EFFECT OF CREDIT SERVICES/FINANCE ON FEMALE ENTREPRENEUR PERFORMANCE
- BACKGROUND TO THE STUDY
The necessity for finance as a tool for economic activities cannot be over emphasized. It is a necessary tool for the purchase and acquisition of knowledge, wealth, and skill among others. Nevertheless, the ability to possess adequate financial facilities has been a problem to female entrepreneur businesses and the society as a whole.
Small and medium scale enterprises in Nigeria constitute about 70 percent of industrial establishment, account for 70 percent of industrial employment and between 10 – 15 percent of manufacturing output (Central Bank of Nigeria (CBN), 2000). Specifically, small businesses provide the most viable option for attaining the current development strategy which seems to be targeted at reduction and alleviation of poverty, establishment of rural industrialization, solution to decades of persistent unemployment and provision of sustainable livelihood (Okorie, 1982). They also provide opportunity for product innovations and services, and development of local skills and technology acquisition through adaptation.
Entrepreneurship has been regarded as a major contributing factor to the economic growth and poverty alleviation both in urban and rural areas. Organizations for
Economic Co-operation and Development (OECD) reports indicate growing phenomena of women entrepreneurship both in developed and developing countries. In some countries, women-owned businesses are increasing at a very rapid pace in terms of both numbers and turnover. Women entrepreneurs have increasingly become a key target group for financial institutions and microfinance
programmes. Providing access to financial institutions is not only considered a precondition for poverty alleviation, but also for women’s empowerment.
Evidence from the millions of microfinance clients around the world demonstrates that access to financial services enables poor people to increase their household incomes, build assets, and reduce their vulnerability to the crises that are so much a part of their daily lives. Access to flexible, convenient, and affordable financial credit facilities empowers and equips the female entrepreneur to make their own choices and build their way out of poverty in a sustained and self-determined way.
In Nigeria Small businesses need adequate capitalization to develop new products and services, required for sustainable economic development. Unlike publicly quoted firms, small firms cannot access traditional capital market funds using standard capital market instruments like stocks and bonds (Aug, 1991). Instead small firms, particularly in Nigeria, depend heavily on personal loans from friends and relatives, supplier’s credit, institutional loans facilitated by international financing agencies, national and state governments and bank loans to finance their operations.
Women are now becoming a growing force in various sectors within their economies, reports around the world show women‟s compelling contribution to business and economic activities in their countries (Welter et al., 2006; Carter et al., 2007). Moreso, many women have taken up business ownership and are exploiting entrepreneurial opportunities as a means of generating an income and sidestepping the harsh reality and discriminatory practices inherent in the corporate sphere. This is because entrepreneurship provides women with unique solutions in overcoming poverty and balancing work and family commitments (Woldie and Adersua, 2004; Kirk and Belovics, 2006). Female entrepreneurial activities, not only empowers them as economic agents but also enables them to contribute more to the overall development of their nations. For example a UNIDO report in 2001 stresses the wider social impact of female entrepreneurial activity not only to the women themselves but to the wider environment in which they operate (UNIDO, 2001).
Consequently female entrepreneurs are now seen to attract considerable amount of attention as a subject of academic debate in their own right .According to Verheul et al. (2006), the interest is attributable to the fact that female entrepreneurs are now considered important forces in economic development of their nations. This is not surprising as more than ever before, many women have been forced into alternative avenues of generating an income, with a greater number of women setting up in business to balance work and family commitments, women are also reported to be in charge of majority of activities in Africa. Female own and operate around one-third of all businesses in the formal sector, and they represent the majority of businesses in the informal sector (Bardasiet al., 2007; Aderemiet al., 2008). Empowering women by promoting female entrepreneurship tends to be associated with both economic and social gains. Because they make up more than half of the population, encouraging women in the business sector has a potential to enlarge the productive capacity of a nation by just adding into the number of business firms. This would tap into their seemingly higher propensity to start a business.
Women-owned businesses are making significant contributions to the Nigerian economy. Their businesses account for about one-half (48 percent) of all micro, small, and medium-sized enterprises (MSMEs); and contribute around 20 percent to Nigeria’s Gross Domestic Product (GOK, 2013). As such, they have been identified as the engine for economic growth and technological innovations. Consequently, the Nigerian government has put in place interventions geared towards improving the business environment through appropriate policy frameworks.
