THE ROLE OF FINANCING SMALL AND MEDIUM SCALE ENTERPRISE IN RURAL AREA

CHAPTER ONE
1.1    INTRODUCTION
Industrialization in Nigeria can be traced as far back as the mid sixty (mid 60’s) although co-ordination and meaningful programmers in this direction become manifested with  the released of the second national development plans, subsequent development plan has  long focused largely on industrial growth and development plan.  These accounted for introduction of the small scale industries credit scheme (s-s-1.cs) all over the federation in 1996 each state from the defined Benue-Plateau states, came the birth of the present Plateau state government which sponsor small-scale industries credit scheme. The federal and state government realized the important of small-scale industries in the growth and development of stable and dynamic economy accounted for their government assistance in both cash and lend. They made funds and expertise available to small scale medium industries to enable them  under take project that could contribute to the economic development of the country.
In general term, the small-scale  industries credit scheme was established to provide  loan in a cash and kind to the establishment and modernization of small-scale industries  that offer promising being of economically viable by producing, needed commodities, making use of local raw  materials and expanding employment opportunities, small- scale  industries being the  “back-bone” of any economy principal source of innovation and new ideals or method, they make  up of economic units in every economy, their development and growth is of great significant to overall health of the natural economy by financing (inform of  loans) these small-scale industries especially those in the rural areas, it is hoped  that growth and development  of small-scale  industries which is an important pre-requisite for  the substance of well balance industries would achieved and there  by ensured the realization of Nigeria’s industrial goals, since the bulk source of the Nigeria raw materials are from the rural areas. Historically small-scale industrial programmes. In developed economy and united state  of America (U.SA ) Germany and Japan developing country like Nigeria, generally speaking, small,  scale  industries served as. 
1.2    BACK GROUND OF THE Study
Union Bank of Nigeria plc, commercial banking operate in Nigeria in 1894 as the bank of British West Africa limited (Liver pool) with an authorized share capital of $100000 (one hundred thousand Dollars), making it the second bank to be established in Nigeria after first bank. The bank recorded remarkable growth over the years with the opening of a branch in Calabar in 1907 and they take over in 1912 of the bank of Nigeria thus, regarding,  it position as second bank of apart from first bank in the country at that time. The bank was nominated to act as agent in Nigeria to the West Africa currently board (set up in 1912) to perform, the role of a commercial banking like first bank in Nigeria.
However, it retained this role until 1959 when the central bank of Nigeria was established. The central bank of Nigeria was established inline with the discoloration process of the 1950’s, the bank’s name was changed to bank of West African Limited in 1957. The standard bank of England in compliance with the company’s decree of Nigeria limited in 1969. the federal government of Nigeria purchased 36, 1% of the bank equity while the Nigeria investors took up 12.9% in line with the indigenization process, commenced by the Nigerian government in 1972, government share holding had increased to 44.76% and that of other local investors to 17.24% as a result of the dilution of union bank of Nigeria plc and its share were listed on the floor of the Nigeria stock exchange in the same year.
In compliance with the requirements of sections 31 of the Companies Allied Matters Act 1990. The name of the bank was further changed to union bank provide its customer a full range of  commercial banking  services including current saving and deposit  accounts, loans and  over-drafts, provision of  international  banking services, least export  credits, financial   advisory services   and soon with the establishment of merchant bank in 1990, the bank has also be able to provide its numerous customers  a full range or merchant banking services. The union bank of Nigeria plc provides services to its customers in different dimensions in the country.
1.3    STATEMENT OF THE PROBLEM
In spite of numerous efforts by the government to increase new form of industrial activities in the national economy and the unique position occupied in the small and medium industries in the overall national development, very competition disadvantages with the big industries in Kaduna state and Nigeria as a whole, one among the major impediments, that hindered the growth of this sector of the economy, is lack of capital and credit facilities. (Money) is the sin-quo without which it is impossible to mobiles other factors of production for small and medium scale credit for the establishment and expansion of the business for the following reasons. They are considered generally high credit risk, commercial bank and other business institution are element to  grant loan to the small and medium scale business and often weak and inefficient enterprise with inadequate accounting systems and little collateral or security to offer. Thus the requirement t for long- term capital and equipment financing demanded by the commercial banks are not met.
