AN EXAMINATION OF THE IMPACT OF MICRO CREDIT PROGRAMMES ON
ENTREPRENEURSHIP DEVELOPMENT IN AKWA IBOM AND CROSS RIVER STATES.
Department
of Business Administration
CHAPTER
ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Prior to the 1970s, the view that
large firms were the cornerstone of a modern economy dominated the literature
(Nnanna, 2003). The theory of economies of scale, which is predicated on
the advantages of large scale operations prevailed. Thus, entrepreneurial
business was seen as belonging to the past; out-moded, and a sign of
technological backwardness. More recently, however, this view has shifted due
to the important role played by relatively small entrepreneurial business firms
in promoting industrialization and facilitating sustainable economic growth and
development.
The concept of entrepreneurship
evokes varying meanings or interpretations, depending on the perspective of the
user. However, as Duke (2006, p.1), puts it, “an individual who pioneers
a new technology or introduces a new method of doing business typifies
entrepreneurship. He also is a person that carries on with an existing
technology or method, but in an innovative way. The entrepreneur usually
undertakes and operates a new business venture and assumes some accountability
for the inherent risks”. Thus, an entrepreneur is an integrated person who
brings about some changes through innovation for both personal and societal benefit.
As such the entrepreneur is a critical factor in driving socio-economic change as
he seeks new opportunities, and brings about new techniques, new products and
co-ordinates the activities required to manage an enterprise.
In Nigeria, the development of entrepreneurial
activities has manifested in virtually all aspects of the economy including
micro finance, personal services, food, clothing, ICT, telecommunications,
entertainment and hospitality, and agriculture/agro-allied business. These entrepreneurial
efforts have contributed to the attainment of some of the nation’s economic
development objectives. Such contributions include employment generation for the
growing rural and urban labour force, production output expansion, income
redistribution, utilization of local raw materials and technology, increase in
revenue base of government, as well as production of intermediate goods that
help to strengthen inter and intra industrial linkages (Osuji, 2005). Similarly,
developed countries such as United States of America, Japan, Germany, Italy, and
Britain, have been found to owe their overall economic development to
entrepreneurship (Fasua, 2006).
The development and growth of
entrepreneurship in Nigeria, has remained a major concern for the government.
The importance of a private sector-driven economy can best be described and
appreciated from its potential for facilitating food security, employment
generation, service delivery, wealth creation and economic empowerment of the
citizenry. These are outcomes that are also aligned with the goals of the
National Policy on Micro, Small and Medium Enterprises (MSMEs), National
Economic Empowerment and Development Strategy (NEEDS), State Economic
Empowerment and Development Strategy (SEEDS) and the Millennium Development
Goals (MDGs)
Unfortunately, the impediments of
entrepreneurship development in Nigeria today include the dearth and paucity of
credible and reliable database, weak infrastructure, inconsistent government
policies, lack of knowledge of the various laws, policies, or statutes that protect
SMEs and which can even help them expand and grow, poor credit administration,
corruption, and, lack of capital and/or inadequate funding due mainly to poor
access to conventional banking facilities (MSME, 2010). Lack of capital and/or
inadequate funding in particular, makes it difficult for entrepreneurs to
transform their initiatives, creations and innovations into finished products
and services capable of satisfying the needs of consumers. It is universally
acknowledged that banks and other financial institutions are only able to
provide credit for just twenty five percent of all clients (Fasua, 2006). The
situation is even worse for entrepreneurs as only two percent of micro enterprises
are being served by the banks (Casson, 1995). In response to this problem,
government and the international development agencies have over the years,
instituted various programmes, strategies and policies aimed at providing
credit to entrepreneurs, with a view to promoting micro, small and medium scale
business ventures. Typical among these efforts, are the various micro credit
schemes instituted by some state governments, multinational companies (MNCs), United
Nations Development Programme (UNDP), United Nation Industrial Development
Organization (UNIDO), and private organizations, such as the Tony Elumelu
Foundation.
However, the
impact of these credit programmes and schemes has so far been unclear. More
worrisome is the perception that micro and small scale business sector has
still not realized its actual potential in Nigeria. This therefore puts a
question mark on the efficacy of the available credit programmes. It is against
this background that this study seeks to examine and establish the real
contribution of micro credit programmes on the development of entrepreneurship
in Akwa Ibom and Cross River States of Nigeria.
1.2 STATEMENT
OF THE PROBLEM
In spite of the
intervention strategies of government and other development partners, through direct
lending or credit guarantee programmes and schemes to micro and small business
firms and entrepreneurs, the growth and development of entrepreneurship remains
observably low. For instance, Nigeria remains listed among the poorest
countries of the world, with unemployment and poverty levels rising increasingly
(World Bank, 2010). This is indicative of the inefficacy of micro and small
businesses in helping address these problems. Specifically, the micro credit programmes are
perceived to be poorly coordinated and managed. The credit administration
mechanisms used for the schemes and programmes are generally considered to be
weak and non-responsive to the challenges of monitoring and controlling of the
lent funds. Also, there are issues of corruption surrounding the management of
the funds. Finally, funding of these programmes, especially the ones instituted
by State governments, is considered to be poor and insufficient.
