1.1 Introduction
Economic growth overall plays a major role in reducing poverty. Global disparities in living standards have been brought about by the prevalence of poverty. Helping the people has been the technique, which has helped to alleviate some of the terrible problems in their life while also introducing new hopes and metaphors to their lives in contrast to their substandard living surroundings. It is widely acknowledged that entrepreneurship is essential to economic growth and a key factor in efforts to help nations escape poverty (Wolfenson, 2001). Sauser (2005) asserts that it is a mechanism for attaining faster economic growth and industrialization, which Harris et al. (2006) view as the industrialization engine.
This chapter will address the background information that motivated this study, the challenges that prompted it, its aim, and its objectives as a preface to subsequent sections of the study. Additional factors include the study's significance, scope, limitations, research questions and hypotheses, and the definition of technical terms.
1.2 Background of Study
The eradication of poverty in Nigeria has been greatly aided by small and medium-sized businesses. In every country's development, SMEs are thought to be the main source of economic growth. Low capital cost employment is the sector's primary benefit. Comparatively speaking to large firms, SMEs have a far greater labour intensity. The inventiveness and inventiveness of individuals frequently drive SMEs, which serve as a breeding ground for entrepreneurship. Their extensive distribution throughout Nigeria and their numerous implications on the rest of the economy allow them to be the engine of economic advancement in addition to their growth potential and crucial role in manufacturing and value chains.
The significance of SME's is widely recognized in the developing world. According to Ojo (2003), small-scale business operations and activities are what propel Asia's economic growth since they employ over 60% of the labour population, particularly in rural regions, and are a crucial component of the subsector. Addaney et al., (2016) asserted that, it serves as a source of income and its redistribution improves capital acquisition, reduces poverty, and empowers individuals especially women and young people.
Similarly, a poor person in Nigeria might not be perceived as such by other Africans in dire economic needs. Thus poverty is partly a matter of how one person’s income stacks up against the other person’s and partly how one earns his living. Due to the arming increase of poverty, the Nigerian government has designed a lot of stabilization measures or programmes to curb or reduce the menace of poverty in this country. Each past administration came up with a unique programme mire in order to eradicate or alleviate poverty in Nigeria (Dike 2000:5).
Nevertheless, a number of studies have found that some of the major obstacles preventing their contributions to socio-economic development, particularly in developing countries, are poor and insufficient support services, restricted access to credit, and unfair market competition (Anyanwu, 2003; Lawson, 2007, Odili & Ighedosa, 2014).
The attitude of the majority of deposit money banks, insufficient financial markets, and incorrect documents submitted by SMEs to obtain credit have all been blamed for the difficulty that SMEs have had in accessing credit in Nigeria (Meijerink & Roza, 2007, Tsai, 2015). Rural industry' ability to secure loans for expansion and long-term growth is hampered by the current circumstances.
Although the prevalence of poverty has been widely discussed, a great deal of writing has been done, and numerous recommendations have been made; nonetheless, this study will add to the body of knowledge regarding the Nigerian context regarding the potential role that SMEs could play in reducing poverty in that country. More significantly, this study adds by utilizing the VAR estimation approach to examine the impact of SMEs on poverty in Nigeria, whereas many previous studies used descriptive statistics based on primary data. By extending the time frame to 2018, it also helped with the timeliness aspect.
The importance of SMEs has been acknowledged on a global scale; they boost economic productivity growth, which is essential for promoting public welfare and reducing poverty. In addition to contributing significantly to the economy's industrialization, SMEs also reinvigorate structural transformation. more productivity in the economy entails more innovation. Small business owners that operate on an insignificant size in production, manufacturing, or services are known as small scale industries, or SMEs. In Nigeria's post-independence economic and social growth, small and medium-sized businesses are essential. Any developing economy with a useful, efficient, adaptable, and inventive business trend is built on the foundation of small and medium-sized businesses. Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Impact of Small and Medium Enterprises Financing on Poverty Reduction.
