EVALUATION OF THE ROLE OF SOCIAL AND ECONOMIC INFRASTRUCTURE IN THE PROMOTION OF BUSINESS ACTIVITIES

1.1 Introduction

Infrastructure means the basic facilities which are necessary for the development of a nation. Economic infrastructure is the combination of basic facilities which is helpful in economic development of an economy and businesses. It includes facilities such as telecommunication, electricity, transportation, energy while Social infrastructure is the combination of basic facilities which are necessary for human development. It includes such facilities as hospitals, schools, and housing. Similarly, infrastructure facilitates the means of goods and services production, and also the distribution of finished products to markets, as well as basic social services such as education and healthcare services (Olaseni et al., 2012).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

1.2 Background of Study

Since Nigeria attained independence in 1960, considerable efforts have been directed towards the nation’s industrial development. The initial efforts were government-led through the vehicle of large industry, but lately emphasis has shifted to Small Scale Industries (SSIs) following the success of SSIs in the economic growth of Asian countries (Ojo, 2003). Thus, the recent industrial development drive in Nigeria has focused on sustainable development through small business development. Prior to this time, particularly judging from the objective of the past National 4-Year Development Plans, 1962-68 and 1981-85, emphasis had been on government-led industrialization, hinged on import-substitution.

Since 1986, government had played down its role as the major driving force of the economy by a process of commercialization and privatization (Beyene, 1999). Emphasis, therefore, shifted from large-scale industries mainly to small scale industries, which have the potentials for developing domestic linkages for rapid and sustainable industrial development. Attention was focused on the organized private sector to spearhead subsequent industrialization programmes. Incentives given to encourage increased participation in these sectors were directed at solving and/or alleviating the problems encountered by industrialists in the country, thereby giving them greater leeway towards increasing their contribution to the national economy.

Interest in the role of Small Scale enterprises in the development process continues to be in the forefront of policy debates in developing countries. The advantages claimed for Small Scale enterprises (SSEs) are various, including: the encouragement of entrepreneurship, the greater likelihood that SSEs will utilise labour intensive technologies and thus have an immediate impact on employment generation (Ayozie&Latinwo, 2010); they can usually be established rapidly and put into operation to produce quick returns; SSIs development can encourage the process of both inter- and intra-regional decentralization (Ogujiuba et al., 2004); and, may become a countervailing force against the economic power of larger enterprises (Salami, 2003). More generally the development of SSIs is seen as accelerating the achievement of wider economic and socio-economic objectives, including poverty alleviation (Safiriyu and Njogo, 2012; Ayozie and Latinwo, 2010; Udechukwu, 2003).

The role of finance has been viewed as a critical element for the development of Small Scale enterprise. Previous studies have highlighted the limited access to financial resources available to smaller enterprises compared to larger organizations and the consequences for their growth and development (Hossain, 1998; Wattanapruttipaisan, 2003; Berger and Udell, 2004; Ogujiuba et al., 2004; etc).

According to Valverde et al (2005) bank credit play a crucial role in providing external financing to Small Scale Industry (SSIs). But in Nigerian context, this crucial source of finance for Small Scale Industry is apparently non-functional (Kadiri, 2012). This is evident in the ratio of loans to Small Scale Industry to Commercial banks’ total credit, which shows that a meager 0.16% of commercial banks’ total credit was granted to Small Scale Enterprises in the last quarter of 2011 (CBN, 2011). More worrisome is the fact that this ratio has been falling over the years and continued unabated in the post-consolidation era (Iorpev, 2012).

Typically, smaller enterprises face higher transactions costs than larger enterprises in obtaining credit (Olorunshola, 2003). Poor management and accounting practices have hampered the ability of smaller enterprises to raise finance. Information asymmetries associated with lending to small-scale borrowers have restricted the flow of finance to smaller enterprises. In spite of these claims however, some studies show a large number of small enterprises fail because of non-financial reasons.

