a low wage structure, the inadequate
economic and social infrastructure, trade union regulations etc. the result
is that there is a scarcity of labor in some areas and serious
unemployment in others. (Anyanwuocha, 2006)
42 | P a g e
2.9 The Relationship between Small and Medium Scale Enterprises and
Unemployment.
From the above discussion, we can say that small and medium scale
enterprises have a great relationship with unemployment because most small
and medium scale enterprises are determined by the level of manpower they
used or employ. Therefore the greater the number of small and medium scale
enterprise the lesser the amount of unemployed in the economy and also the
higher the revenue generated also the greater the utilization of factors of
production in the economy.
43 | P a g e
Chapter Three
Research Methodology
3.1 Introduction:
Research is basically the process of arriving at a dependable solution to
problems – through a planned and systematic process of collecting, recording,
analyzing and interpreting the data to arrive at a solution. Research
methodology on the other hand refers to the process of scientific enquiry used in
a research process. More so, it means a systematic and objective investigation of
a subject or problem in other to discover relevant information.
This research work is expository in nature, which tells the relationship
between small and medium scale enterprises alongside unemployment i.e.
whether small and medium scale enterprises can serve as a viable alternative to
reducing the rate of unemployment in Nigeria.
Research methodology is of paramount importance in a research project
like this, because it is the aspect of the research that provides the methods or
procedure that the researcher employs in the course of the research for the
objectives of the study to be achieved.
3.2 Research Design:
In this research, the sourcing, recording, analyzing and interpreting are
the basic areas identified by the researcher. Therefore, the research designs
adopted by the researcher in tackling these areas of importance are as follows:
44 | P a g e
1. Sourcing: In sourcing for data for the research work, questionnaire will be
issued to elicit responses from the various respondents. The reasons are
that; the questionnaire can carry a lot of questions at a particular time;
also the questionnaire will allow the respondent to give answer to
question at a convenient time and place thus ensuring utmost privacy.
2. Recording: In recording the data for further analysis, the questionnaire
issued will be the first method of recording the data, because the
respondent will do that themselves before returning them to the
researcher for further recording using the statistical package for social
science software (SPSS) to record the data as deemed appropriate by the
researcher.
3. Analyzing: In analyzing the data already recorded, the researcher intends
to use the statistical package for social science software (SPSS) to
analyze the data, because it has the capacity of generating simple
statistical results such as percentage, mean, mode, median etc and also
complex statistical analysis like regression analysis, correlation analysis,
chi-square analysis etc.
4. Interpreting: In interpreting the data, the outcome of the result generated
by the statistical package for social science software (SPSS) will be what
the researcher will largely depend on to interpret, thus the researcher will
use tables, chart etc to represent the result for better understanding and
clarity.
45 | P a g e
3.3 Population of the Study:
The population of this study is the total number of small and medium
scale enterprises documented and pays revenue to sabon gari local government
area council. And the reason is that, the local government will have the
comprehensive list of businesses that are paying revenue to the local
government revenue division, which will serve dual purposes for the research
study, namely; provide this study the total population size; and will also be used
as the sample frame where the population will be stratified and numbered, from
where the sample size will be chosen to enable the total sample size to be a
representative one.
The total numbers of enterprises paying revenue to the council is 250
businesses and are grouped into the categories, namely: factories & industries
(18), printing press & art centre’s (25), trading enterprises (79), filling stations
(34), fast foods outlets, bakeries & restaurants (10), hotels, guest inn & motels
(10), fashion & tailoring centre’s (20), beauty center & barbing saloon (23),
clinics & diagnostic centre’s (10) and patent medicine stores (21).
3.4 Sample Size and Sampling Technique:
The sample size for this research is 52 small and medium scale
enterprises which is 20.8% of the total population. The sample size consist of
randomly selected small and medium scale enterprises which have been
46 | P a g e
stratified or grouped into ten categories and an adequate representative figure
selected randomly with all elements having equally chance of being selected.
A simple random sampling (SRS) was employed in the selection of the
sample for the study. All the documented and active SMEs within sabon gari
local government area were respectively used as the sampling frame which was
stratified into eleven groups. Each member of all the groups was assigned a
number: one (1) to eighteen (18) for factories & industries; one (1) to twenty-
five (25) for printing press & art centre’s; one (1) to seventy-nine (79) for
trading enterprises; one (1) to thirty-four (34) for Filling Stations; one (1) to ten
(10) for Fast Foods outlets, Bakeries & Restaurants; one (1) to ten (10) for
Hotels, Guest Inn & Motels; one (1) to twenty (20) for Fashion & Tailoring
Centre’s; one (1) to twenty-three (23) for Beauty Center & Barbing Saloon; one
(1) to ten (10) for Clinics & Diagnostic Centre’s; one (1) to twenty-one (21) for
Patent Medicine Stores.
For each of the ten groups, five numbers were put in a bag at a time and
thoroughly shuffled. One element was randomly selected by picking one at a
time without replacement, thus the researcher wants one sample to represent
every five element in the population, which is shown below.
S/n Type Of Enterprise No Sample Size
1. Factories & Industries 18 4
2. Printing Press & Art Centre’s 25 5
47 | P a g e
3. Trading Enterprises 79 16
4. Filling Stations 34 7
5. Fast Foods Outlets, Bakeries & Restaurants 10 2
6. Hotels, Guest Inn & Motels 10 2
7. Fashion & Tailoring Centre’s 20 4
8. Beauty Center & Barbing Saloon 23 5
9. Clinics & Diagnostic Centre’s 10 2
10. Patent Medicine Stores 21 5
Grand Total 250 52
The use of SRS method in the selection of participant SMEs used in this
study was a sure way to reduce bias to the barest minimum. This approach was
also used in order to ensure that the sample size used in the study was a true and
fair representative of the population of SMEs in sabon gari local government
area of Kaduna state.