1.3 Statement of Problems
An investigation revealed that earlier Nigerian governments had implemented policies to reduce poverty in the country. Their approach involved helping the poor, which helped to ease some of the difficult situations in their lives while also giving them hope and metaphors to contrast with their impoverished living conditions.
Government initiatives to reduce poverty in Nigeria have been somewhat successful in some regions, but in others, they have failed because of a variety of factors, including political interference, a lack of continuity, the fact that the initiatives weren't really intended to reduce poverty, the failure to carry out the government's programmes exactly as intended, and corrupt political leaders who have only served to enrich themselves at the expense of the populace (Dike 2000:3).
According to Abdul & Mustapha (2005), these factors, along with the state's disregard for communities whose dams are cited and the lack of sufficient compensation following the flooding, caused these areas to become impoverished and devoid of nearly all essential social amenities, including the electricity produced by their communities.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Impact of Small and Medium Enterprises Financing on Poverty Reduction in Nigeria. In achieving this aim, the following specific objectives were laid out as follows:
- To evaluate the significance of the roles that small businesses have been shown to play in reducing poverty;
- To investigate the nature and level of financial support they provide; and
- To assess the issues that small and medium-sized enterprises (SMEs) face that might limit their ability to reduce poverty in Nigeria.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Does epileptic power supply in Nigeria hinders establishment of small business enterprises?
- Has lack of land and good location been a problem in the establishment of small scale enterprise in Nigeria?
- Has unavailability of raw materials been a problem in establishment of small scale enterprises?
- Has government policies been unfavourable to establishment of small scale enterprise in Nigeria?
- Does the consumer’s preference to imported goods adversely affect the establishment of small scale enterprise in Nigeria?
- What is the average source of the initial capital of studied small business ventures?
- What are the roles of small scale enterprises in the development of Nigerian economy?
- What is the significance of the roles that small businesses have been shown to play in reducing poverty?
- What is the nature and level of financial support they provide?
- What are the issues that small and medium-sized enterprises (SMEs) face that might limit their ability to reduce poverty in Nigeria?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant role played by small businesses in reducing poverty
- H1: There is a significant role played by small businesses in reducing poverty
Hypothesis Two
- H0: There are no significant challenges that small and medium-sized enterprises (SMEs) face that limits their ability to reduce poverty in Nigeria
- H1: There are significant challenges that small and medium-sized enterprises (SMEs) face that limits their ability to reduce poverty in Nigeria
1.7 Significance of Study
The study will assist in determining the reasons why, in spite of its many benefits, people choose not to pursue small-scale business. It will also identify the issues we had with managing the company. The government will be able to obtain better target loans and incentives to enhance current endeavours by using the study's assistance in identifying areas that need attention.
It will also offer helpful guidance to aspiring business owners who want to pursue self-employment as a profession. Finally, it will be used as secondary data in future research projects by an interested party.
1.8 Scope of Study
The scope of this research is focused on the Impact of Small and Medium Enterprises Financing on Poverty Reduction in Nigeria.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research Material: availability of research material is a major setback to the scope of the study.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Definition of Terms
Small Scale Enterprise:
Small scale enterprise is a manufacturing, processing or service enterprise involved in a factory or production type operation employing up to 50 full time employees, investment in plant machinery are utilized in its operation.
Opportunity:
An opportunity is a potential gainful situation that must be recognized and exploited; an opportunity has the qualities of being attractive, durable and timely. It is anchored in product or services which creates or adds value for its buyers or end users.
Development:
This entails growth of the business, increases in goods and services and the improvement of lives of the citizen.
Impact:
Here, this concept means the impression or effect on something or somebody. The impression or effect can be negative or positive in nature, e.g in poverty reduction.
Government:
In this study, government means the particular administration that was in place during the inception and implementation of needs as development strategies to reduce poverty in the country, state or local government areas.
Poverty:
In this context, poverty is a state of want or being poor. A state of having limited resources or nothing to satisfy unlimited wants.
Reduction:
In this piece of work reduction is seen as the way of lessening the hardships of life and making life a bit manageable for the people (the poor) through some strategies.
