Government Incentives Schemes towards Small Scale.

Government Incentives Schemes towards Small Scale.

Many economic analysts in Particular have described government incentive schemes towards small-scale business in Nigeria and Enugu metropolis as a well development     especially in this period of low level of economic activity and slow rate of growth of the economy as well as its devastating effects on the demand for labour.

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  Undoubtedly the slow rate of economic growth in the state explains why few job opportunities are available.  In most parts of the world, the importance of small scale business enterprise is not over emphasized in the process of socio-economic development of the country.  It has become sufficiently clear that large scale enterprises have not and cannot alone play the dynamic role that they are supposed to play in the rapid growth and development of the economy, and prominent among these rates is employment creation and technogical development.  Therefore the need for small-scale enterprises which will supplement the effects of the large scale business.  Small-scale are those business that required very little capital to set up and to produce goods that will carter for the needs of the growing population.  It is in the light of importance of small-scale business in Enugu metropolis that government incentive scheme towards small-scale business will be appreciated.

Incentive in a literal sense implies that which has motivating influence and serving to incite actions.  These incentive schemes instituted by government provide other non-financial and financial assistance in the form of loans at affordable interest rate and grants.  It is in the light of the above that nation economic reconstruction fund (NERFUND) and Nigeria bank for commerce and industry (NBCI) and other development banks were created.

However, small-scale enterprises have been defined by various authors in various ways but OSA20 (1984) defined small-scale business as a productive enterprise which is owned, managed and controlled by one or two persons or family which influences the decision making and a well has undifferentiated organization structure but has a small share of the market with less than fifty (5)) employees.  While central Bank of Nigeria annual report and statement of account (1975) defined small-scale business as those enterprises with annual turnover not exceeding N5,00,000.00

Statement of problem

In spite of the recognition of the role of small-scale enterprises in fortering economic development through the promotion of indigenous technology, employment generating activities and bordering the production base of the economy, the impact has not been given adequate recognition.

They have been restricted access to institutionalized credit

because banks see them as high risk ventures (Orji 1996) with the introduction of structural Adjustment programme (SAP) in 1986 and the inevitable devaluation of Naira, Many small-scale enterprises found it very difficult to cope with the attendant high production costs as a result of high cost of imported input and high interest rates.  Therefore, to bridge this observed gap in gap in banks lending to small-scale enterprises, the Federal government set up the national Economic Reconstruction Fund (NERFUND in 1989 with aim of providing soft loans on medium and long term basis to small-scale enterprises wholly owned by Nigerians.

The question now is, can it be said that the scheme has made desired impact on the development of small-scale enterprises in Enugu state? Since there are agencies set up to prove incentives and grants to small-scale enterprises, therefore the researcher intend to find out why small-scale business does not thrive in Enugu state.  Also to investigate whether the growth of the economic activity in the state where these agencies actually providing it only in paper work and not practically.  These are some of the critical issues, which this research work intends to evaluate; hence the topic evaluation of government incentives schemes towards small-scale enterprises is given.

PURPOSE OF STUDY

The purpose of this research work is to evaluate government incentive scheme towards small-scale enterprises with firms in Enugu metropolis as a case study.

This work will also point out the problem encountered by the small-scale enterprises in an attempt to receive incentives or loans from banks and as well investigate whether the incentives when received are properly put to use or not.  This also evaluates the role of small-scale enterprises towards the development of the state economy.  Therefore the objectives of this work as pointed will be summarized thus:

To examine the problems encountered by small –scale enterprises in Enugu state in attempt to receive loans and incentives.

To determine whether incentives, grants or loans received are diverted or put to proper use.

To identify the government incentive scheme towards small-scale enterprises.

To evaluate the role of the small-scale enterprises towards the development of Enugu state economy.

To make recommendations on proper management of government incentives and small-scale industries.

 

SIGNIFICANCE OF STUDY

This research work, which aims at evaluating government incentive schemes towards small-scale enterprises in Enugu state when concluded, will be of great benefit to the folowing interest groups:

THE GOVERNEMNT:  this work will be of great importance to the government of Enugu state.  This is because government has the interest of their economy at heart and equally they are the people that set up this incentive scheme and as well finance them through subventions.  Therefore they will be interested granted to the small-scale enterprises and as well will like to know whether all these incentive schemes were actually granted to the enterprises.  Also they will want to know whether the small-scale enterprises actually contributed to the growth and development of the economy.