3.5 Data Collection Instrument:
48 | P a g e
In a research of this nature, which involves the use of primary data, the
researcher deems it wise to use questionnaire. Here the questionnaire will be
used to obtain information from respondents. Thus, the questionnaire is
expected to show the perception of the respondent on the idea – whether small
and medium scale enterprises is a viable solution to reducing the rate of
unemployment in Nigeria.
Furthermore, the questionnaire is also going to provide the necessary
information to test the research hypothesis, which will include close ended
question to provide the necessary information for the various aspect of this
research work in which the researcher intends to find solutions to.
3.6 Statistical tool used in testing the hypothesis
3.6.1 Chi-square
It is a Latin word denoted by x2 and it’s used when it wished to measure
the discrepancy existing between the observed and expected frequencies. To
investigate agreement between the observed and expected frequencies, we
compute the statistics.
X2=∑ (oi –ei)2
ei
Where o= observed frequency
e= expected frequency
The number of degree of freedom, v of this chi-square distribution is given by:
49 | P a g e
v= (h - 1)(k - 1) if the expected frequency can be computed without having to
estimate population. This technique is employed in testing the first hypotheses.
3.6.2 Justification of the technique used
Chi-square was employed in this study because it is a widely used tool in
data analysis and also because it used mainly to determine how theoretical
distributions (such as the normal and binomial distributions) fits empirical
distribution (that is those obtain from sample data).
And the decision rule for this study will be; if chi-square calculated is less
than the critical value we accept the null hypothesis otherwise we reject the
hypothesis. Thus, the critical value is calculated as 1 – 0.05 = 0.95, where 0.05
is the expected level of error and the 0.95 is the expected level of perfection,
and 1 is the constant. Thus using the chi-square table to determine the critical
value after the questionnaire has been received and inputted into the SPSS for
generation of the chi-square result.
50 | P a g e
Chapter Four
Data Presentation, Analysis and Interpretation.
4.1 Introduction:
This chapter deals with the presentation and analysis of the data obtained
from the structured questionnaire administered to the sample of the population.
It will also test the hypothesis stated in chapter one using the statistical
technique as mentioned in the preceding chapter as this will enable the
researcher to be able to make constructive and logical conclusion.
4.2 Data Presentation and Analysis
The data obtained from the structured questionnaire will be presented
using simple table and percentage. A total of 52 questionnaires were
administered all the identified small and medium scale enterprises in the sample
size during the period and the entire administered questionnaires were returned.
The response rate achieved for the research was 100%, and below are the
response to each question and analysis for the total outcome of the response
derived from the questionnaire.
Question 1: What is the nature of your enterprise or business?
Nature of Enterprises Response PercentagesPartnership 21 40.4%Sole Proprietorship 17 32.7%Family Owned 9 17.3%
51 | P a g e
Others 5 9.6%Total 52 100%
Source: Administered Questionnaire
The above table shows that 21 out of 52 respondents are partnership; 17
out of 52 respondents are sole proprietorship; 9 out of 52 respondents are family
owned and 5 out of 52 respondents are other forms of business ventures.
Therefore we can say that out of the entire distribution, all the various forms of
business enterprise are fully represented and the opinion derived will be highly
proportional and representative.
Question 2: What was the source of your business idea?
Source of Your Business Idea Response PercentagesPersonal interest 27 51.9%Mass media 8 15.4%Seminar/Symposium 5 9.6%Government 5 9.6%Others 7 13.5%Total 52 100%
Source: Administered Questionnaire
The above table indicates that 27 out of 52 respondents derived there
source of business idea based on personal interest; 8 out of 52 respondents
derived there source of business idea from the mass media; 5 out of 52
respondents derived there source of business idea from seminar or symposium;
5 out of 52 respondents derived there source of business idea from government
i.e. government programs like National Directorate of Employment (NDE) and
7 out of 52 respondents derived there source of business idea from other means.
52 | P a g e
Therefore we can say that most of the business enterprise came into existence
based on personal interest and as such will ensure that all effort are put into
such business to see to its success, while others came into existence through
mass media, seminar and government respectively. However, it can be deduced
that except personal interest, all other sources of business idea are not been fully
utilized for SME development.
Question 3: For how long has your enterprise been in operations?
Years of Operation Response PercentagesBetween 1-5 years 23 44.2%Between 5-10 years 19 36.5%Between 11-15 years 4 7.7%Between 16-20 years 2 3.8%Over 20 years 4 7.7%Total 52 100%
Source: Administered Questionnaire
From the above table, it shows that 23 out of 52 respondents have being
in operation between 1 – 5years; 19 out of 52 respondents have being in
operation between 5 – 10years; 4 out of 52 respondents have being in operation
between 11 – 15years; 2 out of 52 respondents have being in operation between
16 – 20years and 4 out of 52 respondents have being in operation for over
20years. Therefore between 1 – 10years 42 out of 52 respondents have being in
existence, thus giving the enterprise the ample experience to survive in the ever
changing and dynamic business world – to solve the challenging issues of
unemployment.
53 | P a g e
Question 4: How many people are employed by your enterprise?
Number of Employees Response Percentages Less 5 9 17.3%Between 6 - 20 36 69.2%Between 21 - 50 6 11.5%Between 51 - 100 1 1.9%Above 100 0 0%Total 52 100.0%
Source: Administered Questionnaire
From the above table, 9 out of 52 respondents employ less than 5 staff; 36
out of 52 respondents employ between 6 – 10 staff; 6 out of 52 respondents
employ between 21 – 50 staff; 1 out of 52 respondents employ between 51 –
100 staff. However, from the distribution all the respondents employ between 1
– 100 staff respectively and most of the respondents are employing more staff.
Question 5: Do you intent to increase your staff strength?
