CHAPTER ONEINTRODUCTION1.1 BACKGROUND TO THE STUDY

The project work on the Impact of Bank Lending on the growth of small scale industries examine, the relationship between functions of bank lending, the interest rate being charged in it and the growth of all small scale industries in Obia/Akpor Local Government Area in Rivers State Nigeria. A responsible financial system is widely regarded as critical for the expansion of the small scale industrial. This sector (bank) is increasable recognized as a vehicle or engine for advancing sustainable social-economic development of small scale industries rather than big multinationals which brought about the most recent intentions and innovation in Nigeria.A small scale industries is basically operated and used by private individual, group of persons or partnership, it helps and play a crucial role in the economic growth and development of every society in the world. It acts as the pivot of an effective tool for development of every economy. It is mostly financed by the banks and government through loans, hence it constitutes important component in the private sector of the economy.According to Elkanu (2001:159). The Impact of Bank Lending and how careful are been mobilized to the small-scale industries in order to ensure development in the economy, and growth in small scale industries. The lack of finance in reasonable terms is most frequently cited as a deterrent, to entrepreneurship particularly at the small scale level, this has forced many small scale industries to relay heavily in self financing than large scale enterprises in Obio/Akpor Local Government Area. According to the central bank show’s that as much as (50%) 12 small scale industries obtain most of their investment funds from personal saving and family contributions.Several scholars have adopted to carryout a study on the Impact of Bank Lending on small scale industries but sometimes it’s usually an empirical analysis, the researcher therefore attempts to solve the problem.

1.2 STATEMENT OF PROBLEM

The outflow side of financial intermediation relates to the lending function, banks facilitate channeling of funds generated as deposit and taken to the deficit sector of the economy. The lending function make’s it easier for the funding of small scale industries housing, commercial and agricultural activities in the economy, the small scale industries is generally unable to gather or generate enough financial resources to aid it’s operations. Therefore banks may not like to grant or lend out fund to small scale industry due to inadequacy of project proposal, incomplete financial documentaries. The small scale industries most time divert those funds given to them by the bank for one project or the other, to another ostentations expenditure which at the end of the day will refuse to pay back as at when it falls for payment. Many of these small scale industries do not keep proper account of their transaction that can attract bank to grant loans to them this now serve as a barrier or hinder effective control and planning to the loan obtained.The small scale industries lack adequate policies implementation, which discourage the banks from given loans to them. They also lack or have the problem of inadequate financial resources that enable them to pay back the loan been given to them by the banks and also limit the rate of small scale industry to attract loan from the bank. Therefore the researcher identify the variable here as the bank lending being the independence variable and the growth of small scale industry as the dependent variable.

1.3 PURPOSE OF THE STUDY

The main aim or purpose of this study is to examine the effect of bank lending on the growth of small scale industries in Obio/Akpor Local Government Area.1. To analyze the success of small scale industries and the reasons for their success.2. To determine factors that affect high failure rate of loan.3. To determine the extent of bank lending to small scale industries4. To identify small scale industries and their contribution to the nation’s economy.5. To identify different sources of financing available to the small scale industries and effect or factors that limits their access to such funds.6. To source out various contributions of bank lending in the growth of the Nigeria small scale industries.

1.4 RESEARCH QUESTIONS

The research questions are certain questions use to aid in the successful implementation of the research work in a specific term thereby making them visible. They are divided from the research problem.i. Of what impact is bank lending to the small scale industry in Obio/Akpor Local Government Area?ii. Does the availability of bank lending lead to the growth of small scale industries?iii. Does government policies on credit administration have impact on the growth of small enterprises?iv. Is the role bank leading to small scale industries important?v. Can economy’s condition have impact on bank lending to small scale industries?

1.5 RESEARCH HYPOTHESIS

Hypothesis can be seen as a declaration for the purpose of any demonstration. It is very crucial in this research work because it is a statement relationship that exists between two or more variables that focuses in the different of two or more parameters, of a conjuncture stated well in advance of observation,Therefore the unsearched hypothesis must be subjected to empirical investigation.Ho: There is no significant relationship between bank lending and the growth of small scale industry.

1.6 SIGNIFICANT OF THE STUDY

This research work indeed serves as a good reference material to enlighten and educate entrepreneurs or business men on how to arrange their loan application form and sensibility reports in such a way it will grant them opportunities or access to obtain loan from the bank. It gives a speculative and comprehensive introduction of the need and importance of bank lending towards the growth and development of small scale industries in Obio/Akpor Local Government Area. This will be of help or benefit to student and also to the small scale industries in our society. It will also help those in the management and contribute to adherence of effective business management of the student about some critical role of lending in their businesses, and make them to appreciate the causes especially those who are aspiring to take banking as a career, this project can be a hand book for today as well as tomorrows manager’s.The taught does not give lasting solution on how to obtain a stable and suitable small business organization through appreciation on the role of lending loan, it view the finding which will help every organization in growth and how to equip itself with updated industries that will help them to meet the demand of its environment and fully exploit their growth potentialities which is obtainable in the area of operation.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers Small Scale Enterprise of the Nigeria economy, which include generally, businesses that are privately owned. It was conducted within the framework of evaluating the impact of bank lending in Small Scale Enterprise within Obio/Akpor Local Government Area. The scope of the research work takes into consideration some activities and transaction been taken place within the small scale industries in the economy. It is also limited to the aspect of many problems facing the small scale industry Obio/Akpor Local Government Area; which is seen as the impact of bank lending to the small scale industries, it highlights the problems and how it has significantly reduced the effectiveness of business organization and extend to how these problems can be reduced and how hard the economy situation may be at least.The basic limitation of the study is how to gather the required data for the subject matter, the time and financing of the study and also inadequate access to all the necessary information needed for absolute analysis.

1.8 ORGANIZATION OF THE STUDY

This study is in five chapters, chapter one is in the general introduction, it looks at the background to the study, the objective of the study and the statement of the problem, it also briefly looks at the research questions, scope and limitation and organization of the study, chapter two is the literature review. Literature is reviewed according to the research question and used in the study. The conceptual framework for the study is also outlined. Chapter three is the methodology, it explain the research design, it also gives details about the population, sample and sampling procedures used in the study, it explain the research instruments, method of data collection, data analysis plan, chapter four is the data presentation, analysis and discussion, chapter five presents the summary, conclusions and recommendations of the study.

1.9 DEFINITION OF TERMS

For more understanding of the topic “Impact of bank lending in the growth of small scale industries” the researcher uses certain words that are needed to be properly defined so as to help the researcher understand the researching line of argument therefore, the following terms will be defined in our discussion.Small Scale Industries (SSI): These are enterprises whose its initial capital is not more than ten million with a maximum access base over five million and not less than ten (10) employed staff, it is owned and financed by private individuals and group of persons.Impact: This is the cause in a particular thing in order to know how it is affected.Bank Lending: This is a process by which financial institution (Bank) that involves in the business of accepting deposit from customer extend credit to end users in such a manner it will guarantee repayment by unit, thus accumulating the credit facilities.