There are inadequate credit institutions in the country where the small and medium scale industries could go to range the capital needed for their operations. However, the ignorance of  where and  how to obtain the funds needed to start up the business, this is partly due to low level of educations on the part of most small  and medium industrialist in Nigeria especially those in rural area where funds are not available, lack of managerial competence constitute another problem. Majority of the entrepreneurs in this country are usually facing the problem of how to administer their own business. Another major problem is, inadequate personnel to assist in running the affairs of the company. There is also planning absence, most Nigerian small and medium enterprise fail because of lack of proper  planning for the purpose of achieving a desired objective of profit maximization where the adequate planning is not there, inadequate infrastructural facilities such as electricity, good roads, water supply, schools and hospitals to enhance the establishment  of small and medium scale enterprise in rural areas  are lacking this, seriously affecting the  development  of small and  medium scale enterprises in Kaduna state and  Nigeria as  a whole.
Finally, there are difficulties in the economic environment, which constitute sever obstacle on the part of success of small and medium scale enterprises. There are other factor upon the operation of a business other than availability of capital and managerial ability of the business himself. These  include, the problems of security, the proper equipment in reasonable time and in good working conditions, the  human resource, infrastructures, supplies,  adequate market, land etc various development bank where establishment by the federal government purposely  to reduced these obstacles to the best minimum and encouraged quick industrial growth, in 1977 commercial bank were directed  by the federal government through the central bank to embarked on rural banking aiming at providing adequate credit facilities to rural dwellers 1977, small and medium scale industries credit scheme  was  established under the ministry of trade and industries to provide credit facilities to industries particularly those  in  the rural areas yet theses various attempts did not yield the results.
1.4    OBJECTIVE OF THE STUDY.
This research is interned to investigate the various forms of financing of small and medium scale industries within particular reference to Kaduna state. It is necessary to have a  study that will examine the factors that inhibit easy access to loan able funds  by small and  medium scale industries in  Kaduna state.
In spite of the present emphasis given to the promotion of small and medium scale business unemployment has continued to be on the increase. Goods and services also continued to be in short supply the general standard of the people of kaduna state has declined. It is therefore, necessary that the problems of small and medium scale business had been properly looked into; the major problem of small and medium scale industries is that of finance.
The significance of this study includes:-
Providing a useful guide for prospective to have self- employment as a career
Serving as a loop for further, researchers in the areas of small and medium scale management.
Lead to effective decision making by small scale operators.
Provide and understanding of the importance of banks to organization as vital tools for economic development of the country. The knowledge about all the above issues to be raised will create enthusiasms for people in this direction.
1.5    Research hypothesis
These financing were used in testing the hypothesis
Capital approved for the small and medium scale industries.
The high rate of interest changed on loans granted in the small and medium scale industries has been responsible for inabilities of the small and medium scale industrialist to honor. The installment repayment of their loans.
The low level of education among the rura dwellers has contributed immensely to the problems of financing small and medium industries in Kaduna state.
Therefore, the nu-hypothesis of lack of capital is the main cause of small and medium scale business, failure in Kaduna state, the alternative hypothesis is rejected. Also in second (2) Sit of hypothesis, null- hypothesis is accepted, low level of general education is a strong factors business is rejected.
1.6 Scope and limitation of the studies
The first limitation of the study was the time. Time allowed to carry out this research work was almost too short to compare with the fact that the researcher has to compound his ideas. Another limitation was the released of earlier documents considered to be confidential which could have been very useful to this study despite the difficulties, it is my hope that this study. Despot the difficulties, it is my hope that this study would help future research, government official as well as interested person conducting future studies on this subject.
1.7 Definition of terms.
In the cause of this study, some operational definition were used which are to be seen strictly and mainly in the light of this study.
CAPITAL: - This refers to the total sum invested in the business including all funds invested both owned and borrowed plus accepted credit.
LOAN BENEFICIARIES: - these are those entrepreneur that been granted loan to undertake small and medium scale project.
PROJECT: - this is the venture which a loan beneficiary is engaging in.
DEVELOPMENT INSTITUTION: - this refers to bodies of government financing to enhance agricultural development.
INTEREST:-this refers to the charge on the capital borrowed to the loan beneficiaries.