Intent to Increase Staff Strength Response Percentages Yes 37 71.2%No 15 28.8%Total 52 100%
Source: Administered Questionnaire
From the above table, 37 out of 52 respondents intend to increase their
staff strength, while 15 out of 52 respondents do not intend to increase their
staff strength. However, from the distribution 71.2% are willing to increase their
staff strength to meet future demand and as such will lead to reduction of the
unemployed in the labor market.
54 | P a g e
Question 6: What is your mode of operation?
Mode of Operation Response PercentagesLabour Intensive 10 19.2%Capital Intensive 12 23.1%Labour & Capital Intensive 30 57.7%Total 52 100%
Source: Administered Questionnaire
From the above table, 10 out of 52 respondents are labour intensive mode
of operation; 12 out of 52 respondents are capital intensive mode of operation
and 30 out of 52 respondents are both capital and labour intensive mode of
operation. Therefore, from the distribution we can deduce that 57.7% of the
entire respondent adopt both labour and capital intensive mode of operation and
as such will require more staff (skilled, semi – skilled and unskilled) to meet it
operational demand.
Question 7: How have you been financing the operations of the business
(You can tick more than one please?)
Mode Of Financing Response Representative PercentagePersonal Funds / Savings 38 73.1%SMIEIS Funds - -Bank Loans 8 15.4%Family Funds 16 30.8%Friends Support 4 7.7%Others 9 17.3%
Source: Administered Questionnaire
55 | P a g e
From the above table, it is a multiple choice question where the
respondent can choose more than one option based on his/her disposition.
Therefore, majority of the respondents choose personal funds/savings, family
funds as the medium through which their businesses are financed, but the
remaining respondent are either financing their business through bank loans,
friends support or other means. However, we can deduce that all respondent are
financing their business through one or more financing option, except through
SMIEIS funds.
Question 8: What are the problems your business experience since
existence? (You can tick more than one please).
Problems your enterprise experience
Response Representative Percentage
Financial 41 78.8%manpower 2 3.8%Infrastructure 26 50%Government regulation 4 7.7%High cost of operation 27 51.9%other 1 1.9%
Source: Administered Questionnaire
From the above table, it is a multiple choice question where the
respondent can choose more than one option based on his/her disposition.
Therefore, majority choose financial, infrastructure and high cost of operation
as the problems they experience while running their business. And on the other
hand the other respondents choose manpower, government regulation and other
problems unlisted as the problems faced.
56 | P a g e
Question 9: Is financing really a setback to the growth of your business?
Is finance a setback to your business Response PercentagesYes 45 86.5%No 7 13.5%Total 52 100%
Source: Administered Questionnaire
From the above table, 45 out of 52 respondents are experiencing financial
setbacks which hamper the smooth progress of their enterprise, while 7 out of
52 respondents are not experiencing are financial setback. Therefore we can
deduce that 86.5% of the entire respondents are experiencing financial setback
to the growth of their enterprise which is as a result of inadequate capital to
finance such enterprise as a going concern.
Question 10: Are you aware of government SME financing scheme?
Are you aware of Government SME Financing Scheme
Response Percentages
Yes 31 59.6%No 21 40.4%Total 52 100%
Source: Administered Questionnaire
From the above table, 31 out of 52 respondents are aware of government
SME financing scheme while 21 out of 52 respondents are unaware of
government SME financing scheme. Therefore, we can conclude that 59.6%
which is more than half of the respondent are aware of government financing
scheme.
57 | P a g e
Question 11: Has your enterprise ever applied for loan from a bank or any
financial institution?
Has your enterprise ever applied for a loan Response PercentagesYes 23 44.2%No 29 55.8%Total 52 100%
Source: Administered Questionnaire
From the table above, 23 out of 52 respondents have applied for loan
from bank or any other financial institution, while 29 out of 52 respondents
have never applied for loan from a bank or any other financial institution.
Therefore, we can deduce that majority of the respondent have never applied for
loan from a bank or any other financial institution.
Question 12: If no, why? (You can tick more than one please?)
If No, Why? Response Representative PercentageYou do not like bank loan 16 30.8%Interest rate too high 15 28.8%No collateral to pledge 8 15.4%Others 7 13.5%
Source: Administered Questionnaire
From the above table, it is also a multiple choice question where the
respondent can choose more than one option based on his/her disposition.
Therefore, out of 29 respondents that has never applied for loan, 16 respondents
are of the opinion that they do not like loans that is why they never applied for
one; 15 respondents are of the view that high rate of interest is the reason why
58 | P a g e
they never applied for loan; 8 respondents opined that no collateral to pledge
was the reason they never applied for loan and 7 respondents opted for other
reasons not listed among the list of choice as the reason they did not apply for
loan.
Question 13: Have you ever been refused or denied to borrow money from a bank?
Have you ever been denied loan Response Percentages Yes 13 25.0%No 10 19.2%Never applied at all 29 55.8%Total 52 100%
Source: Administered Questionnaire
From the above table, 13 out of 52 respondents have been refused or
denied loan from bank; 10 out of 52 respondents have been granted or given
loan from bank while, 29 out of 52 respondents have never applied for loan at
all, which is equal to number of respondents that have never applied for loan at
all.
Question 14: If yes, what was the main reason why your bankers or the
financial institution refused offering you loan?
Why were you denied loan Response Representative PercentageTo avoid bank problem 4 30.8%No security to pledge 3 23%Too small capital base 5 38.5%others 1 7.7%Total 13 100%
Source: Administered Questionnaire
59 | P a g e
From the above table, 4 out of 13 respondents were refused loan on the
ground that they want to avoid bank problems that arise from inability to repay
back the loan or any other unforeseen circumstance that may arise from loan
agreement; 3 out of 13 respondents were refused loan because they had no
security to pledge before being granted the loan; 5 out of 13 respondents were
refused simply because they have small capital base; and 1 out of 13
respondents was refused loan because of other reasons.
