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The purpose of this study was to
establish the relationship between the contributions of insurance companies and
the growth of SMEs in NIC basing on the following objectives; to examine major
factors that affects the growth of SMEs; to assess the contribution of
insurance companies to the growth of SMEs; to investigate the factors
inhibiting the purchase of insurance cover by SME operators and to determine
the strength of the relationship between insurance companies and growth of
The research was descriptive in nature
involving quantitative methods which was administered through questionnaires.
The total sample comprised of 65 respondents of all the managers and employees
of NIGER INSURANCE CORPORATION. Simple random sampling was used whereby the
researcher went to NIC and administered questionnaire to the sampled or
selected employees. Primary data was obtained from the library materials,
textbooks, NIC brochures, internet and journals. Data analysis was carried out
using SPSS and frequency distribution tables.
Findings revealed that innovation is a
strong empirical evidence for fast growing SMEs, competition has a great effect
on SMEs industry and credit remains a great challenge to the growth of SMEs.
Besides that insurance companies mitigate risks and enhance loan acceptability
by SMEs sector with banks. However low income earned by SMEs, high premium cost
and paperwork and experience and beliefs inhibit the purchase of insurance
cover by SMEs. Nevertheless, there is a strong positive relationship between
insurance companies and the growth of SMEs at Spearman Correlation Coefficient.
It was concluded that improvement in
business skills increases the performance of SMEs. However insurance companies
do not lowers insurance rates and offer protection to SMEs income statements.
In addition SMEs being small in size and their inability to fully understand
the document limits them to get insurance cover. It was recommended that
management of NIC need to build a great relationship with SMEs as their
customers in orders to develop and grow them in trust and also lower the
premium rates to SMEs in order to improve on their performance. Also NIC need
to have a fresh look at the scope and spectrum of services provided to SMEs and
has a better understanding on the scale of enterprise sector.
1.0 Background of the Study
The substantial growth of small and
medium enterprises (SMEs) activity clearly marks SME as one of the most
remarkable economic phenomena. SME is a business that is privately owned and
operated with a small number of employees and relatively moderate volume of
sales. The definition of SMEs varies from country to country depending on the
level of development and the strength of the economy. The lower limit for small
scale enterprises is set at between five and ten workers and the upper limit is
set at between fifty and one hundred workers. The upper limit for medium scale
enterprises is set between one hundred and two hundred and fifty workers
In Nigeria there are approximately
1,069,848 SMEs currently in operation and they comprise over 90% of the private
sector. They contribute to employment, provision of basic goods and services,
and generation of export and tax revenues for national socio-economic
development. Their Gross Domestic Product (GDP) contribution to the economy is
75% and they employ about 2,500,000 nationals. The location of these SMEs is
mostly in urban areas with 80% located therein. They operate business like
restaurants, accountants, hairdressers, conveniences stores and guesthouses
On the other hand insurance is a contract
by which one party undertakes in consideration of a payment called premium to
secure the other against pecuniary loss by payment of a sum of money in the
event of destruction or damage to property, fire, accidents or death of a
person. Economy, investment and finance reports (2010) defines insurance as a
policy from a large financial institution that offers a person, company, or
other entity reimbursement or financial protection against possible future
losses or damages. An insurance contract is an agreement by which the insurer
promises, from a premium or assessment, to make a payment to a policy holder or
a third person if an event that is the object of a risk occurs. SMEs often face
a variety of problems related to their size. Frequent causes are bankruptcy,
theft, fire, death, automobile accidents and workers injuries.
Statement of the problem
the contribution of insurance corporations to the growth of SMEs in economic
development, failure and slow growth still exists and the public doubts its
management (Ocici, 2007). Research suggest that 80% of the businesses affected
by major incident close down within 18 month, and 90% of those who lose data
close down within 2 years. This is due to the failure of small businesses to
have adequate insurance cover and proper business continuity plans (cover sure,
2007). However literature has shown that insurance companies are not willing to
insure SMEs and it was the aim of this research to establish whether a
relationship between these two variables exists.
Objective of the study
main objective of the study was to investigate the contribution of insurance
companies in the growth of SMEs in Nigeria.
The study also sought:
examine major factors that affects the growth of SMEs.
assess the contribution of insurance companies to the growth of SMEs.
investigate the factors inhibiting the purchase of insurance cover by SME
determine the strength of the relationship between insurance companies and
growth of SMEs.
are the major factors affecting the growth of SMEs?
contributions do insurance companies responsible for the growth of SMEs?
factors inhibit SME operators from purchasing insurance cover?
strong is the relationship between insurance companies and growth of SMEs?
Purpose of the study
The study established the contribution of
insurance companies and the performance of SMEs in Nigeria.
1.5 Scope of the study
The study focused on Insurance companies
in Nigeria- NIGER INSURANCE CORPORATION Limited (NIC) which is an insurance
company in Nigeria. The company is a leading provider of insurance and risk
management services with 19 branches spread throughout the country (Robinson,
The study focused on the efforts that are
made by National insurance company to raise the growth of SMEs. Contribution
that insurance companies play in the growth and development of SMEs and the
relationship between insurance companies and SMEs was also studied. The study
targeted the employers and employees of NIC.
1.6 Significance of the
It’s through only research that ideas and
approaches will be developed and tested. This research will generate
information to be used as basis for further research in to the contribution of
insurance in other business segments.
The study will increase public awareness
on the operations of NIGER INSURANCE CORPORATION hence making it convenient for
the public when dealing with the corporation.
This research will provide data to policy
makers that will assist towards formulating for appropriate policy for policy
makers operation. This will permit specific plans and policies geared towards
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