THE IMPACT OF DEVELOPMENT BANK IN THE FINANCING OF SMALL INDUSTRIES
The discourse seeks to investigate how the development banks sector has imparted immensely into the growth and development of small industries. Also ascertaining whether small scale industries have any significant impact on the growth of Nigeria economy. In using analysis provided in this research work I ascertained robust evidence that development bank industries has no positive and significant input on the economic growth of small scale industry recommendations were also made that would help to improve further the performance of development banks on the economic growth of the small scale industry and the economic as a whole.
1.1 BACKGROUND OF THE STUDY
The manufacturing industry teaches our daily life since the product (Raw material) converted into finished goods; create substitution for imported goods abroad which in term generate employment and income for the citizenry, but with the economy of a state going through a difficult period due to nonchalant attitude of banks in financing small industry. Bank prefers to pay the penalties imposed on them by the monetary authorities (CBN) to financing manufacturing industries. The plan ahead through efficient financing by some bank and effective checks by some government representative to ensure that the money granted to them (SI) will not be jeopardized by inefficient management.
This study therefore focuses among other issues the problem encountered by bank which hamper their financing of small industry, and this is mostly the cash flow position of industrialist (SI). The cash flow position of small industry also militate them for further application for verdict and financial support from various financial institutions.
1.2 STATEMENT OF THE PROBLEM
Following the increase economic activities in Nigeria, Commercial banks which have been established to provide their customers with short term loans can no longer meet up with dutiess of providing medium. At this point in time the monetary authority and the federal government saw the need to create a bank that will cater for the need of people living in rural and urban areas and those who want to invest on capital projects.
Development banking has not performed satisfactorily area of capital projects and promotional activities to stimulate interest among their customers on new projects which the bank consider necessary and profitable.
This can be attributed to in equate capital base, the high rate of interest charged on loans borrowed and high cost of building houses. Now initiatives are therefore needed to tackle these problems.
THE PROBLEMS OF DEVELOPMENT BANK IN SMALL SCALE INDUSTRIES
The rural banking programme initiated in 1976 which took off in June 1997 did encounter some problems. These problems range from poor infrastructure to the fact that the central bank of Nigeria did not base the criteria for assigning forms to the bank on the level of economic activities of those areas.
The problems are as follows:
Lack of infrastructure in the small scale industries: most of the small scale industries lack portable water supply, Electricity, access roads and medical; facilities. This is to a great extent hampered the establishment of banks in small scale industries. However, it is hoped that in the long run the various rural development effort will help ameliorate these problems.
Problem of communication: the rural areas lack communication facilities which are the care of the success in banking operations. Moreso, the par and inefficient communication problems is the banking industry has inhibited the control of diffused branched network, thus limiting the establishment of new one.
Problem of accommodation: the rural dwellers lack durable building to house the banks on their officials and the banks themselves are redundant to erect their own building due to the high cost of capital involved especially when taking into cognizance the fact that the expected economic returns from such rural operations will amount to little or nothing.
Problem of security: most of the small scale industries lacked security facilities which are needed to project the bank properties including cash, hence banks were unable to establish in these banks.
Lack of provision to advertise the rural branches: there is absence of any provision to enable banks to advertise the rural branches as to create awareness and hence attract customers. Finally, I strongly believe that if these problems are looked into, it will help more in developing the small scale industries in no distance time.
1.3 OBJECTIVES OF THE STUDY
The major objective of this study is to show the significant effect of cash flow in financing of small industry in the states.
to critically examine the problem encountered by banks in financing small scale industry (SIS)
To ascertain the need for financing the country manufacturing industries.
To improve funding of small scale industries by bank in the states.
To provide solution as to the way forward.
1.4 RESEARCH QUESTIONS
How does the cash flow position of industrialists connect with the problem of financing small scale industries?
Does the product produce by small industries which is product (raw material) converted into finished goods; create substitution for imported goods aboard and how?
Does significant relationship exist between management and financing of small industries (S1).
How does small industry create efficiency in utilization of resources?
1.5 SIGNIFICANT OF THE STUDY
The study will help develop ideas and information that will help the banking industry and the management of bank, solve problem associated with electronic application in their organization.
The study will help banks maintain standard in their operation.
It will be a base for retraining of bank staffs on the new system of bank operation.
It will also be a base for further studies by scholars who want to work on related topic.
1.6 SCOPE OF THE STUDY
This study will cover the firm 2002-2007. Again, there is time and financial constraint in only two banks and some registered industries were used. These may not provide the general basis for credit management on the whole.
There also existed data collection problem due to death of co-ordination between data collection agencies. Sufficient coverage too much delay in publishing of data due to non- challant attitude to work in the part of most data collection.
1.7 LIMITATIONS OF THE STUDY
The researcher encountered some constraints during the course of the research work. The most difficult problem is that of owners of the small industries refusal to fill the questionnaires.
Another problem is limitation of some fundamental credit policies of bank that are disclosed. But in spite of all these, the researcher was able to complete the research work.
1.8 DEFINITIONS OF TERMS
Bank: A bank is defined as a corporation or one who accepts money in current account, savings or fixed deposit, and also collects cheque for customers.
Financing: it is the act of supporting a creating subsidiary to a firm or an organization to boost its development and production which can be done through equity participation on loan.
Industry: this is this context refers to various small-scale firms that produce goods and those that reader services while are being assessed in terms of their performance in relation to output.
Cash flow: this is the movement of money into and out of business as goods and service are bought and sold.
Collateral: this is a property or something variable that one promises to give or gives to somebody to hold as security till one pays back the money borrowed.
Borrowing: this means to take or collect money from a person or a bank and agree to pay back to them at a stated time or maturity period.
Business: this refers to any gainful activity which might either be commercial, financial or productive engaged for personal development or emotional gain. In the study, it is used to define the activities of small industries or small enterprise in the states and their importance.
Enterprises: is a company as a business.
Government policy: this can be defined as those government activities that are agreed towards the regulation of business organization but in this context, it is those government activities geared towards the regulation of small industry financing.
Industrialist: is a person who own or runs a large or small factory or industrial company.
Investment: money that is neither spends or save but, put in a thing or project in other to yield income also be useful or helpful.
Smalls scale industry: this can be defined as a business whether registered or unregistered that creates utility.
Transaction: volume of deposit and the rate of interest rate. The only person that can influence the credit policy of any bank is the credit/financial manager.
The lending policy of bank is backed up by some controllable decision variable which banks follow in selecting customers for the purpose of credit extension. The either one is the credit analysis, which influences the quality of banks customers. Credit is to be given to reputable customers that have the 5C which include;
Character: the most important of all the 5C’s of credit is the character of the borrowing customers. No matter how much collateral provided by a borrower, it still remains dangerous to give loan to any person who has a dubious character.
Conveniences: the under must seek to know how the borrower will repay the loan and how convenient his repayment plan is realizable.
Capital: after assessing the propose for which the loan is sought, the banker should also determine the actual amount such as project will take as the amount contributed by the owners.
Collateral: this is simply what the borrower present to the lender as security before loan can advance to them against feature to pay back.
Capacity: this is the main factor in any lending proposition. The bank manager or lender must endeavor to know his customer to ensure that the customer has the capacity to enter into a legal contract and also to mange the business
THE IMPACT OF DEVELOPMENT BANK IN THE FINANCING OF SMALL INDUSTRIES