Although women make up 49% of the population, they have remained in the bottom 30% as the poorest citizens, and while the Nigerian constitution recognizes the principle of equal pay for equal work without discrimination on account of sex and seeks to eliminate discrimination on any ground in employment matters, Nigerian women consistently encounter informal discrimination in employment, this stems from traditional attitudes and perspectives about how women should be regarded by a male-dominated society, Yet, female productive activity, particularly in industry empowers them economically and enables them to contribute more to overall development. Whether they are involved in small and medium scale activities in the informal or formal sector, female entrepreneurial activities are not only a means for economic survival but also have a positive social repercussion for the women themselves and their social environment, In-spite of such remarkable reports, the reality of the situation in many African and transition economies is that female entrepreneurs consistently struggle and remain dormant.
It is against this backdrop, that this research study tends to examine and determine theeffect of Female Entrepreneur in small scale business, their access to credit facilities, including their performancesin the micro and small enterprise sector of Nigeria
1.2. STATEMENT OF PROBLEM
Women owned enterprises in the Micro and Small Enterprise sector have been identified as the engine for economic growth and technological innovations in developing countries. Consequently, the Nigerian government has put in place interventions geared towards improving the business environment through appropriate policy frameworks.
However, these businesses continue to be dodged with myriad of constraints which include lack of appropriate technology, access to market information, credit, business management skills and rigid legal and regulatory framework among others.
The Nigerian government and international organizations have devised programs to improve female entrepreneurs‟ financial situation, and yet neither their livelihoods nor their economic fortunes have improved from their substantially small businesses. Over sixty million Nigerian females are entrepreneurs but they do not have a reasonable income, albeit they have to break a heavy sweat and with a bit of luck, they make about 10 dollars a day, enough to live on.
Furthermore, Banks generally categorise small businesses as high credit risk. They therefore impose tough loan conditionalities when lending to small businesses to minimize the inherent credit risk exposure. Land and real estate are the most valued assets for loan accommodation in Nigeria. Unfortunately, Nigerian women are constrained by socio-cultural factors from owning land. They therefore, experience difficulty in accessing land to be pledged as collateral for bank loans. This condition often prevents most women businesses from accessing available loan facilities in banks. It even discourages them from applying for bank loans in the first instance. Women businesses which muster courage to apply are furthermore expected to demonstrate track of profitability as additional precondition for loans to be approved.
In addition, banks generally demand loan applicants to provide convincing feasibility studies and attractive business plans in which many female small business loan applicants are unable to meet, thus this demand is very cumbersome for mostly small business owners but more cumbersome for women especially where such women are less educated than men. Education and training provide added expertise and competence in business management. It enhances the chance of meeting the demand of bank for feasibility studies/business plans. Banks normally demand financial statements of a business in order to ascertain the financial condition of a prospective loan applicant firm, As a result of this available information on the financial condition, earnings, and earnings prospects of small firms are generally incomplete or out rightly inaccurate. Faced with this type of uncertainty, a lender may sometimes be induced to deny credit to female SMEs that are otherwise credit worthy.
These constraints faced by women entrepreneurs are aggravated by the need to compete in an aggressive business environment with rapid technological changes, globalization of production, trade and financial flows and intense competition both locally and internationally. Strategies are therefore needed to support women run and manage viable business enterprises. The limited access to informal and formal credit by women entrepreneurs has been identified by numerous studies as the major constraint.
1.3 OBJECTIVES OF THE STUDY
The general objective of the study was to examine the factors influencing access to credit services by female entrepreneurs and it effect on their performance in Osun State.
The study aimed to achieve the following specific objectives:-
- Investigating how the financial sector influences performance of Female entrepreneurs in Osun State.
- Determining impact of legal and legislative factors on performance of female microEntrepreneurs.
- Examine how collateral requirements hinder access to credit services women entrepreneurs in Osun State.
- Establish how lending procedures hinders access to credit services by women entrepreneurs in Osun State.
- Determine the challenges encountered by female entrepreneurs in access to finance when starting or expanding their SMEs business venture.
- Examine the leadership styles adopted in enhancing firm performance.
1.4. RESEARCH QUESTIONS
In order to achieve the overall aim of the study, we seek to provide answers to the following questions:
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