Effectiveness of microfinance sources on the profitability of enterprise clusters in south east, nigeria

Thesis Overview

<p> </p><p><strong>INTRODUCTION</strong></p><p><strong>1.1 &nbsp; &nbsp; Background of the Study</strong></p><p>The impact of manufacturing industry in every<br>economy cannot be overemphasized as it goes a long way to enhance production,<br>create jobs, reduce imports, increase exports and hence increase National<br>revenue and income. In Nigeria, the growth pattern has been quite sluggish over<br>the last decades. This fact is connected to the high increase in the level of<br>poverty, which is further exacerbated by the pandemic problem of low<br>productivity (Sulaiman, 2005). Nigeria as a nation is blessed with both human<br>and material resources, but Maduagwu (2000) posits that poverty in the midst of<br>abundance is a popular paradox characterizing the Nigerian economy. According<br>to the Central Bank of Nigeria (CBN) (2006), foreign exchange inflow and<br>outflow through the Central Bank of Nigeria amounted to United States (US)<br>$3.25 billion and US $ 1.16 billion respectively resulting to net inflow of US<br>$2.09 billion. Despite this huge amount of foreign reserves, Nigerian citizens<br>suffer from widespread poverty.</p><p>Micro enterprises have been referred to<br>as the arm of the industry that could be used to reach out to relatively low<br>scale investors and develop the home industries. The roles of micro enterprises<br>cannot be overemphasized in economic development, accordingly, Chibundu (2006),<br>states “it is encouraging to note that research findings and empirical<br>evidences show that significant poverty reduction is possible and has occurred<br>in many countries where micro enterprises are encouraged”. They stimulate<br>private consumption, ownership and entrepreneurial ability; generate<br>employment, help diversify economic activities and make significant<br>contribution to export and domestic trade while utilizing local raw materials.</p><p>Micro<br>and Small Enterprises (MSEs) are globally acknowledged as a potentially<br>critical economic sector. They contribute about 30 per cent of global Gross<br>Domestic Product (GDP) and account for about 58 per cent of global working<br>population (Kushnir, Mirmulstein, and Ramalho, 2010). They are<br>numerically dominant, providing the majority of employment and are the prime<br>sources of new jobs. They play a critical role as safety net for the bulk of<br>the population in developing economies including Nigeria. In addition, they<br>provide amenable avenue for creating new jobs in the economy.</p><p>In Nigeria, the<br>Corporate Affairs Commission (CAC) estimates that about 90% of all Nigerian<br>businesses in 2007 employed less than 200 persons. From the cluster<br>development programme in Eastern Nigeria, that is, administrative and<br>infrastructure costs’ survey of the manufacturing sector (Abia and Anambra<br>States), prepared by Skoup and Company Ltd for the International Finance<br>Corporation and the World Bank, February 2003, Nigeria envisions MSEs<br>sector that can deliver maximum benefits of employment generation, wealth<br>creation, poverty reduction and sustainable economic growth. Towards realizing<br>this goal, the Nigeria’s Vision 20:2020 advocates measures to enhance the<br>ability of MSEs to compete effectively in local, regional and global markets, through<br>increased productivity, greater technological efficiency and reduced cost of<br>doing business. In this context, growth and competitiveness of MSEs are,<br>therefore, the key objects of the national policy on MSEs. In the same vein,<br>the national policy seeks to enhance MSEs’ contribution to GDP and employment<br>and realize its potentials as a principal determinant of the prospects for the<br>growth and sustainability of Nigeria’s non-oil economy. </p><p>One<br>of the major achievements towards MSEs development in Nigeria is the<br>institutionalization of a policy regime that is stable, supportive and<br>consistent with national economic reform agenda – the Vision 20:2020, New<br>Partnership for Africa Development (NEPAD) of the African Union (AU) – as well<br>as being geared towards realising the United Nations’ Millennium Development<br>Goals (MDGs). For the above to be achieved, there is the need to remember that<br>we live in a globalizing and<br>increasingly interdependent world. For developing countries like Nigeria,<br>dependence on rich nations remains a stark fact of economic life. At the same<br>time, the developed world, which once prided itself on its apparent economic<br>self-sufficiency, has come to realize that in an age of dramatically increased<br>capital flows, diminishing natural and mineral resources, global environmental<br>threats, accelerated international migration, bourgeoning world trade in<br>manufactured products and services, and new forms of geopolitical tensions, it<br>is becoming even more economically dependent on the developing world.</p><p>The same applies to industries. They will<br>need to relate with one another at the national, regional and international<br>levels in achieving the specific objectives and broad goals of trade, economic<br>growth and development; hence, the popular industrial and labour maxim – “Industrial<br>Relations for Industrial Growth and Development”. Isolation and barriers have never worked to<br>develop prosperity. According to Amobi (2006), they have been the key obstacles<br>preventing MSEs to boost their<br>competitiveness. To the United Nations Industrial Development Organisation (UNIDO)<br>(2006), “Firms or enterprises that have come together as a group (forming a<br>cluster) and which are located in close proximity have proved to be capable of<br>rapid economic growth, sustainable leadership in export markets, significant<br>employment generation and preservation of high-value added jobs”. Equally,<br>studies from both developed and developing countries have shown that MSEs cluster development provides for economic<br>development, poverty reduction and social equity (UNIDO, 2006).