Impact of Microfinance Banks on Smes Growth in Nigeria

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE 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 and Medium Enterprises (SMEs) following the success of SMEs 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. Emphasis, therefore, shifted from large-scale industries mainly to small and medium 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. Apart from their potential for ensuring a self-reliant industrialization, in terms of ability to rely largely on local raw materials, small scale enterprises are also in a better position to boost employment, guarantee a more even distribution of industrial development in the country, including the rural areas, and facilitate the growth of non-oil exports. According to the National Council on Industry (1991) cited in Olajide, Ogundele, Adeoye and Akinlabi (2008), micro/cottage industry is...