1.1      Background to the Study

Entrepreneurship development is a core factor that contributes to the economic growth and development of a nation if such a nation wants to move being undeveloped or developing to developed nation. The Small and Medium Scale Enterprises are important engines that drive economic growth, jobs and social cohesion. SMEs play an important role in the economies of many developing countries including Nigeria. Thus, governments throughout the world focus on the development of the SMEs sector to promote economic growth Finlayson, (2003). However, the creation, survival and growth of SMEs are often hampered by access to finance. Thus, access to SMEs finance has become a key priority in developing countries like Nigeria. Therefore, Non-availability of debt finance to ensure smooth operations and expansion is one of the major causes of failure for SMEs in Nigeria. According to Global Entrepreneurship Monitor (GEM) Survey in 2008; financial constraint is the primary exit reason for most SMEs failure in Nigeria. However, the need for SMEs growth in Nigeria is beyond question, but access to finance is a major factor stagnating the way of its growth, as a financing tool, debt financing has a distinct advantages over equity financing for the development of SMEs, but debt financing in Nigeria presently comes with significant challenges as can be seen from low responses of commercial banks to finance SMEs.

There is evidence that most SMEs in Nigeria with low capital formation raise capital through loans from family and friends because at the initial stage, majority of young budding entrepreneurs lack laudable forms of collateral, business plans and feasibility studies to actually meet the requirement and convince banks to grant them loans Ebube, (2011). This implies that a vast majority of SMEs depend on internal finance (contribution from the owners, family and friends etc). Internal financing is often inadequate for SMEs in Nigeria to survive and grow, as it is increasingly difficult to keep the costs within the constraints of self-financing. Therefore SMEs need capital from external sources (or Debt Financing). Because of this Nigerian Government over time introduced Small and Medium Enterprises Equity Investment scheme (SMEEIs) as an initiatives through Commercial banks by the CBN to solve financing problem of SMEs and the creation of (Small and Medium Enterprises Development Agency of Nigeria) SMEDAN as an agency to enhance the development of SMEs.

The Banking sector is very essential for any nation because it is the foundation of socio-economic growth of any economy Terungwa, (2011). This implies that commercial banks have active developmental roles to play in the economy such as mobilizing fund from the surplus to the deficit spending units. Commercial banks are considering as the main source of finance for SMEs or rather entrepreneurs in Nigeria. Akabueze, (2002) assert that Finance has been seen as a critical element in the growth and development of SMEs. That is to say that the beginning and efficient and effective performance of any industrial enterprises irrespective of the size (small, medium or large) will require availability of funds for its capitalization, working capital and rehabilitation needs, as well as for the creation of new investments. Availability and provision of capital to the organizational sector, most importantly, for the SMEs has therefore, been of prime interest to policy-makers in both the public and private sectors. It is a known fact that firms depend on a variety of sources for their finances. These include external and internal, formal and informal sources Aruwa (2004). According to Demirguc-Kunt, Maksimovic, Beck and Laeven, (2006) External finance makes many SMEs developed, they depends on bank loans and overdrafts and suppliers credit for early stage financing. Despite the dependence of SMEs on debt finance, paradoxically access to debt finance is very limited for SMEs in Nigeria. Mambula (2002) revealed that Small and medium scale enterprises dominate the private sector of the Nigerian economy, but almost all of them lack access to credit finance from commercial banks. This implies that Commercial banks and trade creditors hesitate to lend to SMEs. However, only few SMEs in Nigeria are able to access bank loans. Past studies have lamented the limited access to external financial resources available to smaller enterprises compared to larger organizations and the consequences for their growth and development (Hossain, 1998; Wattanpruttipaisan, 2003; Berger and Udell, 2004; Ogujiuba et al., 2004 ;).

Valverde et al (2005) shown that bank credit play a crucial role in providing for external financing to SMEs, but in Nigerian context, this crucial source of finance for SMEs is apparently non-functional Kadiri, (2012). This is evident in the ratio of loans to SMEs to Commercial banks’ total credit, which shows that a meager 0.13% of commercial banks’ total credit was granted to SMEs in the year 2012 (CBN 2012). More worrisome is the fact that this ratio has been falling over the years Iorpev, (2012). On the other hand, internal sources include personal savings, loans from family and friends, retained earnings and disposal of the enterprise assets and Esusu Contribution. It is on this foundation that this study aims to evaluate bank contribution to entrepreneurship development in Nigeria by using Guaranty Trust Bank in Anambra State as a case study.

1.2   Statement of the Problem

SMEs does not only have the capacity for self-independent and self-reliant in an industrial making use of local raw materials, but also have the potential to boost employment and as well guarantees even distribution of industrial development and facilitate the growth of non-oil exports Fabayo (1989). Thus, promotion of such enterprises in developing nation like Nigeria will bring about great distribution of income and wealth, economic self dependence, entrepreneurial development and a host of other economic uplifting factors. Small and Medium Enterprises are core factors to be considered to meet up with the national objectives in terms of employment generation at low investment cost, development of entrepreneurial capabilities and indigenous technology. They reduce the flow of people from rural to urban and can easily be established with minimum skill. They also contribute substantially to the country’s gross domestic product, export earnings and development of employment opportunities.

