Roles of Small and Medium Scale Enterprises in Community Development: Evidence from Anambra South Senatorial Zone, Anambra State

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Roles of Small and Medium Scale Enterprises in

Community Development: Evidence from Anambra South Senatorial Zone, Anambra State

Abstract

This study examines the roles development: evidence from Anambra south senatorial zone, Anambra state. Specifically the study provides empirical evidence on: socioeconomic characteristics of the respondents; reasons for going into SMEs; sources of financing SMEs; role of SMEs in community development and factors militating against SMEs in community development. The researchers distributed 55 questionnaires to the respondents that make up the sample size. The research questions were answered using mean rating under the modified four-point likert scale.Result of the investigation reveals that SMEs play the following role in community development: Generation of employment; Service provision; Improve living standards and poverty alleviation. Consequently this study therefore recommends that: government should re-introduce the small business credit scheme so that beneficiaries can use them to run the micro, small and medium enterprises; government, chamber of commerce and other non-governmental organization should regularly organize seminars for potential and actual small and medium enterprise operators where they should be educated on how to plan, organize, direct and control their businesses; micro, small and medium enterprises operat ’ h v v k g strategies; this includes such promotional strategies as advertising, good management customers relations at all times and there should be re-introduction of soft loans for small and medium business by the government and financial institutions.

I: INTRODUCTION

SMEs have been discovered to be a key driver for a country’s economic growth (Schmiemann, 2009) hence, SMEs cannot be overlooked in the economic development of any country. Okongwu (2001) argues that SMEs are recognized as the main source of economic growth and a major factor in promoting private sector development and partnership, in developed and developing countries. SMEs help to create employment and are often seen as very important for the growth and innovation of dynamic economies (Mutula and Brakel, 2006). Therefore, economic growth and development in Africa can be achieved through the emergence of strong SMEs, which will later grow to become major players in the developing economy. SMEs help to diversify economic activities that have significant contributions to imports and exports, they are flexible and can adapt quickly to changing market demands (Ongori, 2009). Thus, SMEs contribute more and more to the national and international economies of the world.

According to Wattanapruttipaisan (2003), the significance of SMEs for growth, productivity and competitiveness of the economies in both developed and developing countries is acknowledged universally, since SMEs bring about substantial local capital formation, contribute to improved living standards and achieve high levels of productivity. SMEs are identified as a major means of achieving equitable and sustainable industrial diversification.

The contributions of SMEs to Nigeria’s economy are not contestable as about 10% of the total manufacturing output and 70% of the industrial employment are by SMEs (Aina, 2007). Through the utilization of local resources, SMEs promote industrial and economic development and are responsible for the production of intermediate goods and the transformation of rural technology (Aina, 2007). Nigerian SMEs not only provide employment and income for majority of its citizens but are also recognized as the breeding ground for domestic entrepreneurial capabilities, technical skills, technological innovativeness and managerial competencies for private sector development (SMEDAN, 2005, Aina, 2007).

The assistance of SMEs to any economy are obvious, as SMEs are known to contribute to the development of several economies in terms of output of goods and services and creation of jobs at relatively low capital cost (Apulu and Latham, 2010). SMEs also improve forward and backward linkages between economically, socially and geographically diverse sectors of many economies (SMEDAN, 2005). Thus, the development of SMEs is an essential element in the growth strategy of many economies including Nigeria.

Statement of the Problem

In Nigeria, SMEs cover the entire range of economic activity within all sectors and share a number of common problems that hinder them from effective performance in some regions of the country. At the macro level, these problems, as identified by (SMEDAN, 2005), include low market access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkages among different sectors, weak operating capabilities in terms of skills, lack of knowledge and attitudes, lack of infrastructural facilities among others.

In another study carried out at the macro economic level by Chukwuemeka (2006) , it was identified that small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful. All these result to inadequate capital available to the sector and thus lead to poor financing. This is the bane of most cottage industries in Nigeria. About 80% of small and medium enterprises are stifled because of this problem of poor financing and other problems associated with it. Accordingly, Osotimehin, Akinlabi and Olajide (2012) noted that the problems that emanated from poor financing of SMEs include: Lack of competent management which is the consequence of inability of owners to employ the services of experts; Use of obsolete equipment and methods of production because of owner’s inability to access new technology; Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry; The high cost of available raw materials affects the prices of good food. This only has adverse affect on the turnover of the enterprise but also on the profitability; The availability of infrastructural facilities is grossly inadequate in the areas of access roads, electricity, water supply, etc. and Multiplicity of policies and regulatory measures such as removal of fuel subsidy, taxes, several charges on loans.

Despite a the catalogue of challenges identified by previous research (SMEDAN, 2005; Chukwuemeka , 2006; Osotimehin, Akinlabi and Olajide ,2012), SMEs remain key drivers and enablers of economic growth and development. However, there seems to be a dearth of literature that seeks to explain the role of SMEs at the micro economic level and at regional level in the country, considering the geographical and socioeconomic peculiarities of these regions. This study therefore compliments previous research in closing up the literature gap by investigating the roles of small and medium scale enterprises in community development: evidence from Anambra south senatorial zone, Anambra state, while adopting a micro economic analysis framework. Specifically, the study intends to: Examine the socioeconomic characteristics of the respondents; Ascertain the reasons for going into SMEs from the respondents; Determine the sources of financing SMEs from the respondents; Ascertain the role of SMEs in community development; and identify factors militating against SMEs in community development.

Organization Of The Study

This paper is divided into five sections. Following the background, section II reviews related literature on the topic. Section III set out the research methodology, while Section IV presents and analyses the empirical results. Section V rounds it up with the conclusion and recommendations.

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