Question 15: Are you aware of the existence of other avenues of funding
your business (e.g. Partnerships, Equipment leasing, Loans from Bank of
Industry).
Aware of other avenues of funding Response Percentages Yes 42 80.8%No 10 19.2%Total 52 100%
Source: Administered Questionnaire
From the above table, 42 out of 52 respondents are aware of other
avenues of funding their enterprises; while 10 out of 52 respondents are not
aware of other avenues of financing their enterprise. Therefore, we can say that
majority of the respondents are aware of other avenues of financing their
enterprise.
60 | P a g e
Question 16: If given the opportunity, would you accept a joint ownership
with person(s) or organizations that are willing to fund the business?
Would you accept joint ownership Response Percentages Yes 46 88.5%No 6 11.5%Total 52 100%
Source: Administered Questionnaire
From the above table, 46 out of 52 respondents are willing to accept joint
ownership with person(s) or organizations that are willing to fund their
business, while 6 out of 52 respondents are not willing to accept joint ownership
from willing person(s) or organization.
Question 17: Are you aware that the government (herein referred to as the
public sector) can partner with you or other private organization to help
grow your business?
Aware of public – private partnership Response Percentages Yes 36 69.2%No 16 30.8%Total 52 100.0%
Source: Administered Questionnaire
From the above table, 36 out of 52 respondents are aware of public –
private partnership, while 16 out of 52 respondents are not aware of public –
private partnership. Therefore, we can deduce that majority of the distribution
are aware of public – private partnership.
Question 18: If yes, has there been any form of such partnership in the past.
61 | P a g e
Has there been any form of such partnership?
Response Percentages
Yes 10 19.2%No 26 50.0%No response 16 30.8%Total 52 100.0%
Source: Administered Questionnaire
From the above table, 10 out of 52 respondents have participated in such
form partnership; 26 out of 52 respondents have never participated in such form
of partnership; while 16 out of 52 respondents are not aware of such form of
partnership therefore they neither participate nor did not participate.
Question 19: What role(s) do you think Public – Private Partnership can
bring to the development of SMEs in Nigeria?
What role(s) can public – private bring to SMEs in Nigeria?
Response Percentages
Access to credit 5 9.6%Creating a legal frame work 5 9.6%Improving physical infrastructure 12 23.1%Supporting access to technology 4 7.7%Facilitate access to business advisory services 3 5.8%Training in entrepreneurship, skills & management
9 17.3%
Capacity building and industries strengthening
4 7.7%
Providing support through credit scheme 5 9.6%Fostering linkage with large industries 2 3.8%Other 3 5.8%Total 52 100%
Source: Administered Questionnaire
From the table above, 5 out of 52 respondents are of the view that SMEs
should have access to credit; 5 out of 52 respondents opined that creating a legal
62 | P a g e
framework will bring development to SMEs in Nigeria; 12 out of 52
respondents are of the opinion that physical infrastructure should be improved;
4 out of 52 respondents are of the view that access to supporting technology will
bring about development to SMEs in Nigeria; 3 out of 52 respondents are of the
opinion that access to advisory services will foster rapid development of SMEs
in Nigeria; 9 out of 52 respondents believes that entrepreneurship training, skills
and management training will enhance development of SMEs in Nigeria; 4 out
of 52 respondents that capacity building and strengthening of the industry will
lead to SME development in Nigeria; 5 out of 52 respondents opined that
provision of support through credit scheme will bring about SME development
in Nigeria; 2 out of 52 respondents agrees with the fact that fostering linkages
with large industries will enhance development of SME in Nigeria and 3 out of
52 respondents believe that other roles apart from the ones listed can be played
by public – private partnership to bring development of SME in Nigeria.
Question 20: Where do you visualize your business in 15yrs from now?
Where do you visualize your business Response PercentagesIndustry Leader 12 23.1%Industry Challenger 24 46.2%Industry Follower 14 26.9%Industry Nicher 2 3.8%Total 52 100%
Source: Administered Questionnaire
From the above table, 12 out of 52 respondents visualize becoming the
industry leader; 24 out of 52 respondents also visualize becoming an industry
63 | P a g e
challenger; 14 out of 52 respondents visualize becoming an industry follower
while, 2 visualize becoming an industry nicher. Therefore, we can say that all
the respondent have various visions they have set for themselves to be attained
in the near future thus making them focus and determined to attain such vision
in the near future.
4.3 Test of Hypothesis
Nature of enterprise and Number of employees Cross tabulation
Alternatives Number of employees< 5 6 - 20 21- 50 51-100 Total
Natu
re of enterp
rise
Partnership Count 1 17 3 0 21Expected Count
3.6 14.5 2.4 0.4 21.0
Sole proprietorship
Count 3 12 2 0 17Expected Count
2.9 11.8 2.0 0.3 17.0
Family owned Count 2 5 1 1 9Expected Count
1.6 6.2 1.0 0.2 9.0
Others Count 3 2 0 0 5Expected Count
0.9 3.5 0.6 0.1 5.0
Total Count 9 36 6 1 52Expected Count
9.0 36.0 6.0 1.0 52
Source: SPSS output
Chi-square test
64 | P a g e
ValueDegree of freedom
Asymp. Sig. (2-sided)
Pearson Chi-Square 14.078a 9 .120Likelihood Ratio 12.175 9 .204No. of Valid Cases 52
a. 13 cells (81.3%) have expected count less than 5. The minimum expected
count is .10.
Since chi – square calculated is 14.078 which is less than the calculated
critical value of 16.92. We accept the null hypothesis and conclude that Small
and medium scale enterprise (SMEs) has no significant effect on unemployment
rate in Sabon – Gari local government area of Kaduna state..