With the continuous policy strategies aimed at attracting credits to the SMEs, most SMEs in Nigeria have remained unattractive for bank credits supply. For instance, as indicated in central Bank of Nigeria (CBN) reports, almost throughout the regulatory era, commercial bank’s loans and advances to the SMEs sector deviated persistently from prescribed minimum. Furthermore, the enhanced financial intermediation in the economy following the financial reforms of the 1986, credits to SMEs as a proportion of total banking credits has not improved significantly. Afolabi (2013) asserted that one of the problems faced by SMEs operators in Nigeria is that government does not give chance or consider them when making policy in which priority is given to large organizations. This makes financing the main constraining factor to SMEs growth and hinders their potentials for enhancing economic growth in Nigeria. Available information from CBN (2012) shows that, as at 1992 commercial bank loan to SMEs as Percentage of total credit was 27.04% in 1997 and decreases to 8.68%, 0.85% and 0.14% in 2002, 2007 and 2010 while 2012 recorded 0.15%. As a result of this, many SMEs in Nigeria are now relying on internally generated funds, which have tended to limit their scope of operation.

1.3   Research Objectives

The study has both general objective and specific objectives. The general objective or main objective of this study is to evaluate bank contribution to entrepreneurship development in Nigeria by using Guaranty Trust Bank in Anambra State as a case study. The specific objectives are:

i)             To investigate the impacts of entrepreneurship development on the Nigerian economy

ii)           To identify the different sources of finance available for entrepreneurs in Anambra State, Nigeria

iii)         To determine the problems encountered by entrepreneurs in Anambra State, Nigeria

iv)         To proffer possible solutions to the problems encountered by entrepreneurs in Anambra State, Nigeria

1.4   Research Questions

The following are some of the questions which this study intends to answer:

i)             What are the impacts of entrepreneurship development on the Nigerian economy?

ii)           What are the different sources of finance available for entrepreneurs in Anambra State, Nigeria?

iii)         What are the problems encountered by entrepreneurs in Anambra State, Nigeria?

iv)         What are the possible solutions to the problems encountered by entrepreneurs in Anambra State, Nigeria?

1.5   Research Hypotheses

The following will be the research hypotheses to be tested for this study

i)             There is no significant relationship between the loans granted to entrepreneurs by commercial banks and its impact on the Nigerian economy.

ii)           There is no significant correlation between entrepreneurship and self-reliance.

1.6   Significance of the Study      

This study will highlight problems associated with the contributions of commercial banks in development of entrepreneurship in Nigeria. It will give information on the possible areas for improvement. Furthermore, the study will help commercial banks to assess their role in financing small scale industry in Nigeria. Moreover, suggestions and recommendations made in this paper will help policy makers formulate new economic policies to maintain or modify the existing one. It will equally serve as a guideline to researchers who may wish to research this study in the future. It will also help entrepreneurs to make sufficient preparation in their request for credit assistance. It will guide the entrepreneurs in making credits demands that are in compliance with government monetary policy. This study will be of significance to monetary authority, policy maker, government, academia and the general public. The findings of this study will help government and the monetary authorities to see the effectiveness of monetary policy in the management of the Nigerian economy interns of credit demand and supply to entrepreneur which have a spill over effect on Nigeria economic growth. This research work further serves as a guide and provides insight for future research on the topic and related field for academia’s and policy makers who are willing to improve on it. The study will also contribute to knowledge by appraising the impact of bank contribution on the growth of entrepreneurship in Nigeria.

1.7   Scope of the Study

This study seeks to evaluate bank contribution to entrepreneurship development in Nigeria by using Guaranty Trust Bank in Anambra State as a case study. Therefore, the study will be carried out among Guaranty Trust Bank officials and entrepreneurs in both Awka and Onitsha cities. This is because the two cities are regarded as the commercial centres of the state. It is believed that there will be large concentration of entrepreneurs there, which will be suitable for this study.

1.8   Limitations of the Study

        This study entailed investigation into a variety of issues to be able to achieve a comprehensive study of the problems; a lot of constraint were encountered in form of data collection, lack of adequate information from the respondents. The main limitation of this survey was the difficulty in getting accurate information from the small, medium and large-scale entrepreneurs as well as unemployed and underemployed individuals in the country.

1.9   Definition of Terms

The following terms were used in the course of this study:

Economic development: is the growth of the standard of living of a nation’s people from a low-income (poor) country to a high-income (rich) economy. When the local quality of life is improved, there is more economic development. When social scientists study economic development, they look at a lot of things.

Entrepreneurs: is an individual who, rather than working as an employee, founds and runs a small business, assuming all the risks and rewards of the venture. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services and business/or procedures.

Entrepreneurship: is the process of designing, launching and running a new business, which is often initially a small business. The people who create these businesses are called entrepreneurs.

SMEs: Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ less than a given number of employees.