Social Sciences

Effect of Small Scale Enterprises on Poverty Alleviation

Bachelors Degree

Small scale enterprises play a very vital role in the economic growth and development of any nation. In Nigeria, it is now realized that the large scale enterprises left alone would not be able to fast track the needed development and growth challenges that would project Nigeria as one of the first 20 most viable economies in the world by the year 2020. Therefore, it becomes very imperative for the development of the small scale enterprises in order to take care of specifically the rural developmental needs and the harnessing of the thought insignificant raw materials into the production of goods that can serve the very urgent needs of the entire middle and lower classes in Nigeria.

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Description

This work focuses on the effect of small scale enterprises on poverty alleviation in FCT: A case study of Gwagwalada Area Council. Poverty has been a recurring phenomena in Nigeria such that majority of her population live below the poverty line of one dollar per day. To this effect, this study, seeks to find out what are impact SMEs has on poverty reduction specifically in the FCT.

Two basic data were used, which includes primary and secondary sources was used. Secondary data were gathered by consulting some books, journals related to the subject matter while for the primary data, survey method was used. A sample of 75 respondents was selected from Gwagwalada Area Council.

Base on the review on the documented source and analysis of primary data, it was concluded that poverty persist in the FCT due to lack of infrastructure, constrained access to credit, poor implementation of products, procurement problems and insufficient demand for products.

This study therefore recommended that adequate credit need to be made available at a very low rate for small scale industries, there is the need to have adequate information on the sub-sector to enhance planning, policy design and evaluation, the problems of infrastructural deficiencies need to be tackled with a view to enhancing the performance of small scale industries in FCT.

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Table of Contents

TABLE OF CONTENTS

Title

Table of Contents

Abstract

CHAPTER ONE: INTRODUCTION

1.1      Background to the Study –           1

1.2      Statement of the Problem           –           5

1.3      Research Questions           –           5

1.4      Objectives of the Study –             6

1.5      Research Hypothesis         –           7

1.6      Significance of the Study –           7

1.7      Scope and Limitation of the Study        –           8

1.8      Definition of Terms            –           9

CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.1      Introduction

2.2      Conceptual Framework   –           11

2.3      Theoretical Framework    –                       –           36

2.4      Empirical Review    43

CHAPTER THREE: RESEARCH METHODOLOGY

3.1      Method of Data Collection and Analysis-        49

3.2      Research Design and Sampling procedure     52

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

  • Data Presentation –             –                       53

4.2      Hypothesis testing and findings 64

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

  • Summary –           68
  • Conclusion –           69
  • Recommendations 70

References   –           72

Appendix      –           78

Background

 

Small scale enterprises play a very vital role in the economic growth and development of any nation. In Nigeria, it is now realized that the large scale enterprises left alone would not be able to fast track the needed development and growth challenges that would project Nigeria as one of the first 20 most viable economies in the world by the year 2020. Therefore, it becomes very imperative for the development of the small scale enterprises in order to take care of specifically the rural developmental needs and the harnessing of the thought insignificant raw materials into the production of goods that can serve the very urgent needs of the entire middle and lower classes in Nigeria.

The laudable objectives of the Small scale and Medium Enterprises (SMEs) among the highlighted objectives listed above include the inter-alia substantial contribution of this sector to the Gross Domestic Product, employment generation, increasing local Value Added Tax, and technological development and above all poverty alleviation. It is thus becoming evidence that small scale enterprise which had hitherto generally been neglected could play the aforementioned roles, as well, if not better than the large scale establishments, the only viable and reliable option for development, growth and survival of any economy. The developments of small scale enterprises do not only contribute significantly to improve living standards, they also bring substantial local capital formation and achieve high level of productivity.

The exploitation of the vast natural and human resources available to Nigeria for economic development would to a great extent depend on how the small businesses are organized. The performance of the small scale business sector in the economy should be a matter of great concern to all. Nigeria today, currently estimated about twelve (12) million businesses of all sizes located in various parts of the country, out of which, small businesses clearly account for over seventy percent (70%) of industrial employment, (World Bank, 2008).