4.4 Discussion of Findings
In the light of the above presented data, here are some of the findings
discussed to the best of the researcher’s ability:
i. The question about the nature of enterprise or business, the response
shows that all the respondent are SMEs and are adequate for the study
which can be seen from the sample size table in chapter three as well as
the response from question one.
ii. The response on what was the source of the business idea shows that
most of the SMEs came into existence based on personal interest, thus
showing the flair they have to invest and become productive, but it could
be better if the other sources are developed to give such venture a bigger
boost.
65 | P a g e
iii. The question on how long has your enterprise been in operations reveals
that majority of the enterprises have been in existence for more than five
years, thus it can be interpreted that within such period they must have
acquired a lot of business experience to survive and remain in the ever
changing and dynamic business environment.
iv. The question on how many people are employed by your enterprise
shows that majority of the enterprises employ between 1 – 50 staff,
therefore we can say that most of the SMEs are not a one – man business
and as such they have the potentials of absorbing willing labour force
when the need arises.
v. The question on whether they intend to increase their staff strength
reveals that 71.2% of the respondents have the intention to increase their
individual staff strength assuming the need arises, thus it can be
interpreted as a viable alternative of absorbing the ever growing rate of
unemployed labour force.
vi. The question on what is the mode of operation shows that majority of the
respondents are both adopt capital and labour intensive modes of
operation, while the remaining are either capital or labour intensive
modes of operation, therefore we can boldly say that all respondent are
actually involved in productive venture(s) and as such will need skilled,
semi – skilled or/and unskilled manpower to carry out the operations for
the enterprise.
66 | P a g e
vii. The question on how have the enterprises been financing the operations
of the business reveals that all the options are source of finance for SMEs
except SMIEIS funds which not even one of the respondent acknowledge
using it as a source of finance, therefore the government has to intensify
effort in areas of publicity to stimulate patronage from willing investors
to adopt such scheme as a means of financing SMEs.
viii. The question on what are the problems your business experience since
existence shows that all the possible dimension of problems that are
likely to be experienced by enterprises during the course of operations is
actually being experienced by enterprises.
ix. The question on whether finance is really a setback to the growth of
business reveals that 86.5% are actually facing financial predicament of
different dimensions. Therefore, since finance is the life – wire of any
business the problem really need to be solved by providing suitable
financial options that can ease the difficulty in accessing finance.
x. The question whether the enterprises aware of government SME
financing scheme shows that 59.6% of the total respondents are aware of
government SME financing scheme, therefore we can deduce that the
knowledge of existence of such scheme is simply a step in the right
direction, because it will be assumed that interested investors will utilize
such scheme to their benefit and also the economy in general.
67 | P a g e
xi. The question on whether the enterprise has ever applied for loan from a
bank or any financial institution bring to bear the fact that 55.8% has
never applied for bank loan, while 44.2% did actually applied for a bank
loan. Therefore we can say that despite the fact that finance is a setback
to the growth businesses, yet they do not applied for loan to solve their
problems for reasons which will be explained in the next findings.
xii. The question on reasons why enterprises do not apply for loan reveals
that 30.8% do not actually like loan based on personal reasons and
convictions; furthermore, 28.8% did not apply for loan because the
interest rate is too high; more so, 15.4% did not apply for loan on the
grounds that they do not possess enough collateral to pledge before
collecting and loan from any financial institution and finally 13.5% do
not apply for loan for other reasons apart from the once mentioned.
However, despite the financial constraint bedeviling businesses, majority
do not believe that applying for loan will solve their financial
predicaments.
xiii. The question on whether they have ever been refused or denied to borrow
money from a bank brings to limelight the fact that 25% of the
respondents have actually been denied loans before, while 19.2% have
not been denied loans before. But as for the remaining 55.8% of
respondent, it actually represents the same percentage of enterprise that
has never applied for bank loans before. Therefore, it is evident that were
68 | P a g e
some did not want to apply for loans, others actually did apply for loans
to solve their financial predicament.
xiv. The question on the main reason why their bankers or the financial
institution refused offering you loan indicated that 30.8% of the
respondent are of the view that the reason why their bankers refused
giving them loan is because to avoid problem – which normally arise
from inability to repay back the loan at the agreed time or period; more so
23% of the respondent say they do not have or possess adequate security
to pledge before collecting such loan; furthermore, 38.5% opined that the
reason why they were denied loan was because they did not have the
required capital base for the loan they needed therefore they were denied
the loan. And finally, 7.7% of the respondents say they were denied loan
because of some other reasons not listed in the possible options.
xv. The question on whether the enterprise are aware of the existence of other
avenues of funding their business (e.g. Partnerships, Equipment leasing,
Loans from Bank of Industry) demonstrate the fact that 80.8% of the
respondents are actually aware of other avenues of funding their business,
while on the other hand 19.2% of the respondents are not aware of other
avenues of funding their business. This goes to say that a large percentage
of the respondents are aware of other means of financing their business.
xvi. The question on if given the opportunity, would they accept a joint
ownership with person(s) or organizations that are willing to fund their
69 | P a g e
business reveals that 88.5% of the respondent are willing to accept joint
ownership, and as such this goes to show the high level of willingness to
grow, because when such proposals are accepted it will lead to increase in
productivity, assuming all thing being equal.
xvii. The question on if they are aware that the government (herein referred to
as the public sector) can partner with them or other private organization
to help grow their business also confirm the previous response on the
willingness to partner with private organizations. And now this also
shows the willingness to partner with the government to grow their
various businesses. Therefore, from these outcomes we can say that there
is a high degree of willingness on the part of the respondents to partner
with suitable investors, because it is a known fact that no man is an
island.
xviii. The question on if yes, has there been any form of such partnership in the
past indicates out of the respondent that are aware of such form of
partnership 19.2% of the respondent have actually participated in such
form of partnership, while 50% have not participated in such form of
partnership. And on the other hand 30.8% represent those that are not
aware at all therefore there was no response from them.
xix. The question on what are the possible role(s) they thought Public –
Private Partnership can bring to the development of SMEs in Nigeria
reveals that a large proportion of the respondent believed that improving
70 | P a g e
physical infrastructures will bring about development of SMEs in
Nigeria, but notwithstanding all other options are also predicted to bring
development to SMEs in Nigeria if the public – private partnership goes
through, because from the response to the question and suggested roles to
be played by the public – private partnership it means that all the
suggested roles will bring development to SMEs in Nigeria.
xx. The question on what is the vision or where do they visualize their
businesses in 15yrs from now, shows that despite the prospect and
constraint evident in the operation and management of the individual
enterprises, they still do have vision set for themselves to be achieved
within the projected period of 15years if all things being equal.
