TABLE OF CONTENTS

TITLE PAGE…………………………………………………………………………………..i

ABSTRACT        ii

DECLARATION iii

CERTIFICATION         iv

DEDICATION     v

ACKNOWLEDGEMENTS     vi

TABLE OF CONTENTS        vii

CHAPTER 1        1

INTRODUCTION         1

1.1     BACKGROUND TO THE STUDY 1

1.2     STATEMENT OF THE PROBLEM 3

1.3     OBJECTIVES OF THE STUDY      4

1.4     SIGNIFICANCE OF THE STUDY  5

1.5     RESEARCH QUESTIONS     5

1.6     STATEMENT OF HYPOTHESES  6

1.7     SCOPE AND LIMITATION OF THE STUDY   6

1.8     DEFINITION OF RELATED TERMS       7

CHAPTER 2        9

LITERATURE REVIEW        9

2.1     CONCEPTUAL FRAMEWORK      9

2.2     BUSINESS CREDIT     9

2.3     DIMENSION OF BUSINESS CREDIT     11

2.4     OVERVIEW OF SMALL SCALE ENTERPRISE/SMALL BUSINESS    12

2.5     MEASURES OF SMALL BUSINESS DEVELOPMENT      14

2.6     ROLE OF THE GOVERNMENT IN IMPROVING SMALL BUSINESS 16

2.7     PROBLEMS OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA      19

2.8     IMPORTANCE OF CREDIT AVAILABILITY TO SMALL BUSINESS  21

2.9     ROLE OF SMALL SCALE ENTERPRISE IN ECONOMIC DEVELOPMENT 24

2.10   FACTORS MITIGATING THE CONTRIBUTIONS OF SMALL BUSINESS IN ECONOMIC DEVELOPMENT       27

2.11   THEORETICAL FRAMEWORK     29

2.12   EMPIRICAL REVIEW  31

CHAPTER 3        32

RESEARCH METHODOLOGY      32

3.1     RESEARCH DESIGN   32

3.2     POPULATION OF THE STUDY     33

3.3     SAMPLE AND SAMPLING TECHNIQUE        34

3.4     QUESTIONNAIRE DESIGN  35

3.5     SOURCES AND METHOD OF DATA COLLECTION         36

3.6     DATA ANALYTICAL METHOD    37

3.7     RELIABILITY AND VALIDITY     38

CHAPTER 4        40

DATA PRESENTATION AND ANALYSIS       40

4.1     DATA PRESENTATION       40

4.2     DATA ANALYSIS        41

4.4     DISCUSSION OF FINDINGS          48

CHAPTER 5        51

SUMMARY, CONCLUSION AND RECOMMENDATIONS         51

5.1     SUMMARY         51

5.2     CONCLUSION    52

5.3     RECOMMENDATIONS         54

REFERENCES    55

APPENDIX I       59

APPENDIX II      60

CHAPTER 1 INTRODUCTION 1.1     BACKGROUND TO THE STUDY

The term Small and Medium Scale Businesses (SMEs) according to Oni and Daniya (2012), has different meanings and applications in different countries but in Nigeria, it represents any enterprise with a maximum assets less than N1 million and with the number of staff employed less than or equal to 10 (Yusuf et al., 2014). However, the major characteristic of small and medium enterprises (SMEs) worldwide is that they are generally managed by their owners either as sole proprietorship or partnership (Adamu, 2005). SMEs stands as a sub-sector of the industrial sector which plays crucial roles in industrial development (Ahmed, 2006) and as well, forms an important pillar of a country’s economic future, not just a means of livelihood for poor groups in the population (Yusuf et al., 2014). This could be said to be the reason why so many discuss is on-going on small business development programs globally. Many development scholars and professionals have now come to believe that supporting small businesses within low- income communities stands as a credible development strategy to combat poverty (Lichtenstein and lyons 2001; Acs and Malecki, 2003). In Nigeria, SMEs came into existence following the adoption of Economic reform programme in 1981 and the decisions to switch from capital intensive and large scale industrial projects (which was based on the philosophy of import development), to Small and Medium Scale Enterprises which have better prospects for developing domestic economy, thereby generating the required goods and services that will propel the economy of Nigeria towards development (Oni and Daniya, 2012). It is based on this premise that Ojo (2009), argued that one of the responses to the challenges of development in developing countries particularly, in Nigeria, is the encouragement of entrepreneurial development scheme. This in the view of Iloh and Chioke (2015) is because SMEs has been acknowledged to have huge potential for employment generation and wealth creation in any economy. However, the seminal role played by SMEs notwithstanding its development is everywhere constrained by inadequate funding and poor management, with the unfavorable macroeconomic environment has also been identified as one of the major constraints which most times encourage financial institutions to be risk-averse in funding small and medium scale businesses (Ogujuba et al., 2014). This reluctance on the part of financial institution to fund SMEs can be explained by the insufficient capital base of banks and information asymmetry that often exists between SMEs and lending institutions.

