THE ROLE OF COMMERCIAL BANKS IN THE DEVELOPMENT OF SMALL – SCALE ENTERPRISES

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THE ROLE OF COMMERCIAL BANKS IN THE DEVELOPMENT OF SMALL – SCALE ENTERPRISES

ABSTRACT

In the last fifteen years Nigeria has been experiencing the most serious small – scale crisis. The first major factor that put the country’s small – scale on the tendons position was the main stay of the economy. Nigeria being among the major producer of crude oil, suffered adversely from the effects of hurt in the wide oil market. Nigeria depend on oil exportation for over 90% of its foreign exchange earning and 85% it government revenue. I also observed that if banks declare huge profit in a year, it is for the benefit of the small – scale industries since part of it is invested in preferred sector of the economy. a case in point in the natural housing funds decree of 1990 which require banks and insurance companies to invest an amount equipment to not less than 10% of their loan and advance rate. Such policy, it must be enforced should cut policy, it must be enforced cut across all sectors of small-scale industries. All these tend to imposed restrictions on banks and limit their performance.

TABLE OF CONTENTS

Title Page – – – – – – – – i

Declaration – – – – – – – – ii

Approval page – – – – – – – – iii

Dedication – – – – – – – – iv

Acknowledgment – – – – – – – v

Abstract – – – – – – – – – vi

Table of Contents – – – – – – – vii

CHAPTER ONE

Introduction – – – – – – – 1
1. Statement of the General Problems – – – 2
1. Objectives of the essay – – – – – 5
1. Significance of the study – – – – – 6
1. Scope of the study – – – – – – 7
1. Definition of Terms – – – – – – 8

CHAPTER TWO

Literature Review – – – – – – 10

2.1 Historical background of Commercial Bank – 21

Functions of Bank in the Economy- – – – 14
- CBN Regulation on Commercial Banks – – 14
- The Business Environment and Future Prospect – 22

CHAPTER THREE

3.0 Summary of finding – – – – – – 23

Summary – – – – – – – – 24
- Conclusion – – – – – – – 26
- Recommendation – – – – – – 27

Reference: – – – – – – – 32

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The aims of every government is to provide its people with basic services leadership and protect the entire people’s interest within its power, for government to this, it must have a sound and adequate financial planning to make it possible to cater for the people’s needs.

To a larger extent any government which comes into power has to depend on banks and other financial institution for keeping of some of its development project so also, the government agencies and general public depends largely on loan from the banks to carry out their day to day business affairs.

Generally, the main aim of every bank is to minimize the lost of running affairs of the bank and at the same time maximize owners profit. Some bank like the Central Bank of Nigeria (CBN) and development Bank was established purposely to develop some section of the economy e.g Small Scale Business, Industry, Agriculture etc.

Therefore, this bank despite the fact that they make profit, they are not profit oriented.

Therefore this research is based on the role played by commercial banks to the promotion of small scale enterprises in Nigeria with particular interest on the role played by the first bank of Nigeria Plc at it is the oldest commercial and leading bank in the country having been in prevailing economic problems brought about by the structural adjustment programme.

STATEMENT OF THE GENERAL PROBLEM

The banking industry plays an important role to the economy of any nation and there is no doubt, it plays an indispensable role for the development of Small Scale business.

This is not to say that they do not have lapses. Among the factors that lead to the inefficiency in the banking industry are:

Financial Distress: This financial distress in Nigeria financial system is a problem that has recent assume an intractable dimension.
Bad Management: This singular factors leaves a high stone of management which usually determined by academic/professional qualification, relevant experience, technical know how, business reflect, ability to formulate and implement good policies leadership qualities and style etc. because of the relative attractiveness of banking especially, people from different profession find them self in the mid system of banking operations without proper grooming the fact that banking is a district profession of its own with intricacies and idiosyncrasies.
Inadequate Capital Bases: There is a saying that says “Life guard in a swimming pool must himself be a good swimming,” for a bank to enjoy confidence of depositors, it must have strong capital bases as evidence of strength. It is important that bank operates portability for the shareholders have to increase through accreting to statutory and general in service.
Risk Assets Portfolio: This is no doubt a reflection of poor management. Most banks do not have clear investment or credit policy and there is absolutely no control on credit. In most cases it is the managing director or chairman or the promoters of these banks, who have lending power and they lend mainly to their own business and to friends without business or without following the due assessment or control.
Board Room Crisis: It is unfortunate that s business which begins in a spirit of annuity and cordially at times turns into loss face and tension among the sponsors problems have in the past arisen on such topic as who plays what roles and people instability to concentrate on another people’s opinion have cause dissentients in the boardroom even physical frame as autocracy on the part of these who see themselves as the promoters or major shareholders can often caused board room crisis.

The monetary authorities had to be called into the management of some banks when thing get out of hand until the crisis is over. Board member engage in protected legal battle and by the end of the day who losses the rest of us.

OBJECTIVES OF THE ESSAY

The objective of this essay is to investigate in to the role played by commercial banks, which cannot be over emphasized in the small – scale development.

The purpose of carrying out this research work is to present a details and clear picture of the role played by commercial bank in small scale development. Example to what extent commercial banks have fulfilled their role in small scale development in Nigeria.

Expose factors which affects and determine the role of commercial in small scale development, suggest ways for improving banks participation in the development of small scale and the growth of the economy as a whole.

SIGNIFICANCE OF THE STUDY

The significance of the study is therefore based on: identifying and analyzing to commercial bank on how to apply the small scale business situation in Nigeria. Also in identifying analyzing and providing advise to the government and central bank of Nigeria, on how to adjust or improve the banking regulation.

It is hoped that the finding of this research work regardless of its limitation would give the banking industries an insight knowledge of identifying ways to improve customer services in term of small scale development.

In enlightening customers of services available which are unknown to them.

SCOPE OF THE STUDY

The research specifically covers comprehensively the banking industry to the small scale and economy of Nigeria.

The primary responsibilities of all types of banks that we have in the industry have been touched in the literature review.

Generally the author attempted to examine their role of commercial bank to the small scale, thought there are several financial and banking industries to banking industries. A particularly consider the sources of fund to the bank and how these funds are fully utilized to make it own contributions to our national development and at the same time, maximize owners profit.

DEFINITION OF TERM

BANK: It can be seen as an institution set up purposely for safe keeping of money, valuable goods and documents like wills and others. Its could be seen as a places where money is until the owners requires it.

COMMERCIAL BANK: It can be seen as “a Financial Institution set up for keeping and lending money to people, owned by individuals, organization or governments, for the main purpose of making profit.”

SMALL SCALE ENTERPRISE: It can be seen as a business which is independently owned and operated by one person, and is not dominant in it field of operated in local area.

DEVELOPMENT: it can be seen as an increase in income per capital and financial side of people, social and administrative structures as well as social behaviour and attitude of people’s including sometimes the people’s customs and beliefs.

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