71 | P a g e
Chapter Five
Summary, Conclusion and Recommendation
5.1 Summary:
This study work came to being as a result of the researcher interest in the
current trend of unemployment, thus trying to carry out a study to examine the
relationship between small and medium scale enterprises as a viable option in
reducing the rate of unemployment in Sabon Gari local government area of
Kaduna State.
In chapter one, it brought to bear the trend of unemployment rate from
4.7% in 2000 to 19.7% in 2011, the statement of the problem examines attempts
made by different administration in Nigeria to reduce the rate of unemployment
to a manageable minimum. Furthermore, the objectives of the study is aimed
conducting a scientific study to see the level of awareness about the concept of
small and medium scale enterprise and to evaluate the impact of SMEs on
unemployment. The research question tries to raise projective questions which
will be answer in chapter four – data analysis, presentation and interpretation.
The scope of the study will mainly be based on examining the relationship
between SMEs and unemployment in Sabon Gari local government area of
Kaduna State which will be tested by the hypothesis put forward and tested
using statistical tool.
72 | P a g e
In chapter two, it digs deep to examine the technical meaning of SMEs
and unemployment from different scholarly view point; the importance of
SMEs to the economy i.e. contributing the GDP and adequate utilization of the
abundant raw materials available in the country; the source of financing
available to SMEs in Nigeria as well as financing schemes put in place by
different administration to ameliorate the stress associated with sourcing for
funds to carry out business investment; furthermore, it examines the general
problem associated with SMEs as well as prospects that are evident therein;
more so the classification of unemployment from economics view point as well
as the causes of unemployment in the Nigerian context alongside the
relationship between SMEs and unemployment.
In chapter three, it explores different scientific methods to come up with
an adequate design for the demands of the study. Firstly, sourcing of data for the
study is carried out by administering a closed ended questionnaire to
respondents to elicit response to serve as the primary data. Secondly, recording
the data – the administered questionnaire will serve as the medium through
which the data will be recorded for further analysis and interpretation. Thirdly,
analyzing and interpreting the data, simple percentages were generated using
SPSS and also the SPSS was used to generate the Pearson chi – square test for
the hypothesis. Furthermore, the population for the study was gotten from the
revenue department of Sabon Gari local government area which constitutes
73 | P a g e
SMEs from the local government area, thus further subjected to simple random
sample for the sample size for the study.
In chapter four, the analyzed data will be presented in table alongside
their respective percentages for easy understanding of each and every question
on the questionnaire. Also, findings arrived at during the course of the research
was discussed for better understanding of the interpreted data.
In chapter five, summary of the entire research was reached, conclusion
based on the researchers understanding of the findings as well as
recommendations put forward as deemed appropriate.
5.2 Conclusion:
Some of the conclusions reached after the entire study has been
conducted are highlighted below, that:
i. Most of the enterprises are small scale enterprises and not both small and
medium scale enterprises based on the definition of “Storey 1994”.
ii. Apart from personal interest as a source of idea by which majority of the
respondent identified as their source of business idea, the remaining
source are not being utilized to the fullest.
iii. Majority of the enterprises are averagely young into the business,
therefore they lack basic experience and resources to attack in more than
one front i.e. diversification into other profitable venture alongside their
current business.
74 | P a g e
iv. On the average, most of the enterprise are not employing or absorbing the
numerous labour force available comprising of skilled, semi – skilled and
unskilled as expected, simply because of financial and other predicament
they are experiencing.
v. Despite the under – utilization of manpower resources, the enterprises are
willing to increase their individual staff strength whenever the situation
demands.
vi. More so, majority of the enterprises are both capital and labour intensive,
which will create an avenue to absorb the abundant manpower available
in Nigeria.
vii. Out of all the identified source of financing, small and medium industries
equity investment scheme (SMIEIS) is the only under – utilized source of
financing business in Sabon Gari local government area of Kaduna State,
and this is because they are aware of the scheme, but are not accessible
because of the bottle – necks involved in benefitting from such scheme.
viii. Finance, inadequate physical infrastructure and high cost of operation are
the major problems facing smooth operation of business operations in
Sabon Gari local government area.
ix. Majority of the enterprises are not willing to apply for loans to solve their
problems because they do not want to be involved in any crisis associated
with loan repayment, as well as the high interest rate attached to loan and
75 | P a g e
finally the insufficient collateral/security to pledge before benefitting
from loans from financial institutions.
x. The enterprises used for the study runs an open door policy for public –
private partnership to enhance their ability to overcome their operational
challenges and benefit from the awaiting prospects.
xi. Based on individual opinion of the enterprises, they believe that public –
private partnership can play these roles to bring about development to
SMEs in Nigeria, namely:
- Creating a legal frame work to regulate entry and exit of competitors
and investors.
- Improving physical infrastructure such frequent energy supply,
provision portable water etc.
- Supporting access to technology.
- Facilitate access to business advisory services and consultancy.
- Training in entrepreneurship skills, management, capacity building
and industries strengthening
- Providing support through credit scheme without stringent bottle –
necks.
- Fostering linkage with large industries i.e. vertical and horizontal
integration – where they can either serve as suppliers of raw material
or demand for finished (market for finished goods).
