financial scheme established by fed.gov. to assist small business

he Scheme requires all banks in Nigeria to set aside ten (10) percent of their Profit After Tax (PAT) for equity investment and promotion of small and medium enterprises. The 10% of the Profit After Tax (PAT) to be set aside annually shall be invested in small and medium enterprises as the banking industry’s contribution to the Federal Government’s efforts towards stimulating economic growth, developing local technology and generating employment. The funding to be provided under the scheme shall be in the form of equity investment in eligible enterprises and or loans at single digit interest rate in order to reduce the burden of interest and other financial charges under normal bank lending, as well as provide financial, advisory, technical and managerial support from the banking industry. Every legal business activity is covered under the Scheme with the exception of trading/merchandising and financial services. Ten percent (10%) of the funds set aside has been earmarked for lending to microfinance enterprises. For details check the In terms of monetary authority support, the Central Bank of Nigeria introduced credit guidelines requiring commercial and merchant banks to allocate a portion of their loanable funds to small enterprises. A number of developmental financial institutions and schemes were also established to aid the development of the small and medium enterprises (SMEs) in the country. These included the 1. Nigeria Bank for Commerce and Industry (NCBI), Nigerian Industrial Development Bank (NIDB), the so-called Peoples Bank, the National Economic Reconstruction Fund (NERFUN), and the World bank SME I and SME II loan schemes. There were also export incentives from the Nigeria Export-Import Bank (NEXIM) to stimulate export loan facilities to SMEs, and export duty draw-back schemes administered by the Nigeria Export Promotion Council (NEPC). 2. Other incentive programs were technical in nature, such as the provision of manpower training, appropriate machinery selection and installation, machine repairs and maintenance, and extension services. These services were provided by institutions such as the Industrial Development Centers (IDCs) the Center for Industrial Research and Development (GIRD), the Center for Management Development (CMD), Project Development Agency (PRODA) and the Raw Materials Research and Development Council (RMRDC). 2. Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) This body was established to promote the development of micro, small and medium Enterprises (MSME). Its mission is to facilitate the access of micro, small and medium entrepreneurs/investors to all resources required for their development. Its vision is to establish a structured and efficient micro, small and medium enterprises sector that will enhance sustainable development of Nigeria. If SMEDAN functions optimally it will be one of the most veritable channels to combat poverty. Like any other agency of its kind, harsh economic condition couple with week government institutions does not help its performance. Summary of SMEDAN functions • Stimulating, Monitoring and Coordinating the development of the MSMEs sector, • Initiating and articulating policy ideas for micro, small and medium enterprises growth and development, • Promoting and facilitating development programmes, instruments and support services to accelerate the development and modernization of MSME operation. • Serving as vanguard for rural industrialization, poverty reduction, job creatioin and enhance sustainable livelihoods. • Linking SMEs to internal and external sources of finance, appropriate technology, technical skills as well as to large enterprises. • promoting information and providing access to industrial infrastructure such as layouts, incubators, industrial parks. • Intermediating between MSMEs and the Government. SMEDAN is the voice of the MSMEs. • Working in concert with other institutions in both public and private sectors to create a good enabling environment of businesses in general, and MSME activities in particular 3. National Poverty Eradication Programme (NAPEP) This programme aimed at poverty eradication and empowerment. There are four major intervention schemes in Nigeria’s current poverty eradication programme. One is Youth Empowerment Scheme (YES), it is targeted at youth. YES is more than employment scheme as it is aimed at the provision of training opportunities, skills acquisition, employment opportunities, wealth creation through enhanced income generation, improved social status and rural development. It is primarily aimed at the economic empowerment of Nigerian youths. Its impact is still below expectation. 4. Micro Finance Institutions (MFIS) These financial institutions are set up to meet the credit needs of the rural and urban poor, artisans, farmers, petty traders, vulcaniser, etc. CBN gave a directive to all erstwhile community Banks to convert to MFls by recapitalizing to meet the new guidelines for the setting up of MFls. One of the challenges microfinance face in Nigeria is that they do not reach to great number of poor Nigerians. The effect of not appropriately addressing this situation would further accentuate poverty and slow down economic growth and development. 5. Small and Medium Industries Equity Investment Scheme (SMIEIS) The Scheme requires all banks in Nigeria to set aside ten (10) percent of their Profit After Tax (PAT) for equity investment and promotion of small and medium enterprises. The 10% of the profit After Tax (PAT) to be set aside annually shall be invested in small and medium enterprises as the banking industry’s contribution to the federal governments efforts towards stimulating economic growth, developing local technology and generating employment. Activities covered by the scheme include all legal business activity with the exception of trading/merchandising and financial services. Beneficiaries are expected to comply with guidelines of the scheme and ensure prudent utilization of fund. Like its other counterparts its performance is still below expectation. Such support programs and initiatives have had varied levels of success in different countries around the world. In Korea for instance, public policies were found to be instrumental in the development of the SME sector and the industrialization of the country. But in Singapore this was not found to be the case (Regnier, 1998). In light of the difficult economic conditions and business climate in Nigeria, and the fact that the support initiatives were principally a response to such conditions, it would seem reasonable to expect the intended recipients would patronize these initiatives. Correspondingly, one would expect a positive effect on the performance of supported firms. The effectiveness of the enterprise support programs and initiatives in Nigeria over the period of economic decline remains unclear. Accordingly, the present study will explore three hypotheses concerning whether support is received, how much support is received, and the form of the support that is received: