Small Scale Industries and Financing Challenges in the Rural Areas
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Date
2012-09-18
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Elixir Pubishers
Abstract
Small Scale Enterprises have been recognized to be the main engine of economic growth and a major factor in promoting private sector development and partnership in the developing economies of the world. The enterprises in this category have not only brought about substantial local capital formation, it has really increased the level of productivity and capabilities of the dwellers of the rural commodities thereby redistributing the nations income and curbing rural-urban drift of citizens. However, despite the benefit accruable from the development of Small Scale Industries (SSI), little attention has been paid to its improvement by various tiers of government because of the distance between the government and the local dwellers. Also, lack of infrastructural facilities like power supply, provision of water, accessible roads to link the rural communities to the commercial centers,
and non – availability of formal financial institutions have negatively affected the optimum performance of the various Small Scale Enterprises in Nigeria. Therefore the thrust of this paper is to assess how far the Small Scale Industries have been thriving in the face of various problems ranging from infrastructural to financial, confronting the entrepreneurs in the local communities and the effects of such constraints and problems on their business and how the problems can be ameliorated in order to improve the welfare and enhance the social economic development of the citizens at the grassroots. The population for the study comprises the small scale entrepreneur in Osun State of Nigeria. The sample consists of Iwo Local Government Area and Ola Oluwa Local Government Area. The two local councils are predominantly of villages and towns which can be regarded as real grass root communities and the major enterprises being practiced is the small Scale type. Out of this population, 200 respondents randomly chosen were served questionnaires, in which 153 respondents returned their questionnaire filled. The researcher also made use of oral interview with the officials of the Ministry of Commerce and Industry in Iwo Zonal office serving the two local councils as well as using some relevant data from the internal Revenue Board of Osun State. For the analysis of the data, simple percentages were used to classify the responses of the
respondents and Chi-square (x2) was used to test the various hypotheses proposed. The findings of the study indicate that Small Scale business entrepreneurs have no access to funds from the formal financial institutions (Banks) due to non-availability of banks in these rural areas and where there are few of the banks, the formality of processing loans and the interest on such loans have been very discouraging. Due to this, majority of the respondents make use of non-bank financial institution like thrift and cooperative societies, and also get financial assistance through Revolving Loan Scheme (ESUSU) and Daily Contributions Arrangement (AJO). However, in spite of all these challenges, it was found out by the researcher that investing in small scale business in these areas has great prospect and thus profitable to the owners. Small scale businesses have really served as a very charitable linkage between the source of raw materials and the usage of such materials by the large scale counterparts in the state. Also, of small scale business have thrived greatly by helping the rural dwellers to have access to the finished products of large corporations through buying and selling.
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Keywords
Small Scale Industries, Rural areas, Finance, Entrepreneurs