Impact of Institutional Financing on the Performance of Small-scale Manufacturing Industries

Abstract on Impact of Institutional Financing on the Performance of Small-scale Manufacturing Industries

Various development finance institutions were established to alleviate the major problem of finance that small-scale industries face. Inspite of the intervention of such finance institutions, the performance of most small-scale industries, especially manufacturing, is not encouraging. This may be as a result of funds not adequate to gear-up their performance or their inability to utilise the funds towards the said goal. This research evaluates whether or not the funds from such development finance institutions increases the performance of small-scale manufacturing industries in Kaduna State, using profitability and working capital as indicators. To this end, financial statement of five small-scale manufacturing industries selected at random across the three senatorial zones in the state were made used of for the period of ten (10) years i.e. five years before financing and five years after financing. Two-sample t-test were used to test the hypothesis. It was found that the funds obtained from development finance institutions increases the profitability and working capital of the small-scale manufacturing industries in the state. It is recommended that small-scale manufacturing industries should embrace such funds from development finance institution to improve their performance for growth and development, and the government should provide interest-free loans tosmall-scale manufacturing industries to strength their performances.

Chapter One of Impact of Institutional Financing on the Performance of Small-scale Manufacturing Industries

INTRODUCTION

BACKGROUND OF THE STUDY

Financial institutions called development financial institutions DFI(S)

were established by the federal government with the specific and clear mandate of providing industrialists and entrepreneur with the required medium and long term finance in order to accelerate industrial development in Nigeria. These financial institutions are the Nigeria Industrial Development Bank (NIDB), Nigerian Bank for Commerce and Industry (NBCI), and the National Economic Reconstruction Fund, NERFUND, all of which have been merged to form the new Bank of Industry, BOI.

Industrial development, otherwise known as real sector growth which small-scale industries is the sub-sector of the real sector, remains the most important parameter for measuring a country’s level of economic development. Thus, industrial development is the bedrock of economic development of a nation.

Nigeria falls within the bracket of world’s underdeveloped countries. Over the years and since independence in 1960, successive governments have had to make conscious efforts aimed at pulling the country out of economic backwardness and stemming up economic development Philips (1987;3). Recognising the importance and significance of industrial growth in the scheme of overall economic development, government (both past and present) have had to embark on one form of economic blueprint or the other.

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