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Development of Small and Medium Scale …

Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, ; February 2012 16 Development of Small and Medium Scale Enterprises: The role of Government and other Financial Institutions By: Emmanuel O. Oni & Daniya A. A. Department of Entrepreneurship and Business Technology, Federal University of Technology, Minna ABSTRACT Small and Medium Scale Enterprises constitute essential ingredients in the lubrication and Development of any economy. In Nigeria, the story makes no remarkable difference as Small and Medium Scale Enterprises dominate the economy. Government over the years has formulated a number of policies aimed at developing Small and Medium Scale Enterprises.

Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, No.7; February 2012 16 Development of Small and Medium Scale Enterprises: The role

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1 Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, ; February 2012 16 Development of Small and Medium Scale Enterprises: The role of Government and other Financial Institutions By: Emmanuel O. Oni & Daniya A. A. Department of Entrepreneurship and Business Technology, Federal University of Technology, Minna ABSTRACT Small and Medium Scale Enterprises constitute essential ingredients in the lubrication and Development of any economy. In Nigeria, the story makes no remarkable difference as Small and Medium Scale Enterprises dominate the economy. Government over the years has formulated a number of policies aimed at developing Small and Medium Scale Enterprises.

2 While most policies actually failed due to poor implementation, others however, succeeded. Efforts have been made in the past to identify the role of Small and Medium Scale Enterprises to the Development of Nigeria s economy, its problems and prospects which created a vacuum on the role of government and other financial institutions in the Development of Small and Medium Scale Enterprises. It is this vacuum created by previous researchers that prompted this write up. It is therefore the thrust of this paper to identify the role of government and other financial institutions particularly micro finance institutions in the Development of Small and Medium Scale enterprises in Nigeria.

3 Relevant literatures were reviewed to bring out salient issues on the subject matter of this paper. The chief source of information for this write up is secondary method of data collection. It was discovered that financial institutions provide the necessary financial lubricant that facilitate the Development of Small and Medium Scale Enterprises, but, a lot still need to be done by the government in terms of policy formulation in order to complement the efforts of financial institutions. This paper recommends among others, further establishment of micro finance institutions to serve the grass root financial needs, sensitization of the general public on how to access funds for SMEs Development , public private partnership should also be Arabian Journal of Business and Management Review (OMAN Chapter) Vol.

4 1, ; February 2012 17 encouraged, the financial muscle of the financial institutions must be geared up to meet the financial need of SMEs in their respective locality. INTRODUCTION Small and Medium Scale Enterprises are sub-sectors of the industrial sector which play crucial roles in industrial Development (Ahmed S. 2006). Following the adoption of Economic reform programme in Nigeria in 1981, there have been several decisions to switch from capital intensive and large Scale industrial projects which was based on the philosophy of import Development to Small and Medium Scale Enterprises which have better prospects for developing domestic economy, thereby generating the required goods and services that will propel the economy of Nigeria towards Development .

5 It is base on this premise that Ojo .O. (2009), argued that one of the responses to the challenges of Development in developing countries particularly, in Nigeria, is the encouragement of entrepreneurial Development scheme. Despite the abundant natural resources, the country still finds it very difficult to discover her developmental bearing since independence. Quality and adequate infrastructural provision has remained a night-mare, the real sector among others have witnessed downward performance while unemployment rate is on the increase. Most of the poor and unemployed Nigerians in order to better their lots have resorted to the establishment of their own businesses.

6 Consequently, Entrepreneurship is fast becoming a household name in Nigeria. This is as a result of the fact that the so called white collar jobs that people clamour for are no longer there. Even, the touted sectors (Banks and companies) known to be the largest employer of labour are on the down-turn following the consolidation crisis and fraudulent practices of the high and mighty in the banking sector. The companies of course are folding up as a result of erratic power supply, insecurity and persistent increase in interest rate which has lead to high cost of production and undermines profit making potentials of companies operating in Nigeria.

7 As a result of banking sector practices and continuous folding up of companies, a lot of Nigerians are thrown into unemployment which inevitably detriment the economic situation of the country. Since the office jobs that people desire are no longer there for the teeming population, and the few ones that succeeded in getting the jobs are thrown out as a result of the factors identified above, the need for the government and the people to have a rethink on the way-out of this mess Arabian Journal of Business and Management Review (OMAN Chapter) Vol.

8 1, ; February 2012 18 became imperative. Hence, the need for Small and Medium Scale Enterprises (SMEs) became a reality as a means of ensuring self independent, employment creation, import substitution, effective and efficient utilization of local raw materials and contribution to the economic Development of our dear nation (Nigeria). All the aforestated benefits of Small and Medium Scale Enterprises cannot be achieved without the direct intervention of the government and financial institutions. Over the years a number of policies have been formulated by the government with a view to developing Small and Medium Scale Enterprises.

9 The Nigerian government under the then leadership of Chief Olusegun Obasajo promulgated micro-finance policy and other regulatory and supervisory frame work in 2005. This paper will therefore examines several policies aimed at developing Small and Medium Scale Enterprises vis-a-vis roles played by the government and financial institutions in achieving SMEs Development in Nigeria. REVIEW OF LITERATURE Overview of Small and Medium Scale Enterprises. According to (2010), the abbreviation SMEs occurs commonly in the European Union and in International Organizations such as the World Bank, the United Nations and the World Trade Organization.

10 Also the term Small and Medium Scale Businesses (SMEs) is predominantly used in the United States of America. The European Union states traditionally have their own definition of what constitutes SMEs. For instance, the traditional definition in Germany Limits Small and Medium Scale Enterprises to two hundred and fifty (250) employees while in Belgium, it is limited to one hundred (100) employees. Recently, the European Union has standardize the concept by categorizing enterprises with less than ten (10) employees as micro , those with fewer than fifty (50) employees as Small and those with fewer than two hundred and fifty (250) employees as Medium .


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