THE IMPACT OF MICRO FINANCIAL INSTITUTIONS ON THE GROWTH ON SMALL AND MEDIUM SCALE BUSINESS
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Microfinance constitute the facilitation of financial services to meet the needs of low-income individuals such as micro-entrepreneurs, through the provision of small loans (microloans), small savings deposits (micro-savings), micro-insurance and enhancing simple payments services required by micro-entrepreneurs and economically active poor people who cannot gain access to financial services provided by the formal banking sector. (USAID, 2000). The loans provided are small in amount and directed for entrepreneurial ventures. The loans are collateral free and grouped based and mostly direct to entrepreneur, generally with low interest charges or interest free. This is because of their ability to handle meager amount of money profitably (UNITUS, 2000).
The National Council of Industries define SMEs as those business enterprises having a total cost excluding land not more than two million naira (N2, 000,000) only. SMEs are also defined by the federal ministry of commerce and industry as those business enterprises with paid employees of up to 50 persons and with a total investment worth up to 750000 excluding cost of land. SMEs play significant roles towards the economic development of the nation. This role includes technological and industrial development, Employment generation, Technology acquisition, capacity building, promoting growth, increased standard of living, industrial spread, serving of large-scale industries, export promotion, rural development, Innovation. The research seeks to investigate the impact of micro financing on the growth of small and medium scale businesses in Lagos Nigeria.