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CHAPTER ONE

INTRODUCTION

1.1     Background of the study

Small and Medium Enterprises {SMEs} as defined by the Central Bank of Nigeria, in its credits guidelines to banks, state that in the case of Commercial Banks, refer to business enterprises whose annual turnover not exceeding N500,000. In case of merchant Banks, they are enterprises with capital investment not exceeding N2 million {excluding cost of land} or with maximum turnover not more than N5 million (CBN 1993). The need for finding sources to provide adequate supply of fund is a prime concern to management of small-scale enterprises and in particular where to obtain the fund.

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 token, governments at various levels (local, state and Federal levels) have in one way or the other focused on the Small and Medium Enterprises. While some governments had formulated policies aimed at facilitating and empowering the growth and development and performance of the SMEs, others had focused on assisting the SMEs to grow through soft loans and other fiscal incentives.

International Agencies and Organizations (World Bank, United Nations Industrial

Development Organization (UNIDO), International Finance Corporation (IFC), United Kingdom Department For International Development (DFID), European Investment Bank (EIB) etc are not only keenly interested in making SMEs robust and vibrant in developing countries but have also heavily invested in them. Locally, the several Non Governmental Organizations such as Fate foundation, Support and Training Entrepreneurship Programme (STEP), the Nigerian Investment Promotion Commission (NIPC), the Association of Nigerian Development Finance Institutions (ANDFI), as well as individual Development Finance Institutions (DFIs) have been promoting the growth of SMEs in Nigeria through advocacy and capacity-building initiatives, and have continued to canvass for better support structures for operators in the SME sub sector (Basil, 2005).

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