This research investigated The Role of Small Scale Enterprises in Employment Generation in Otukpo metropolis Benue state. Three research questions and three hypotheses were raised. The descriptive survey research method was adopted and a sample size of 370 respondents was used for the study. Frequency tables, percentages, and mean were used to analyse the data. Z-test was used for testing the hypotheses. The findings revealed among others that; Inadequate capital for financing the business, difficulty in accessing loans from banks, and difficulty in raising money for expanding the business constitute the major challenges to the generation of employment by SMEs Lack of good access roads and power are some of the major infrastructures that hinder employment generation by SMEs and poor education attainment of the manager, lack of good managerial skills, inability of the manager to understand operating environment as well as inability of the manager to define business goals impedes the development of SMEs as well as its ability to generate employment. The researcher recommended among others that in other to improve the role of small scale enterprises in employment generation, Government should; encourage banks to set aside 20% of their annual profits before tax as soft loans to SMEs at a very low interest rate, set up an agency that will assess the working capital requirement of SMEs in and make such funds available to them at a very low interest rate with long term repayment period, partner with the private sector in the provision of efficient public utilities (power supply, water supply, good transport/communication facilities etc.) in other to ensure uninterrupted supply of these public utilities.
TABLE OF CONTENTS
Title Page i
Approval Page ii
List of Table x
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Problem 4
1.3 Objectives of the Study 5
1.4 Research Questions 6
1.5 Hypothesis 6
1.6 Significance of the Study 7
1.7 Scope of the Study 7
1.8 Definition of Terms 8
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual Review 10
2.1.1 Small and Medium Scale Industry 10
2.1.2 The Concept of Unemployment 12
2.2 Theoretical Review 14
2.2.1 Review of Small Scale Business 14
2.2.2 Employment-Oriented Group 16
2.2.3 Drivers of Small-Scale Businesses in Nigeria 18
2.2.4 Causes of Unemployment in Nigeria 19
2.2.5 Characteristics and Objectives of Small Scale Industries 22
2.2.6 Obstacles to the Rapid Growth of Small Scale Industries 24
2.2.7 How Government Promote Small Businesses 26
2.3 Empirical Review 28
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design 31
3.2 Population of the Study 31
3.3 Sample and Sampling Method 31
3.4 Sources of Data 32
3.4.1 Primary Sources of Data 32
3.4.2 Secondary Sources of Data 33
3.5 Instrument of Data Collection 33
3.6 Validity of the Research Instrument 33
3.7 Method of Data Collection 34
3.8 Method of Data Analysis 34
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Bio Data of Respondents 37
4.1.1 Presentation of the bio-data of the respondents 37
4.1.2 Analysis of the bio-data of the respondents 38
4.2 Analysis of the Research Questions 41
4.3 Test of Null Hypothesis 47
4.4 Discussion of Findings 50
SUMMARY OF FINDINGS, CONCLUSION, AND RECOMMENDATIONS
5.1 Summary of Findings 53
5.2 Conclusion 54
5.3 Recommendations 54
LIST OF TABLES
Table No: Title Page
4.1 Distribution and Return Rate of Questionnaire 37
4.2 Distribution of the respondents based on gender 58
4.3 Distribution of the respondents based on age 38
4.4 Distribution of the respondents based on educational qualification 39
4.5 Distribution of the respondents based on marital status 40
4.6 Distribution of the respondents based on nature of employment 40
4.7 Respondents views on the extent poor financing constitute a major challenge to the generation of employment by SMEs 42
4.8 Respondents views on inadequate infrastructure 44
4.9 Respondents views on lack of managerial skills 46
4.10 z-Test: Two Sample for Means 48
4.11 z-test on hypothesis two 49
4.12 z-test on hypothesis three 50
1.1 Background of the Study
Small and medium scale enterprises (SMEs) are generally regarded as the engine of economic growth and equitable development in developing economies. They are labour intensive, capital saving and capable of helping create most of the one billion new jobs the world will need by the end of the century (Lalkaka, (1997). They are also perceived as the key to Nigeria’s economic growth, poverty alleviation and employment generation. But their unimpressive performance in employment generation in recent years has generated a lot of research interests on their challenges and prospects.
After Nigeria’s independence in 1960, much emphasis has been laid on the growth of small and medium scale industries as a means of reducing the incidence of poverty and unemployment in the country. Since the adoption of the economic reform programme in 1986, there has been a decisive shift from grandiose, capital intensive and large scale industrial projects based on import substitution to small scale industries with immense potentials for developing domestic linkages for sustainable industrial development.
