THE ROLE OF MICROFINANCE INSTITUTIONS IN THE GROWTH OF SMALL AND MEDIUM SCALE INDUSTRIES IN NIGERIA
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
In as much as the world is gradually moving from a 20th century technology to a 21st century technology, the more there is need for adequate supply of funds to acquaint to the growing and ever needing population. Looking at time in memorial one could discover the permanent stay of large production firm as well as enterprises due to their stable availability to capital and hence due to their large economies of scale they could only keep some few employees whom could serve a lot of time in the production sector hence definitely becamemonopolistic. In recent years with the evolution of microfinance and small and medium size enterprises there has been some changes which this study will enlighten the minds of the scholars who are interested in the development of Cameroon to attain the 2035 vision of an emergent economy. Microfinance is not a new concept. It is dates back in the 19th century when money lenders were informally performing the role of now formal financial institutions. The informal financial institutions constitute; village banks, cooperative credit unions, state owned banks, and social venture capital funds
to help the poor. These institutions are those that provide savings and credit
services for small and medium size enterprises. They mobilize rural savings, deposits and agricultural fares so as to encourage these entrepreneurs and have simple and straight forward procedures that originate from local cultures and are easily understood by the population (Germidis et al., 1991). These funds are to finance the informal sector SMEsand it known that these SMEs are more likely to fail (Maloney, 2003). The creation of SMEs generates employment but these enterprises cannot survive for long if they do not have access to enough capital consequently they are bound to die after a short while causing those who gained job positions to lose them and even go poorer than how they were when they do not have adequatesupport from government and financial institutions.
It is not until recent that microfinance had gained recognition thanks to the noble prize winner Yunus Muhammad of the Grameen Bank together with his development to then banking welfare to the Indian women who could not get access to capital from the traditional principle of financial collateral which they could not affordMohammadYunus, 2003. Banker to the Poor: Micro-Lending and the Battle against World Poverty. Alan Jolis, New York)
It should be noted that microfinance is not a panacea but it is a main tool that foster development in developing countries.It is known worldwide (E.U 2011,
google.com) that the poor cannot borrow from the banks. Banks do not lend to
them because they do not have what is required to be granted a loan or to be provided with the bank services. The lack of financial power is a contributing factor to most of the societal problems. These problems emanate from poverty and it is known that with poverty one is bound to suffer so many consequences ranging from lack of good health care system, education, nutrition, Microfinance has proved this bank concept to be wrong. They target the poor who are considered risky but the repayment rate turns to be positive as compared with the regular commercial banks (Zeller and Sharma, 1998).
Researchers have viewed microfinance in different dimensions. Microfinance gives people new opportunities by helping them to get and secure finances so as to equalize the chances and make them responsible for their own future. It broadens the horizons and thus plays both economic and social roles by improving the living conditions of the people. These improvements are in a nutshell to alleviate poverty, and according to this project, it will be seen from the point of the development of small and medium size enterprises SMEs and focusing mostly in the rural areas
The UN millennium goal to alleviate poverty by the year 2015 is far from fetch despite the enormous works that microfinance institutions are doing to contribute in this domain (HiderinkandKok, 2009). The main challenge facing the poor is to
gain financial power to enable them boost their income generating activities (Yunus, 2003).
STATEMENT OF PROBLEM
The research problem is based on the welfare of small and medium size enterprises in their varioussectors of activities. This resource base should provide a platform for the development of rural SMEs, and contribute to the country’s fightagainstpoverty. Business development, however, requires more than natural resources, and it is not clear what challenges and opportunities in development rural SMEs are facing in Cameroon.
DoesMicrofinance assistance have an absolute condition in the development of small and medium size enterprises?
This study will investigate the underlying issues small enterprises in rural areas are facing in their development. Particular attention will be given to the issue of financing firm development, where one of the biggest microfinance institutions in Cameroon by name Azire Cooperative Credit Union Ltd (AziCCUL). Whom from the 1960’s have been carrying out a serious campaign against poverty by the provision of financial, moral and developmental support to the growth of SME’s.
These specific questions shall guide us into the research
a) What markets are available for the small and medium size enterprises?
b) Is there sufficient access to technology and labour resources?
c) Do firms have access to financial capital to fund development by MFI under the normal regulatory condition?
d) 1.3 Objectives of Research
This study is intended to investigate the problems and opportunities that small businesses face in their development efforts, with a particular interest in the role that microfinance institutions may be playing. In addition to gaining a more general understanding of the challenges facing developing small firms, the study will identify how MFIs are contributing to the development of small businesses and small businesses succeed or fail in their efforts to acquire financing for their development. This study is focus on the resource needs of developing rural small and medium size firms, and how microfinance may be contributing to small firms’ development, and thus the sustainable development of rural agricultural, and manufacturing infrastructure in Cameroon. The specific objectives are:
I. To investigate the extent in which AZICCUL helps its members in developing their small or medium size businesses.
II. If these services provided by AZICCUL are helpful to those who receive it.
III. If any other institution provided more better services than MFI’s
HYPOTHESIS
A hypothesis is going to further explain the idea behind the study which is definitely a defense why the research is out to produce a particular result hence proving the reasons for the research. This is justified as seen below;
H0: Small and Medium Size Enterprises receive absolute assistance from microfinance institutions
H1: Small and Medium Size Enterprises do not receive absolute assistanceS support from microfinance institutions
Significance/Justification of Study
In trying to justify why the current study is important, it is vital to mention that researchers have found this area of study very important to the development of the socio-economic activities in developing countries and their contributions to the development of small and medium size businesses in. Extensive research has been carried out on the role of the financial management aspects. Thisresearch will therefore focus on AZICCUL which has not been exploited in terms of its contributions to the development of small and medium size businesses and particularly in the agricultural domain. A study of this nature is equally very
important because it is going to add more scientific facts on the microfinance plays in the society.
Microfinance as a whole provides the rural population a means to have access to financial services in their localities to boost their living standards in a sustainable manner in line with the millennium development goals of alleviating poverty in developing countries by2035. They can contribute in the fight against poverty by improving the agricultural sector which is the main source of living to the inhabitants of such developing nations as well as the secondary and tertiary sector. Thus it will pave a way forward for potential investors to invest and a sustainable development of SMEs to understand the difficulties they may come across and how they can succeed in their endeavors.
SCOPE OF THE STUDY
AZICCUL is a credit union with six branches in Cameroon (Bamenda, Yaoundé and Douala) with its main objective of providing financial services to the poor which cannot be done by macro financial institutions and as such helping in poverty alleviation and alleviating poverty. To cover the regions in the country will be impossible because of the limited time frameof this research. For this reason, the research will be limited to activities in the North West of Cameroon and south west region due to the possibility of my accessibility
. The impact of microfinance to the development of SMEs in this area will be analyzed, looking at its contributions, and in what form, and of course the response of entrepreneurs to the contributions of this institution to them. As well as a comparison between the before and after effect of the union on the business.
1.6 STRUCTURE OF THE STUDY
Chapter two comprises of theoretical perspective of the research; it talks about the Literature Review Empirical Literature. It is followed by Chapter Three which discusses the Method of Research and Data Collection. Chapter four which analyses the result collected from our study and interpretation. Finally chapter five summarizes the research, Discussion, Conclusion and Recommendation
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