CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The history of community Banks (Micro finance banks) can be traced to 1990 when general Ibrahim babangida announced the establishment of community banks now microfinance Bank in his 1990 budget speech.

In January 2007, there was a new reform in banking sector which led to changing, its name from community bank microfinance bank. Various effort have been made in the past to extend banking activities to rural areas and improve their banking of which most of the establishment policies could not achieved but the introduction of microfinance bank stands out to the remedy to this problem.

Section 61 of bank and other financial institution act (BOFIA) stated that one of the levels of banking in Nigeria is microfinance bank. This can be seen as bank whose activities are restricted to specified geographical area in Nigeria. Microfinance bank is a scheme introduction by the federal government though central bank of Nigeria aimed at producing financial service to the less privileged which are traditionally not served with conventional financial institutions. Its capital base is twenty million naira (N20,000,000), and this will enhance efficiency in microfinance banking system and increase banking habit among the community dwellers and eradicate poverty.

STATEMENT OF PROBLEM

Several studies have helped to identify the major problem facing small scale business in Delta State. The primary focus of this study emanates from the fact that small scale enterprises owners are contend with daunting challenge:

1.      Lack Of Finance: finance has been the major problem faced by the small scale enterprise owners. Due to insufficient finance or capital needed for successful business transaction by small scale enterprises owners, they have decided to get loans from micro finance bank to support their business finance/ capital.

2.      Lack of experience in the field: this is another problem facing small scale enterprise owners. It is meant to understand that any business decision require experience and knowledge to avoid business failure.

3. Poor planning:  as a result of poor planning, so many small enterprises have failed in the long run. This is because business success entails adequate plan on how to get the required resource such as fund raising customers, raw-materials, recording, employees that will make the business grow effectively.

4. Week marketing strategy/skill: the beginning and end of any successful business is satisfying customer’s wants and need. Small scale enterprises owners lack the adequate marketing skills, and this has stand as one the problems facing enterprises.

5. Poor human relation: another problem facing small scale enterprises is poor human relation. The level at which managers relate with their employees is very poor because of this; the enterprises will experience a very low rate of turnover as a result of poor communication between the small scale owners and their employees.

PURPOSE OF THE STUDY

The aim objective of this study is to determine, the contribution of micro-finance bank in the empowerment of small scale business in Agbor, Delta State. The following are the specific objective:

I.    To determine whether the provision to fund to small scale business owners help in promoting such business.

II.    To determine whether micro-finance banks provide training exercise skill acquisition programme to those who wants to start up business, on the management or fund and running of small scale business.

III.    To determine whether micro-finance bank adopt strategy that help in managing small scale industries do as to enable them complete effectively, in the market environment.

IV.    To determine whether loans from micro-finance banks are favourable to small scale industries in other to encourage borrowing.

SIGNIFICANCE OF THE STUDY

      Considering the research topic “the contribution, of microfinance banks in the empowerment of small scale business in Agbor”. The following, group of people would derive great benefit from the study. The people in both urban and rural areas through the promotion of economic growth and development.

      Microfinance banks have encourage infants industries through the provisions of loan to support their capital. Finally, the study will make government appreciate the need to assist micro-finance banks in bringing out lasting solution to those problems that are affecting small and medium scale enterprise in Nigeria at large, also would benefit future researchers on same topic as the material would be a great source of better guides to the and also a great benefit to small scale business owners to know the usefulness of micro finance banks and their functions in the empowerment of business in rural and urban areas.

 RESEARCH QUESTION

1.    Does the provision of fund to small scale business owners           by micro-finance banks help to promote small scale                      business?

2.    Does the provision of training exercise by microfinance               banks help to promote or solve the problem of small scale       industries lack of management issues?

3.   What strategy does a micro-finance bank adopt in      promoting small scale industries as to enable them compete    effectively in the market environment?

4.   What is the interest rate of those loans provided by micro- finance banks to small scale business?

HYPOTHESIS FORMULATION

    In the course of the study, the following hypothesis is formulated:

Null hypothesis (Ho) - there is no provision of fund to small scale business owners by microfinance banks that helps to promote small scale business.

Alternative hypothesis (Hi) - there is provision of fund to small scale business owners by microfinance banks that helps to promote small scale business.

Null hypothesis (Ho) - there is no provision of training exercise by micro-finance banks that helps to solve the problem of small industries.

Alternative hypothesis (Hi) - there is no provision of training exercise provided by micro-finance banks that helps to solve the problem of small scale.

Null hypothesis (Ho) – there is no strategy adopt by micro-finance banks in promoting small scale industries in market environment.

Alternative hypothesis (Hi) - there is no strategy adopt by micro-finance banks in promoting small scale industries in market environment.

SCOPE OF THE STUDY

This research work focuses on the promoting of small scale and medium enterprises in Nigeria by paying special attention to the impact of bank credit on the development of small scale enterprise.

Although there are other types of banks that grant credit facilities to small and medium scale enterprise in Nigeria, this study focuses on micro-financed banks only.

The researcher studies the essential problems encountered by small and medium scale enterprises and suggest ways by which they can be adequately and efficiently financed.

DEFINITION OF TERMS

1.    Finance: management of money, management of flows of   money through an organization, whether it is private,               government organization and the claims and the claims of        money, finance can be seen as a concept, principle and facts   concerned in the evaluation and acquisition of production        assets, procurement of funds and disbursement of funds.

2.    Management: this is defined as the process of organizing,   staffing, directing and controlling at levels of an                         organization.

3.    Planning: This includes process of forecasting, formulating,         policies, objectives and event which will enable management          in achieving the overall objectives of an undertaking.

4.    Entrepreneur: this is defined as the willingness and ability          of an individual to seek out investment opportunities,               establish     and run enterprise successfully.

5.    Research: this is the process of finding out the solution to a        problem, it includes the methodology and the magnitude of the problem