Apart from SMEs potential for self-reliant industrialization using local raw materials, they are in a better position to boost employment, guarantee even distribution of industrial development and facilitate the growth of non-oil exports. Fissaeha (1991), states that SMEs employ 22% of the adult population in developing countries while Fabayo (1989) observed that small firms are major source of employment opportunities for a wide cross-section of the workforce: the young, old part-time workers and the cyclically unemployed. Kombo, etal (2011), submitted that “SMEs have contributed greatly to the growth of Kenyan economy, accounting for 12-14% of GDP, through creating employment opportunities, training entrepreneurs, generating income and providing a source of livelihood for the majority of low income households in the country”.
Hence, promotion of such enterprises in developing economies like Nigeria will bring about great distribution of income and wealth, economic self-dependence, entrepreneurial development and a host of other positive economic uplifting factors (Aremu, 2004). SMEs are veritable engines for attainment of national objective in terms of employment generation at low investment cost, development of entrepreneurial capabilities and indigenous technology. They reduce the flow of people from rural to urban areas and can easily be established with minimal skill. They also contribute substantially to the country’s gross domestic product, export earnings and development of employment opportunities.
The performance and effectiveness of small and medium scale enterprises as an instrument of economic growth and development in Nigeria has long been under scrutiny. This intense scrutiny has been against the backdrop of the low performance and inefficiency that characterized small and medium scale enterprises particularly in assessing its role on economic growth and development. Despite government institutional and policies support to enhancing the capacity of small and medium scale enterprises, small and medium scale enterprises has fallen short of expectations. This has generated serious concern and sceptism on whether SME can bring about economic growth and national developments in Nigeria. The concern is even more disturbing when comparing SME in Nigeria with other countries particularly where SME has become harbinger of economic reconstruction and transformation. (Ihua; 2009)In the case of Nigeria, small and medium scale enterprises have performed at very abysmal level. This low performance has further exacerbated poverty, hunger unemployment and low standard of living of people in a country whose economics is ailing.
The current problems of hunger poverty and unemployment have undermined the capacity of the economy and small and medium scale enterprises are seen as mechanism for intervention to addressing these long term problem of the economy. Unfortunately, SME have not been able to propel economic growth and development which are quintessence of mitigating the effect of Poverty, hunger, unemployment, and low standard of living on the economy. The challenge of addressing the problem of hunger, poverty and unemployment is even more worrisome when considering the actualization of the millennium development goals by the country 2015. If Nigeria is to achieve the millennium development goals by 2015, one of the sure ways is to enhance the capacity of its SMEs. The core issues identified by the millennium development goal such as hunger, poverty, literacy, maternal and mortality rate would not be achieved unless the problems of SMEs are clearly tacked.
The challenges and the problem of small and medium scale enterprises are tied to some economic variables and the challenges that generally characterized the nation’s economy. Some of the challenges and problems include high level of unemployment, high poverty incidence, and low industrialization capacity, lack of finance, inconsistent government policies and inadequate infrastructure and insecurity of the business climate among others. Nevertheless, the internal characteristics of small and medium scale enterprises too have also interact with some economic variables to undermine the capacity of the economy. Issues of low level of entrepreneurial skills, poor management practice, inadequate equity capital and lack of information among other problems.
In spite of these problems and challenges, the current economic reform process ongoing in Nigeria aimed at reducing poverty, unemployment and strengthening of basic institutions and sub sector of the economy target at improving and enhancing the capacity of small and medium scale enterprises is beginning to show a renew optimism on small and medium scale enterprises as instrument of economic growth and development.
1.2 Statement of the Problem
Most SMEs in Nigeria die within their first five years of existence, a smaller percentage goes into extinction between the sixth and tenth year while only about five to ten percent survive, thrive and grow to maturity (Aremu and Adeyemi, 2011). Many factors have been identified contributing to this premature death of SMEs. Key among them include: insufficient capital, irregular power supply, infrastructural inadequacies (water, roads etc.), lack of focus, inadequate market research, over-concentration on one or two markets for finished products, lack of succession plan, inexperience, lack of proper book keeping, lack of proper records or lack of any records at all, inability to separate business and family or personal finances, lack of business strategy, inability to distinguish between revenue and profit, inability to procure the right plant and machinery, inability to engage or employ the right caliber of staff, cut-throat competition (Basil, 2005).