The panacea for solving problems of economic growth in developing countries often resides in the development of small scale industries. The establishment of those industries has been the centre piece of industrial development of many countries such as India, Malaysia, Pakistan and Indonesia, to mention a few. It is expected that the gains to be derived from the establishment of small-scale industries will be translated into the generation of employment at a low investment cost. These industries will also be able to harness raw materials locally and serve as raw inputs to the large-scale industries.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Evaluation of the Role of Social and Economic Infrastructure in the Promotion of Business Activities.

1.3 Statement of Problems

Investigation revealed that the key problem facing most small scale enterprises is lack of finance whether for the establishment of new industries or to carry out expansion plans. The inability to attract financial credit or resources has hindered or stifled the growth of small scale enterprise.

The reasons for the lack of fund include the followings:

1. Low level of savings in the economy, which leads to low capital formation.
2. High rate of interest charged on loans, which scares off potential Small Scale enterprise.
3. High rate of inflation that led to the vast depreciation of Naira exchange rate, thus making it difficult for most Small Scale enterprise to obtain required inputs for expansion.

The unwillingness of retail banks to grant credit to Small Scale enterprise because of the low creditworthiness of these enterprises has also hampered their growth over the years. Bothered by the persistent decline in the performance of the industrial sector and with the realization of the fact that the small and medium scale enterprises hold the key to the revival of the manufacturing sector and the economy, the Central Bank of Nigeria successfully persuaded the Bankers’ Committee in 2000 to agree that each bank should set aside 10 percent of its annual pre-tax profit for equity investment in small and medium scale enterprises. To ensure the effectiveness of the programme, banks were expected to identify, guide and nurture enterprises to be financed by the scheme.

The main thrust of this study is to evaluate the financial problems and survival strategies of Small Scale enterprise in Aguata Local Government Area of Anambra State.

1.4 Aim and Objectives of Study

The aim of the study is to evaluate the Role of Social and Economic Infrastructure in the Promotion of Business Activities. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine the extent to which Small Scale enterprise contributes to economic development.
2. To identify the problems they encounter in sourcing out funds.
3. To identify survival strategies needed by Small scale industries.
4. To ascertain if the financing options available to the SSE are practically obtainable to support the capital required for their operation.

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• To what extent does small scale enterprise contribute to towards economic development of a nation?
• What are the various sources of funds available to the small enterprise?
• What are the problems encountered by the small scale enterprise in sourcing for funds?
• What are the survival strategies to be adopted by the small scale enterprise?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is no significant relationship between the source of fund available to small scale enterprises and the funds available to them.
• H1:There is a significant relationship between the source of fund available to small scale enterprises and the funds available to them.

Hypothesis Two

• H0: There is no significant relationship between the development of small and medium scale industries and the economic development of that nation.
• H1: There is a significant relationship between the development of small and medium scale industries and the economic development of that nation.

Hypothesis Three

• H0: There is no significant relationship between the problems encountered by the small scale enterprises in their source of funds.
• H1: There is significant relationship between the problems encountered by the small scale enterprises in their source of funds

Hypothesis Four

• H0: There is no significant relationship between the survival strategies adopted by the small and medium scale industries and the survival of small and medium scale enterprise.
• H1: There is a significant relationship between the survival strategies adopted by the small and medium scale industries and the survival of small and medium scale enterprise.

1.7 Significance of Study

Small-Scale Enterprises in Africa rely largely on own savings, not only to grow but also to innovate, firms often need real services support and formal finance assistance. This study will be of benefit to the operators of the Small and Medium Enterprise, the government, and the general public on the possible financing options and survival strategies available to the Small and Medium Scale enterprise and give the possible means of accessing them.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.8 Scope of Study

The scope of the research is focused on the Evaluation of the Role of Social and Economic Infrastructure in the Promotion of Business Activities. The study will cover only the Aguata Local Government Area of Anambra State.

1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Research material: availability of research material is a major setback to the scope of the study.
3. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
4. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

1.10 Definition of Terms

Infrastructure: Infrastructure means the basic facilities which are necessary for the development of a nation.

Economic Infrastructure: It is the combination of basic facilities which is helpful in economic development of an economy and businesses.