76 | P a g e
xii. Finally, majority of the enterprises are highly visionary, goes to say that
with such vision in place the flair for success will be stimulated.
5.3 Recommendation:
Based on the above findings and conclusions reached, it is necessary to
make some recommendations for consideration by stakeholders such as the
government, foreign and domestic investors, financial institutions and corporate
managers.
Public – private partnership should be strengthened to achieve success in
areas such as:
i. Provision of soft loans and finance devoid of stringent requirement to
interested applicants.
ii. Training in entrepreneurship skills, management, capacity building and
industries strengthening.
iii. Improving physical infrastructure such frequent and cheap energy supply,
provision portable water, construction and rehabilitation of roads to link
industries to markets.
iv. Organize seminars, symposiums as well as research and development to
come up with new information, simply to enlightened potential investors
of new ideas, or faster and cheaper way of doing things.
v. Establish ethical code of conduct to guide industry practice to avoid low
quality or sub – standard practice among competitors.
77 | P a g e
vi. Organize seminars, symposium as well as research and development to
enlightened potential investors of new ideas, or faster and cheaper way of
doing things.
vii. The government should establish fiscal incentives and support such as tax
rebate for SMEs which have demonstrated capabilities in local sourcing
of raw materials, value addition to commodities for export as well as
other business ethics and good corporate governance which government
may wish to promote.
viii. Government should come up with a new pragmatic and realistic industrial
policy that will address the current globalization challenges as well as the
emergent domestic challenges and problems in order to make the
Nigerian SMEs globally competitive.
ix. The government should set up an inter-ministerial body to coordinate all
matters relating to SMEs. This body should comprise all relevant
Ministries (Finance, Industry, National Planning, Commerce, Science &
Technology, CBN, NASME, MAN, NACCIMA, NASSI, BOI and
Committee of NAS) and be chaired by SMEDAN.
x. Policy makers should endeavor to understand the nature, problems and
needs of SMEs before enunciating policies for the sub-sector. In this
regard, policy makers should consult with relevant stakeholders before
enacting such policies that affect them.
78 | P a g e
xi. Above all, the government should have the political will to effectively
and efficiently implement the above recommended measures in order to
achieve the desired results for as long as the status quo remains we cannot
achieve or expect any improvement in the crucial SME sector. If we want
a change in the status quo as it relates to our SMEs, we must change the
way and manner we manage affairs relating to SMEs.
xii. Finally, the government should establish a conducive economic
environment to enhance a hitch – free business operation i.e. the force of
demand and supply should interact positively e.g. reduce and discourage
importation and encourage purchase as well as mass patronage of
domestic products and/or services. Thus, this will go a long way in
boosting increase in GDP, standard of living as well as foreign exchange
rate.
79 | P a g e
References:
Anyanwuocha C. (2006) Fundamentals of Economics: Precious publishers,
Onitsha.
Basil A. N. O (2005) Small and Medium Enterprises (SMEs) In Nigeria:
Problems and Prospects: St. Clements University.
Begg et al (2000), Economics, Mcgraw Hills: United Kingdom.
Bolton J.E (1971), Report of the Committee of Inquiry on Small Firms, United
kingdom
Central Bank of Nigeria (2004). “Progress Report on SMIEIS.” Accessible from
http:\\www.cenbank.org
Central Bank of Nigeria (2001), First Annual Monetary Policy Conference on
Growing the Nigerian Economy.
Central Bank of Nigeria (2005) Microfinance Policy, Regulatory and
Supervisory framework for Nigeria, Abuja, Nigeria.
Cochran, W.G. (1963). Sampling Technique, (2nd ed) New York: john wiley and
sons, inc.
Douglason, G.U and Gbosi, A (2006) The Dynamics of productivity and
unemployment: Implications for employment generation in Nigeria
2006”. Annual conference, Ibadan, Nigeria.
Elaian K (1996), `Employment Implications of Small Scale Industries in
Developing Countries: Evidence from Jordan’, Science, Technology &
Development.
80 | P a g e
European Commission (2003). Recommendation 2003/361/EC: SME
Definition" .http://ec.europa.eu/enterprise/enterprise_policy/sme_definiti/i
ndex_en.htm
Gbosi, A.N. (2006) Modern Labour Economics and Policy Analysis. Abakaliki,
Pack Publishers
Federal Office of Statistics (1998) Review of the Nigerian Economy 1997,
Lagos.
International labour organization (1996) World Employment.
www.ilo.org/public/nglish bureau/inf/pkits.
International Labour Organization (ILO (1996); Meeting the Challenges of
Rising Unemployment and Underemployment. Report submitted by the
ILO's Employment Policy Strategy Formulation Mission to Nigeria.
International labour organization (2000) World Employment reports 1998 –
1999 employability in the global economy: Geneva.
Jim O. (2001) Financing Nigeria’s digital revelation via SMEs: Paper
presentation in Lagos during Zenith bank seminar.
Mead D.C and Liedholm C. (1998) The dynamics of micro and small
enterprises in developing countries: world bank development summit:
Geneva.
Ministry of Agro & Rural Industries". Msme.gov.in. (2007).
http://msme.gov.in/msme_aboutus.htm. Retrieved 2010-12-09
81 | P a g e
National Bureau of Statistics (2005) The Nigerian statistical fact sheets on
Economic and Social Development, FOS, Nigeria.
Odusola, A.F. (2001) Nigeria’s unemployment problem in the 80s and 90s:
Implication for policy directions in the 21st century. NCEMA Policy
Seminar Series. Ibadan, Nigeria.
Odusola, A.F. (1997); "Poverty in Nigeria: An Eclectic Appraisal", in Poverty
Alleviation in Nigeria, Annual Conference Proceeding of the Nigerian
Economic Society.
