Page 1 of 8

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 04 Issue 06

June 2018

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 1

Modern Funding For Small Scale Business for

Overall Growth of Economic Development

Adekanmbi, J.A.

Department of Business Education, College of Education, Ikere – Ekiti

Augustine Sunday Oge

Department of Business Education, College of Education, Ikere – Ekiti

Talabi, A.O.

Department of Accountancy, Federal Polytechnic, Ile Oluji, Ondo State.

Abstract

This paper focuses on the new funding methods for small scale business (SSB) for overall growth

of economic development in Nigeria. Base on the emphasis on the small scale business in

Nigeria, the nation has been able to benefit tremendously from the promotion of small scale

business. However, the study reveals the old and common means of finance available to SSBs. It

went further to emphases on some new modern methods of funding accrued to SSBs. The

problems associated with finances of small scale business in Nigeria were also discussed to

reveal the major constraints. Therefore, Recommendations were made among which include.

There is need to strengthen the link between the research and development institutions and

business enterprises to provide feedback on the requirements for assessment of the modern or

new funds available for the benefit of the small business as a pre-requisite for the overall growth

of economic development in Nigeria.

Keywords: Economic Development, Economic Growth, Employment, Entrepreneurs, Finance,

Investment and Small Scale Business.

1. Introduction

Looking at the multiplier effect of drastic

reduction in the price of much dependent

crude oil at the world market on the Nigeria

economy, small scale business has a key

role in sustaining, revitalization and

development of national economy.

However, small scale businesses have

contributed greatly to the growth and

development of many developed nations in

terms of employment, contribution to Gross

Domestic Products (GDP) as well as export.

In a developing nation like ours, (Nigeria)

small scale business has been recognized as

the foundation for achieving rapid economic

growth and development by way of their

output as well as employment potential.

(Wale – Awe 2005).

Around the world, leaders talk about how

startups can create new jobs and lift regions

out of poverty. Many entrepreneurs,

particularly those in the world’s toughest

economy are still battling hard to secure the

capital they require to launch and run their

own businesses

Theirry (2013) noted, that most of the

finances provided for small business is

working capital leading secured by business

Page 2 of 8

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 04 Issue 06

June 2018

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 2

assets or the personal property of the owner/

manager. Gayle (2012) emphasized that a

country that wishes to promote the

development of venture capital investment

opportunities must be concerned with the

flow of funds to small business. According

to World Bank Data cited by Dalber, (2012)

revealed that 43 percent of business with

between the range of 20-99 employees

agreed that access to finance is a major

constraint. Oloyede and Fapetu (2008)

optioned that the functional activities of any

business such as marketing, production,

personnel, etc require the use of money. It is

on this background that finance is to be very

important in any business organization.

Thus, it has been ascertained that funding

small business is a pivot around which the

wheel of any business revolves. It should be

note that some business had wound up

untimely due to insufficient funds, despite

the vital role that small business is playing

in improving economy and eradicating

poverty.

1.1 Nature of Small Scale Business

Small scale business means those businesses

that are indigenously owned or managed,

usually having few employees and operating

at a single location. In fact, there is no

single, uniformly acceptable, definition of a

small scale business. Businesses differ in

their levels of capitalization, sales and

employment.

National Council on Industries (2001)

defines a Small Scale Industry as a business

with capital employed of over N 1.5 million

including working capital but excluding cost

of land and or a labour size of 10- 100

workers. However, according to Clive

(2004), the 1992 review by the National

Council on Industrial Standards noted that

small scale enterprises (SMEs) are

enterprises with total cost (including

working but excluding cost of land) above N

31 million but not exceeding N 350 million

with a labour size between 11 and 100

employees.

The socio – economic contribution of SMEs

to the overall growth of economic

development process in Nigeria are

enormous, by providing periodic

employment to urban people on one hand

and supplementing their income from their

regular job on the other hand, SMEs has no

measure aggravating economic development

in Nigeria (Owuala, 2000).

In a study by the International Labour

Organization (ILO), more than 50

definitions were identified in 75 different

countries, with a considerable antiquity in

the terminology used. The variety of

features applied or noted included size of

workforce or capital, form of management

or ownership, production techniques,

volumes of sales, client number, level of

energy consumption etc (Postobsky, 2009).

A small enterprise is one in which the

administrative and operational management

is in the hand of one or two people who also

make important decisions in that enterprise.

Broadly speaking, the definition of small

enterprises would depend on their activities

and the level of development of the country

where the enterprise is located.

The major driving force for economic

growth, economic development and

eradication of poverty in any developing

nation is massive investment in small scale

business. However, it is an over statement

that the education system in Nigeria is not

producing relevant manpower capable of

meeting domestic challenges and the

increasing global competitiveness. This

immediately translates to the unemployment

Page 3 of 8

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 04 Issue 06

June 2018

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 3

crisis, today, out of over 1 million graduates

that the Nigeria’s higher institutions produce

annually, only between 9-10 percent of them

have a hope of getting wage employment

(Onwumere, 2000). No wonder that the

president Muhamadu Buhari in one of his

media chart emphasized that his

administration in collaboration with both

state and local government will employ over

500,000 graduates teachers by the half

quarters of the year 2016. (Muhamadu

Buhari, 2015)

It has been evidenced that curricular of all

professional courses in higher institutions

now include entrepreneurship education.

This clearly shows the direction of all

professions and government at all levels to

the importance of business and its role to lift

the nation out of poverty.

Aganga (2012), Noted that the shift in recent

years from agriculture and promotion of

small scale business to oil has contributed in

no small measure in aggravating low finance

of small scale business which has negative

effect on economic growth in Nigeria. He

urged investors to look beyond the oil and

gas sector and diversify into other sectors

like agriculture. Berle (1990) noted that the

Nation’s inability to develop the capacity for

an appropriate apparatus and sustainable

environment that would make small scale

businesses attractive to the unemployed, vis- à-vis poor budgetary allocation on the sector

is a testimony to the failure of government

policies. Therefore, the need by the

government to create enabling environment

and awareness for the business operators on

the modern sources of finance is highly

imperative.

2. Roles of Small Scale Business in a

Developing Economy

The role of small scale business (SSBs) in

alleviating socio- economic problems and

their contributions to national economic

development cannot be over emphasized.

According to Awe (2010), small businesses

are identified as tools for improving the

standard of living of most developing

countries. The strategies for industrialization

and economic development which focused

on the establishment and operation of small

and medium scale enterprises pursued by the

developed world has also been considered

for the developing countries. Other role

includes:

Employment Generation: It is estimated

that in Nigeria 80% of work force is

engaged gainfully by small businesses. This

is because operations in the sector are labour

intensive and studies have shown that SMEs

create more jobs per unit of capital

employed than big businesses (Akeredolu,

1975)

Mobilization of Domestic Saving: This is

a way of mobilizing funds from surplus to

deficit unit. It should be noted that if

domestic saving is calculated to be less than

level necessary to achieve the target

economic rate of growth, there is said to

exist a savings investment gap. It is

however, inevitable of the commitments of

banks and governments to develop this

sector (Gayle 2012).

In summary, Awe (2010) enumerated the

roles of SSBs in developing economy as

follows:

i. Provide a good training ground for

entrepreneurship

ii. Are more labour – intensive and so

create more employment

opportunities.