SMALL SCALE ENTERPRISES: this is another group that will be interested in this research work. This is because they are the firm we are evaluating the incentives given to them.  Therefore, they will like to know how best to put to use the incentive received from government and as well know the best way to approach government in order to get more incentives from them and what the government expects from them when they receive such incentives.

RESEARCH STUDENTS: it will be of great importance to research scholars who may want to investigate or research further on this topic.  It will serve as a source of reference to this researcher and will help the students to know where to locate data, source of data and how to present the research work.  This implies that it will make further research very simple

GENERAL PUBLIC: this work will equally be of great interest to the general public because they will like to know how small-scale enterprises contribute to the growth and development of the economy, which affects them.  They are potential investors who can be influenced into going into small-scale enterprises due to the incentives which government gives to help them growth.

RESEARCHER QUESTIONS

The research is translated into questions of which when

Answered will provide the detail solution to the problem of study.  For this purpose of this research work, the following questions will be asked and answered.

What are the problems encountered by small-scale enterprises in an attempt to receive loans and incentives in Enugu state?

What are modalities of receiving grants and incentives by small-scale enterprises and are the grants put in to other uses?

Is the government incentives scheme set up to help small-scale enterprises?

What are the roles of small-scale enterprises towards the development of the state economy?

SCOPE/AREAS OF STUDY

This work is meant to cover the totality of the small-scale

enterprises in Nigeria, but due to the fact that small-scale enterprises are scattered all over the country thereby making it difficult within the time frame, the researcher therefore decided to limit the work to some selected small-scale enterprises within Enugu metropolis.  The emphasis will be the modalities of receiving incentive grants and subventions from government incentives scheme and how the incentive were put to use towards the development of the state economy.

DEFINITION OF TERMS

INCENTIVE:  this is defined as anything capable of motivating an individual or organization into greater performance.

SMALL SCALE ENTERPRISES: This is business that is produced in small-scale, owned, managed and controlled by one or two persons with staff strength less than 50 and control a small share of the market.

NERFUND: national Economy Reconstruction fund is one of the credit schemes that provide soft loans to small scale enterprises

CREDIT: These are loans given to individuals, organizations, on agreed terms which boast their working capital.

The Role of Small-Scale Business Enterprises:

In the light of contemporary economic dispensation, government now accords a very high priority to the development of small and medium scale enterprises, especially industrial enterprises.  The importance is based mainly on the belief that such enterprises are likely to facilitate the development of the economy in general through indigenous entrepreneur culture for the country and high value-added to the domestic industrial production.  In addition, the promotion of small-scale industries is seen as a major tool for boosting employment as they employ a large number of people per unit of capital investment than the large scale capital enterprises.

Owners of small business enterprises are mere innovation than one large publicity held corporate enterprises because indigenous people working on new idea that relate to their profit are motivated in a more directed way.  However, there are other objectives of promoting small-scale business which include the following:

Enhancement of state economic balance through industrial dispersal including rural area.

Moderation of rural – urban migration

Promotion of effective resources utilization palliation of managerial training for unskilled and semi skilled labour

Production of intermediate goods for use in large enterprises.

Advantages of small-scale business enterprises

Economist have identified specific advantages associated  with small scale enterprises.

(a)     Small scale enterprises are relatively less capital intensive and therefore ideals as channel of industrial development of capital deficient in developing economic.

(b)     They are relatively more flexible and can react quickly and easily to change and special requirement and therefore better suited for launching new products, where scale of operation can be made very small at the outlet and allowed to expand in case of success, thereby keeping work under greater control than large enterprises.

(c)      The size of the enterprises enables great flexibility in their management and are therefore variable testing grounds for new techniques of production.

(d)     They are suitable for mobilizing small scale saving for productive purposes, which are not readily forthcoming or at least not in industrial capital formation within the context of large scale profits.

(e)      Small scale enterprises can easily adapt to local market and local source of raw materials and may thus achieve saving in transport cost and are therefore more suited for promotion industrial, dispersal/decentralization of industries in the areas.