Empowering the poor and small scale enterprises economically as well as liberating them from poverty serves as some of the very important reasons for the establishment of the financial institutions (Madume et al., 2016). However, several issues and concerns have been rising from time past in all quarters concerning the case of credit availability to small scale businesses and firms. This credit refers to the aggregate of all loans, advances, overdrafts, bills discounted banks guarantees, banks acceptances, commercial papers, leases and indemnities given by the banks to individuals with possible date of repayment. As stated by Iloh and Chioke (2014) commercial bank credits play a crucial role in the development of an economy as it influences positively the level of economic activities in any country, as well as what is to be produced, who produces it, and how much is to be produced. These banks which are involved in activities leading to profit making, perform a number of functions one of which is the acceptance of deposits from the public. It is these deposits that are in turn given as credit to Small and Medium Scale Enterprises among others, thereby leading to more production and provision of employment opportunities in the economy (Ijaiya and Abdulraheem, 2000; Ijaiya, 2003).

Hence, if SMEs indeed has the potential to be the engine room of Nigerian commerce, it would be salient, appropriate and timely to analyse and identify the possible way to jump through the loop holes challenging its growth and hindering it from reaching its assumed potential.

1.2     STATEMENT OF THE PROBLEM

The economy of our great nation, Nigeria, which was ones regarded as “The Giant of Africa” is currently on a steady state of decline with many of the governmental and private industries and organizations shutting down or laying off workers, resulting to huge level of unemployment. This occurrence in a country where there is abundance of unexploited natural and human resources is simply appalling, coupled with the stagnated state of the SME sector (which has been acknowledged to have huge potential for employment generation and wealth creation in anyeconomy) which remains relatively small in terms of its contribution to GDP or to gainful employment. This can also be seen as a function of the activity mix in the sector which is limited–dominated by import dependent processes and factors (Ogujuba et al., 2014).

Though economic empowerment enables the poor to reach his or her God given potentials and small scale industries to move from everyday survival to planning for the future (Cheston and Kuhn 2010), credit still remains the largest element of risk in the books of most banks and failures in the management of credit risk in some cases have contributed to many episodes of financial instability. A greater understanding of the nature of credit risk, leading to improved measurement and management, would help to strengthen the financial system vis-à-vis the small and medium enterprises in the long-run. An increasing amount of research on credit risk is being carried out within financial firms, central banks, regulators and universities; however this study is centred on the importance of business credit on small scale business development in the city of Port Harcourt in terms of growth, development, income generation and profit.

1.3     OBJECTIVES OF THE STUDY

The main objective of this study is to access the impact of Business Credit on the development of Small Business. The specific objectives are:

• To determine the impact of trade credit on the growth of small business.
• To determine the impact of bank loan on the performance of small business.
• To determine the effect of overdraft on market share of small business.

1.4     SIGNIFICANCE OF THE STUDY

The emphasis of this study lies in the fact that it examines the impacts of business credit availability on small scale business development in the city of Port Harcourt. Hence, this study will expose the relationship between business credit availability on growth, development, income generation and profit of small scale business. It will also highlight other factors (whether external or internal) that is and may influence the small-scale industries, while outlining some limiting factors that hinder the growth of small scale industries. In line with this, the study will seek to add to the existing body of knowledge on the business credit availability and small and medium scale enterprises. Hence, the research will be most useful to; old and new entrepreneurs, the government, as well as future researchers will use work as the basis for further research.

1.5     RESEARCH QUESTIONS

The study will be asking the following questions.

1. To what extent does the availability of trade credit affect the growth of small scale business enterprise?
2. To what extent does the availability of bank loan affect the performance of small scale business enterprise?
3. To what extent does the availability of overdraft impact on the market share of small scale business enterprise?

1.6     STATEMENT OF HYPOTHESES

Based on the research questions, the following null hypotheses are formulated.

H01: There is no significant relationship between the availability of trade credit and the growth of small scale business enterprise.

H02: There is no significant relationship between the availability of bank loan and the performance of small scale business enterprise.

H03: There is no significant relationship between the availability of overdraft and market share of small scale business enterprise.

1.7     SCOPE AND LIMITATION OF THE STUDY

This study focuses on some of the Small Scale Enterprises within the city of Port Harcourt in the area of credit availability and its impact in the growth and development of these businesses. The small scale enterprises include TK Industries, Mac-Mary Ventures and Oya Industries Limited.

Every research work has some limitations that can affect the overall research activities and research report. The researcher had limited time to complete the research. Combining lectures hours with the research work is indeed time demanding. The researcher also had limited resources that in some cases affected the overall completion of the research work. Limited finance and unwillingness of some of the respondents to provide useful information also affect the success of the research.

1.8     DEFINITION OF RELATED TERMS

Some of the terms which the researcher will encounter and use in this study are defined as follow:

Banks: A monetary institution owned by either government or private businessmen for the purpose of profit making.

Credit: The money that banks give out as loans and advances with future date of repayment.

Entrepreneur: A person who always searches for change, responds to it and exploits it as an opportunity.

Economic development: A process of upward change whereby the real per capita income of a country increases over a period of time

Micro Credit Scheme: Micro credit scheme is usually defined as a consciously planned and coordinated institutional effort for making credit readily available to the small business operators of the national economy.

Trade Credit: The credit extended by one trader to another for the purchase of goods and services

Loan: The lending of money by one or more individuals, organizations, and/or other entities to other individuals, organizations etc.

Overdraft:Money that is withdrawn from a bank account and the available balance goes below zero.

Market share:The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.

Performance: An organization’s achievement in its job. It relates to the efficiency and effectiveness of its job performance.