Beckman (1983) contend that most of the problems of SMEs are external to it, among them are those related to capital shortage, taxation and regulations, product liability patent and franchising abuses.
The internal problems of SMEs in Nigeria include: inadequate working capital, stiff competition from larger companies, difficulties in sourcing raw materials, low capacity utilization, lack of management strategies, poor educational background of operators, and huge financial problems while the external problems include: policy inconsistencies, multiple taxation, harsh regulatory requirements and trade groups (Osamwonyi, 2009).
It is also important to note that SMEs in Otukpo Benue, state are not immune from the aforementioned challenges in their day to day operations hence it becomes necessary to embark on a study that investigates the role of small scale enterprises in employment generation in Otukpo metropolis Benue state.
1.3 Objectives of the Study
The general objective of this study is to determine the role of small scale enterprise in employment generation in Otukpo metropolis Benue state. Specifically, it intends to;
a. To determine whether poor financing constitute a major challenge to the generation of employment by SMEs in Otukpo metropolis Benue state
b. To ascertain whether inadequate infrastructures constitute a major problem to the generation of employment by SMEs in Otukpo metropolis Benue state.
c. To determine whether lack of managerial skills constitute to the generation of employment by SMEs in Otukpo metropolis Benue state
d. To proffer useful solutions to these problems.
1.4 Research Questions
1. To what extent does poor financing constitute a major challenge to the generation of employment by SMEs in Otukpo metropolis Benue state?
2. How has inadequate infrastructure hinder the generation of employment by SMEs in Otukpo metropolis Benue state?
3. To what extent does lack of managerial skills constitute a problem to the generation by SMEs of employment in Otukpo metropolis Benue state
1.5 Research Hypothesis
Ho: Poor financing does not constitute a major challenge to the generation of employment by SMEs in Otukpo metropolis Benue state
H1: Poor financing constitute a major challenge to the generation of employment by SMEs in Otukpo metropolis Benue state
Ho: Inadequate infrastructures does hinder the generation of employment by SMEs in Otukpo metropolis Benue state.
H1: Inadequate social infrastructures does hinder the generation of employment by SMEs in Otukpo metropolis Benue state.
Ho: Lack of managerial skills does not constitute a problem to the generation by SMEs of employment in Otukpo metropolis Benue state
Ho: Lack of managerial skills constitute a problem to the generation by SMEs of employment in Otukpo metropolis Benue state
1.6 Significance of the Study
This study will be of benefit to the operators of the Small and Medium Enterprise, the government, and the future researcher.
• To the government it will help them to develop better policies that will encourage the development of SMEs for the creation of job opportunities.
• To the operators of Small and medium Scale enterprise it will help them to better repositions themselves on the best possible ways of improving job creation
• To the future researcher it will help them by contributing to the up to date material on the subject
1.7 Scope and Limitation of the Study
Finance problem is the fundamental problem that the researcher encountered. It is an unarguable fact that any worthy research is capital intensive. In fact for the researcher to accomplish this work he invested a lot of money on sourcing of various texts and necessary data which could not be readily found in the library. Much money was also needed for browsing and printing of valuable internet materials.
Insufficient time also impacted adversely on the work. This was as a result of the rush in the academic calendar as such the researcher has to limit this study to only 1999-2013.
1.8 Definition of Terms
The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses (investipedia, 2014).
In economics, entrepreneurship combined with land, labour, natural resources and capital can produce profit. Entrepreneurial spirit is characterized by innovation and risk-taking, and is an essential part of a nation’s ability to succeed in an ever changing and increasingly competitive global market place.
Small and Medium Scale Enterprises (SMEs)
Small and Medium Scale Enterprises (SMEs) as defined by the National Council of Industries (2009) refer to business enterprises whose total costs excluding land is not more than two hundred million naira (N200,000,000.00) only. Although, there exists no consensus among policy makers and scholars concerning the point at which a business firm is deemed to be small or medium. Indeed, there is no universally or even nationally acceptable standard definition except that the scale of business needs to be defined for a specific purpose.
A situation in which all available labor resources are being used in the most economically efficient way. Full employment embodies the highest amount of skilled and unskilled labor that could be employed within an economy at any given time. The remaining unemployment is frictional (Investipedia, 2014).