(f)      Small-scale enterprises are more efficient than the large scale plant utilizing and training a small number of skilled labour which can more readily and be effectively utilized concern of government of the country and Enugu state in particular.

PROBLEMS OF SMALL BUSINESS IN ENUGU STATE

In almost all discuss on problems whether by their owners or those interested in their well-being, their financial problems have tend to over shadow others which they also encounter in their daily struggle for survival.  This should not however be surprising.   Other problems in areas of production, marketing personnel and every day-to-day management, usually have a financial coloration.  In need capital is crucial for the sources of any business organization irrespective of its size.  This is due to fluid nature of capital, which lends it to a variety of use within organization.

The financial problem of small business arises are classified within internal and external problems. The internal problems include those due to under capitalization, poor accounting and record keeping, management incompetence and financial indiscipline.  Under capitalization, it can be traced to the strong aversion of their owners to  the dilution of ownership and control of their organization.  Lack of effective planning is often symptomatic of the inept management in most of the small business and this robs them of the benefits of proper cash flow projections among others.

The origin of their financial problems is partly due to the behaviour of the institutional lenders and the capital market and partly, to post policy biases against them.  In the opinion of Tom (1992) “banks have the reputation of being ignorant unimaginative lenders, indecisive and irresponsible creditors”.  A united kingdom study cited by him also found that bank managers pay too much attention to narrow financial criteria when assessing small business proposals and too little to factor such as management skills and technical knowledge.  Similar audience abounds in Nigeria research or in several countries have revealed how past industrial policies marginalized small business and treated them as if they never existed or mattered.

However, later in the day in Nigeria and many other countries, policy matters have finally woken up to think and learn about the lack of wisdom of  leaving this important sector unit of the development  calculus.  This is now a better appreciation of the not-so-obvious linkage between small businesses and development progress.

The first national calculation and strategies for financing small and medium scale enterprises in Nigeria in June 1992 at Abuja organized by the Federal Ministry of Industry and Technology in collaboration with the international Labour organization (ILO) though somewhat belated, was most suspicious.  The three-day consultation provided a broad plat form for the participation, which include policy markers, lending institutions, (local and international) Non Government Organization (NGOs), International Support Agencies and small business owners to deliberate on a wild range of issues affecting the financing of small and medium scale enterprises in Nigeria.  At the end of the consultation no one was left in doubt about the shortcomings and inadequacies in the existing institutional environment and the need to do something about the situation.  Although recommendation was put forward on the communiqué to address the problem, the objective of this contribution to this area of inquiring in the SNIEs in Nigeeria sector is to propose a comprehensive and integrated financing support policy for SNIEs in Nigeria after a view of a number of financing instruments and experience of other countries in the Far East.

The institution of a liable financing programme for the small business sector or any sector for that matter pre-support that there is a good understanding of the targets of the programme.  This is basically why a consideration of the characteristics of the two broad groups of loan-seekers are potentially “good” and “bad” borrowers in the first groups, the probability of recovering both the principal amount of loan and interest payment can be taken as a unity or nearly so.  This is because the “good” borrowers are honest and capacity to repay is not, usually in doubt and indeed can be ascertained.

On the other hand, the group of “bad” borrowers is represented by borrowing with no ease to ascertain credit ratings.  Put differently, the group carries with it extremely high risk of delinquency of default on loan repayment (TOM 1992).

Within this broad group of “bad” borrowers, four sub-groups are identified each with its varying degree of the default risk.  The first is the dishonest sub-group, which includes borrowers, who from the onset make no pretension about defaulting.  Fully conscious of the high cost of monitoring and the likely acquiescence of lenders, they obtain their loans with no intention to repay.  For such cases of borrowers, the tendency to default becomes highly correlated with the degree of solutions on the part of lending officers on how well connected they are in the society.  ………………………….

 

—-This article is not complete———–This article is not complete————

  This article was extracted from a Project Research Work Topic

AN EVALUATION OF GOVERNMENT INCENTIVES SCHEMES TOWARDS SMALL SCALE.

(A CASE STUDY OF SOME SELECTED SMALL SCALES FIRMS IN ENUGU METROPOLY)

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Government Incentives Schemes towards Small Scale.

 

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Comments

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