Okigbo, P.N.C. (1986); "An Address Delivered During Productivity for Self
Reliance and Excellence", Proceedings of the 1st National Productivity
Day Celebration, National Productivity Centre, Lagos.
Okigbo, P.N.C. (1986); "Theoretical and Methodological Issues Relating to
Unemployment in Nigeria", in Unemployment and Underemployment in
Nigeria, Annual Conference Proceedings of the Nigerian Economic
Society, Kaduna State,
Osei B, Baah-Nuakoh A, Tutu K.A, & Sowa N.K (1993), `Impact of Structural
Adjustment on Small-Scale Enterprises in Ghana’, in Helmsing A.H.J and
Kolstee T. H (eds), Structural Adjustment, Financial Policy and
Assistance Programmes in Africa, IT Publications.
Osuala E.C. (2007), Fundamentals of Research Methodology (5th Ed.), Africana
– first publishers: Onitsha.
82 | P a g e
Steel W.F (1977), Small Scale Employment and Production in Developing
Countries: Evidence from Ghana, Praeger, New York, USA.
Storey D (1994), Understanding the Small Business Sector, Routledge: United
Kingdom
The World Bank Group (2001), Small and Medium Enterprise Department,
Country Mapping, Nigeria
Webster L (1990), `Ghana’s Small Enterprise Sector: `Survey of Adjustment
Response & Constraints’, World Bank Industry and Energy Dept,
Washington D.C
Wynarczyk P, Watson R, Storey D.J, Short H & Keasey K(1993), The
Managerial Labour Market in Small & Medium Sized Enterprises,
Routledge, United Kingdom.
World Bank, (2001). World Development Report 2001: Washington, Oxford
University Press for the World Bank.
83 | P a g e
Appendix:
DEPARTMENT OF BUSINESS ADMINISTRATION
FACULTY OF ADMINISTRATION
AHMADU BELLO UNIVERSITY, ZARIA
Dear Respondents,
QUESTIONNAIRE FOR SMALL AND MEDIUM SCALE ENTERPRISES: A
SOLUTION FOR REDUCING THE LEVEL OF UNEMPLOYMENT IN
NIGERIA.
I am a final year student of the above institution currently conducting a
study on small and medium scale enterprises: a solution for reducing the level
of unemployment in Nigeria. It is in view of the above that i request you to fill
the attached questionnaire.
The study is purely for academic purpose and your answers/responses
will be most appreciated, all information will be treated as highly confidential.
Thanks.
Please tick the appropriate box and comment where necessary. In order to
ensure confidentiality, please do not put down your name on the questionnaire,
but please answer the questions as honestly and objectively as possible.
84 | P a g e
1. What is the nature of Enterprise/Business: Please tick as appropriate
Partnership [ ] Sole proprietor [ ] family owned [ ]
Others [ ]
2. What was the source of idea of your business? (You can tick more than
one please). Personal interest [ ] mass media [ ]
seminar/symposia [ ] government programs [ ] others[ ]
3. For how long has your enterprise been in operations: please tick as
appropriate: less than five (5) years [ ] between 5 and 10 years [ ]
between 11 and 15 years [ ] between 16 and 20 years [ ] over 20
years [ ]
4. How many people are employed by your enterprise: less than 5 [ ]
between 6 and 20 [ ] between 21 and 50 [ ] between 51 and 100 [
] between 100 above [ ]
5. Do you intent to increase your staff strength. Yes [ ] No [ ]
6. What is your mode of operation? Labor intensive [ ] capital
intensive [ ] both capital & labor intensive [ ]
7. How have you been financing the operations of the business: tick as
appropriate: (You can tick more than one please).
Personal funds / savings [ ] SMIEIS funds [ ]
Bank loans [ ] family funds [ ]
Friends support [ ] others [ ]
85 | P a g e
8. What are the problems your business experience since existence? (You
can tick more than one please). Financial [ ] manpower [ ]
infrastructure [ ] government regulations [ ] high cost of operation
[ ] others[ ]
9. Is financing really a setback to the growth of your business? Yes [ ] No [
]
10.Are you aware of government SME financing scheme? Yes [ ] No [ ]
11.Has your enterprise ever applied for loan from a bank or any financial
institution? Yes [ ] No [ ]
12.If no, why? (You can tick more than one please).
You do not like Bank loan [ ] Interest Rate too high [ ]
No collateral to pledge [ ] others[ ]
13.Have you ever been refused or denied to borrow money from a bank?
Yes [ ] No[ ]
14.If yes, what was the main reason why your bankers or the financial
institution refused offering you loan? (You can tick more than one
please).
To avoid bank problem [ ] No security to pledge [ ]
Too small capital base [ ] others [ ]
15.Are you aware of the existence of other avenues of funding your business
(e.g. Partnerships, Equipment leasing, Loans from Bank of Industry).
Yes [ ] No [ ]
86 | P a g e
16.If given the opportunity, would you accept a joint ownership with
person(s) or organizations that are willing to fund the business? Yes [
] No [ ]
17.Are you aware that the government (herein referred to as the public
sector) can partner with you or other private organization to help grow
your business? Yes [ ] No [ ]
18.If yes, has there been any form of such partnership in the past.
Yes [ ] No [ ]
19.What roles do you think Public – Private Partnership can bring to the
development of SMEs in Nigeria.
i. Access to credit [ ]
ii. Creating a legal frame work [ ]
iii. Improving physical infrastructure [ ]
iv. Supporting access to technology [ ]
v. Facilitate access to business advisory services [ ]
vi. Training in entrepreneurship, skills and management [ ]
vii. Capacity building and industries strengthening [ ]
viii. Providing support through credit scheme [ ]
ix. Fostering linkage with large industries [ ]
x. Others [ ]
87 | P a g e
20.Where do you visualize your business in 15yrs from now? Industry
leader[ ] industry challenger [ ] industry follower [ ] Industry
nicher [ ]
88 | P a g e