Advantages And Disadvantages Of Smes In Nigeria

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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Small and Medium Enterprises (SMEs) as defined by the US business Act of 1953 refer to business enterprises that is independently owned and operated and that isn’t dominant in its operation. One with fewer than five hundred employees. According to Bank of Ghana (2006) under the Funds for Small and Medium Enterprises Development defined small and micro enterprises as firms with assets (excluding land) of between 25million Ghana cedis and 5million Ghana cedis. A lot has been said and written about SMEs the world over. It has also formed the subject of discussions in so many seminars and workshops both locally and internationally. In the same vain, governments at various levels (local, state
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In a Consultant’s Report on Business Support in FCT Number 107, by David Irwin in March 2004 for DFID, it was stated on Page 5, paragraph 3.3 that “Governments all around the world now recognise the important contribution that small firms make to the economy- and many governments have established extensive support arrangement to help people start and grow their businesses. In Nigeria, hitherto, there has been no concerted effort to encourage and support new businesses”. Some others have argued that the bane of SMEs in Nigeria is the lack of long-term loans since most loans in the Nigerian market are short-term while what SMEs require to grow and become really successful is long-term patient capital. The death of venture capital financing in Nigeria has also aggravated the situation as venture capital provides long-term patient capital, which allows a small business to grow, as is the case in Ghana and some developed…show more content…
Stanley and Mose (1995) see indigenous base industrialization process as a means of mobilizing capital towards productive ventures. Due to low capital requirement, individuals can set up their own firms through their own resources, thereby, serving as means of mobilizing funds for economic activities. UNECA, focus on Africa Industries (1991) states that SMEs can make contribution to the technological base of a Country. This cue was taken from the USA where more than 40% of major innovations originate from small medium enterprises and individual investors.

Although assistance has been given to SMEs in Ghana, the sector has made relatively low contribution to the economic development of the Country, though some have made immerse contribution to the economy. According to Hug (1989) SMEs provide the bulk of the people employed in manufacturing in developing Countries. In Ghana about 70% of the total manufacturing employment is provided by the SMEs. A recent nation-wide survey of all industrial establishments by the statistical Service in (2003) reveals that the SMEs contribute about 97% and employ 46% of the total industrial labour
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