An Empirical Investigation into How Inadequate Access to Finance Has Limited the Contributions of Small and Medium Scale Industries to the Economic Development in Nigeria

Abstract

This study sought to empirically investigate how inadequate access to finance has limited the contributions of Small and Medium Scale Industries (SMSls) to the Economic Development in Nigeria. The SMSIs are recognized worldwide as the necessary back bone of industrial growth and development, and they have experienced continuous problem with sourcing and accessing appropriate financial resources, both on the long and short term for their business needs. Research findings suggest that Small and Medium Scale Industries constitute about 75 percent of total industrial make-up, both in developing and developed nations. However, successive Nigeria governments from independence to date have not paid sufficient attention to addressing the funding problems of SMSls, while governments have instituted various financing and credit schemes on paper for the firms, the implementation of such schemes have been fraught with fraud and total lack of commitment on the part of the authorities. In line with the design of this study, primary data were collected (through the use of questionnaire) from the two principal stakeholders in the medium and small scale industries sub-sector – the banks and the SMSls industrialists, to investigate why this important and major sub-sector of the industrial sector of the economy have suffered so much neglect in terms of sourcing sufficient and appropriate funding, for their growth and development since independence in Nigeria.The findings of this study revealed that there is a positive relationship between the growth and development of SMSls and adequate provision of required funding both from the banking sector and through government support through subsidized funding and credit schemes provided at favourable interests. This research therefore recommend among other things that a honest and logical implementation of the SMSIs funding initiative, will greatly improve their contribution to the significant turnaround of the industrial sector on one hand and help revitalize the Economic development in Nigeria, on the other hand. Nigeria is at the verge of witnessing an industrial explosion as experienced in the South East Asian industrial miracle, if Nigerian governments will borrow a leaf from the experiences of those nations and appropriately implement the SMSls initiative and other government funding support schemes. This research recommend a CBN/government back-up monitoring and supervision programme for the recently energized micro-finance banking sector, in terms of improved capitalization and management efficiency to ensure, that the micro-finance banks can meet their target obligation to SMSls. More importantly, there is need for Effective Counseling, Monitoring and Evaluation through Business Advisory Services for funded SMSI's as a new measure of control to ascertain proper use of funding.