Nigeria, like any other developing country faces development challenges. To locate these challenges, the nation’s grand norm, the 1999 constitution stipulates the nation’s economic objectives to includes harnessing its resources for promoting national prosperity and an efficient, a dynamic and self-reliant economy” (the 1999 constitution Sec. 16: 1) in order to achieve this objective, the state shall direct its policy towards ensuring the promotion of a planned and balanced economic development, that the material resource of the nation are harnessed and distributed as best as possible to serve the human good; that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group (the 1999 constitution Sec. 16: 2).

Government has no doubt pursued these national objectives over the years. The result of the implementation of these economic policies and the realization of the economic objectives has not been particularly successful. The history of growth has been generally disappointing. The National Economic Empowerment and Development Strategies (NEEDS) documents states that the country is totaled on an average growth rate of 10% higher than 3% per annum for most of the decades following the discovery and expectation of all (NEEDS 2004: 28).

The slow economic growth and sustainable development has been traced to (NEEDS 2004: 31) to a number of factors. These factors include; macro-economic policy goals, public sector dominance in production and consumption, perverse rent-seeking and corruption facilitated by government being hub of economic activities. Other challenges facing our sustainable human development efforts are infrastructural inadequacy and decay, weak institutional capacity for economic policy management and coordination, unsuitability of public finance at all levels of government. As can be seen, some of these challenges are institutional, while others are due to disharmony between goals and means.

Key instruments for the realization of these policies among others includes coordinated national sectoral development strategies for agriculture, industry-especially Small and Medium Enterprises (NEEDs 2004: 33) the strategic role of SMEs in the growth of an Economy and indeed human development has appropriately been channeled. This research work seeks to know the impact of Small and Medium Scale Enterprises (SMEs) and poverty alleviation in nation. That is, seeks to achieve some of the objectives of National Poverty Eradication Programme (NAPEP). Its wealth creation capacity, its job creation and general socio-economic empowerment roles cannot be overemphasized.

Agagu (2004) recently highlighted the crucial role of SMEs as serving as a source of income and also providing employment opportunities for others and contributing to economic growth. He describes SMEs as an antidote for rapid socio-economic development. Small scale business has provided almost seventy percent (70%) of employment to able-bodied men and women in Nigeria and in long run alleviate poverty. It encourages indigenous entrepreneurship, regional economic balance through industrial dispersal, including rural areas, moderation of rural-urban migration and production of international goods for use in large enterprises.

Thus, the study intend to fundamentally address the factors that necessitate the establishment of small scale businesses; role of small scale business enterprises in the economic development of FCT; major characteristics of small scale business enterprises; and problems militating against the smooth operations of small business enterprises in FCT specifically Gwagwalada area council.

Significance

The primary importance of this study is that it will bring forth the importance of Small scale enterprises in alleviating poverty in the FCT. It would help highlight the major benefits of people in SMEs in Gwagwalada Area Council of the F.C.T to the growth and development of the FCT economy as well as the pending challenges to be surmounted for sustainability purposes.

The findings of the study will also add to the existing knowledge of the impact of Small scale enterprises; how it affect poverty alleviation at least by affirming the findings of other studies carried out and broaden the bases of comparability of states and nations experiences. The findings of the study would also contribute to the number of reference materials for future research endeavours for interested students and other class of researchers.

Finally, the study will enlighten the government, policy makers and people of developing nations to embrace the policies and programmes of increasing the volume of small scale enterprises in the economy so as to combat the menace of poverty.

Objectives

The broad objective of this study is to determine the extent to which small scale enterprises can assist poverty reduction in Gwagwalada area council.

Specifically the study examined the followings:

  1. To ascertain the role played by small scale enterprises in poverty reduction in FCT.
  2. To determine the factors militating against the growth of small scale enterprises in FCT.
  3. To evaluate how these factors hinder small scale contribution to reducing poverty in FCT.
  4. To determine possible ways of enhancing small scale enterprises in order to reduce poverty in FCT.

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