1.3 OBJECTIVES OF THE STUDY
The main objectives of the study are:
1. To
determine the impact of micro credit programmes on entrepreneurship development
in Akwa Ibom and Cross River States.
2. To
establish the effect of operating cost on the performance of micro credit
programmes in Akwa Ibom and Cross River States.
3. To
establish the effect of credit administration on the performance of micro
credit programmes in Akwa Ibom and Cross River States.
4. To
make recommendations based on the findings of the study.
1.4 RESEARCH QUESTIONS
The following research questions will
be relevant to this study:
1. To
what extent do micro credit programmes affect entrepreneurship development in
Akwa Ibom and Cross River States?
2. To
what extent does operating cost affect the performance of micro credit
programmes in Akwa Ibom and Cross River States?
3. To
what extent does credit administration affect the performance of micro credit
programmes in Akwa Ibom and Cross River States?
1.5 RESEARCH HYPOTHESES
Arising from the foregoing, the
underlisted hypotheses will be stated for the research:
HO1: Micro credit programmes do not have
a significant effect on entrepreneurship development in Akwa Ibom and Cross
River States.
HO2: Operating cost does not have a
significant effect on the performance of micro credit programmes in Akwa Ibom
and Cross River States.
HO3: Credit administration does not have
a significant effect on the performance of micro credit programmes in Akwa Ibom
and Cross River States.
1.6 SIGNIFICANCE
OF THE STUDY
This study will be useful to governments at the various
levels, (Federal, State and Local) and their ministries, departments and agencies
(MDAs) charged with the responsibility of implementing policies and programmes
on entrepreneurship development such as National Bureau of Statistics (NBS),
SMEDAN, NDE, NAPEP, NDDC, NASSI, CBN (Development Finance Department), Small
and Medium Industry Development Agency (SMIDA) and National Association of
Small and Medium Enterprises (NASME), among others.
Secondly, the study will be useful to International
Development and Funding agencies, Multinational Corporations (MNCs) operating
in the country, and Non-Governmental Organizations (NGOs), which have been
partnering and supplementing the efforts of government in providing micro
credit for entrepreneurship development in the country. They include United
Nations Industrial Development Organization (UNIDO), United Nations Development
Program (UNDP), World Bank (SMEs department), Lift Above Poverty (LAPO), and
Oil and Gas Companies (Exxon Mobil, Shell, Agip, Chevron, etc), who will find
the work a useful intervention document for designing and projecting the extent
of their involvement in meeting their social responsibility expectations in
their area(s) of operation. Others are private organizations like Tony Elumelu
Foundation that recently donated about N2.5billion
for the development of Entrepreneurship in Nigeria and Dangote group that has
been partnering government in this direction.
Thirdly, this study will be of benefit to management
scholars in universities, polytechnics and professional bodies as it will enrich
the body of literature on micro credit programmes and their impact on
entrepreneurship development in Nigeria. The content of this study will also
stimulate further research on related subjects.
1.7 ASSUMPTIONS OF THE STUDY
1.
It is assumed that the
variables used for the study are appropriate.
2.
It is assumed that the
sample selected for the study is truly representative of the population.
3.
The methodology
employed in the study is appropriate and replicable.
1.8 SCOPE OF THE STUDY
The study is cross-dimensional as
it involves more than one state. Geographically, the study will be limited to
Akwa Ibom and Cross River States in South-South Nigeria. The study will limit
its scope to the examination of micro credit as a catalyst and a facilitator of
micro and small enterprises development in the two states.
1.9 DEFINITION OF TERMS
1.
ENTREPRENEURSHIP:
Entrepreneurship is the act of creating a new business in the face of risk and
uncertainty, for the purpose of achieving profit and growth by identifying
significant opportunities and assembling the necessary resources to capitalize
on them (Zimmerer, Scarborough & Wilson, 2013).
2.
MICRO CREDIT: Micro
credit is the extension of small loans to active poor people (entrepreneurs)
who are unable to access traditional bank loans to engage in self employment
projects or to finance micro and small business initiatives, in order to
generate income to cater for themselves and others (Edeghe, 2005).
3.
MICRO ENTERPRISES: These
are enterprises whose total assets (excluding land and buildings) are less than
five million naira, with a workforce not exceeding ten employees (SMEDAN,
2010).
4.
SMALL ENTERPRISES: These
are enterprises whose total assets (excluding land and buildings) are above
five million naira, but not exceeding fifty million naira, with a total
workforce of above ten, but not exceeding forty-nine employees (SMEDAN, 2010).
5.
INNOVATION: This
is the act of bringing about changes by introducing new methods, new ideas, new
technology and new ways of doing things. It is the ability to apply creative
solutions to problems and opportunities to enhance people’s lives.
6.
LATENT CAPACITY: This
is an existing capacity for entrepreneurship which is not yet visible or
developed.
7.
GROSS DOMESTIC PRODUCT:
The GDP is the market value of final
goods and services produced within a country at a particular period, usually a
year. It is earned domestically, rather than abroad.