</p><p>The potentially networking gains of clustered<br>firms or enterprises have led to the view that clusters offer a specific path<br>of regional, industrial and economic development, as well as the possibilities<br>of technical innovation and growth. Clusters are also considered particularly relevant<br>to developing countries since they motivate significant policy initiatives<br>within industrial development strategies. This has fostered a growing academic<br>literature on clusters (Markusen, 1996; Scott, 1998; Malmberg, 1996 and 1997;<br>Nadvi and Schmitz, 1999; Todaro and Smith, 2009).</p><p>From available literature, it is agreed<br>that providing a microfinance framework targeted at these clusters will create<br>a more sustainable model to cushion the fears of conventional banking<br>institutions who would rather not lend money to individual firms. This would then cultivate high confidence level<br>by the emerging microfinance institutions that are now expected to grant micro<br>credits to such target markets on enterprise clusters.</p><p>Over the years, the Nigerian government<br>has embarked on series of policies and institutional reforms aimed at enhancing<br>the flow of finance from the banking system to Small and Medium Industries<br>(SMIs) as well as those involved in the petty-business (micro) activities at<br>the informal level. The much talk on the need for government, financial<br>institutions, corporate organizations and government agencies to support the establishment<br>and development of the small enterprises subsector has its merits and demerits.<br>Although, it is not an indication that small business operators should fold<br>their arms and wait for the almighty handout from these agencies, either in the<br>form of loans or grants, getting such support could go a long way to transforming<br>the small business landscape in a number of ways and also help to strengthen<br>the economy of the nation.</p><p>According to Amagwu (2006), the focus of<br>microfinance has been on the poor in the society and the rural populace who are<br>believed to be the most vulnerable. He opines that, making micro finance<br>available to this group of people would not only guarantee that they are in a<br>sustainable employment but also contribute to the economic wellbeing of the<br>nation. In line with this argument, existing community banks were mandated to<br>upgrade to microfinance banks. They had to raise the minimum share capital or<br>shareholders’ funds of one unit bank from N5<br>million to N20 million with effect from<br>September, 2006. The minimum capital of N20<br>million, according to Godwin (2007), was to be deposited with the bank’s formal<br>application before it can be issued a unit bank operating licence. New<br>investors into this area were encouraged to do so. Individuals, co-operative<br>societies, corporate organizations, groups, investors are free to go into this<br>area of investment.</p><p>Every year, the government at federal,<br>state and even local and development centres through budgetary allocations, policies<br>and pronouncements express strong interest and appreciation of the crucial role<br>of this sub-sector of the economy and hence, made policies for energizing same.<br>Even local and international donor agencies have been inundated with requests<br>from non-governmental agencies and organized private sector associations for<br>grants and other forms of assistance to the sector.</p><p>With the above interventions, it is<br>necessary to ascertain whether there have been some achievements (positive or<br>negative) among these MSEs in the South East Nigeria, following the various pronouncements by the<br>governments. Among the group of people in South-Eastern Nigeria are the<br>artisans, petty-traders, subsistence farmers, fishermen, traders, local textile<br>producers, intra-city transporters, cobblers etc. These people in the South<br>East, Nigeria region are found within the industrial clusters at Nnewi,<br>Onitsha, Aba and other rural but emerging locations in the region.<br>Interestingly, these clusters have the advantage of proximity to several<br>industrial raw materials which makes it possible to produce associated<br>semi-finished or finished goods cheaply. Thus, this study is expected to find<br>how effective microfinance from both formal and informal sources affect the<br>profitability of these micro and small enterprises.</p><p><strong>1.2 &nbsp; &nbsp; Statement of the Problem</strong></p><p>The performance of Micro and Small Enterprises (MSEs)<br>in Nigeria, particularly in the South East has been affected by so many<br>problems like poor infrastructure (that is, inadequate power supply, bad roads,<br>and poor transportation system), financial access, poor corporate governance,<br>insecurity and the hostile legal framework. At the core of these problems is<br>that of access to finance due to the fact that the people are mostly informal<br>operators. Hence, the conventional commercial banks and other formal financial<br>arrangements shy away from extending credit facilities to the sector. Consequently,<br>majority of the operators resort to informal sources like family and friends, <em>Isusu</em>, cooperative societies, trust fund<br>model and informal saving groups. Unfortunately, these sources have limitations<br>in ensuring effective contribution of micro enterprises to economic growth and<br>sustainable development.</p><p>MSEs in Nigeria have not performed optimally and, hence,<br>have not played the expected vital and vibrant role in the economic growth and<br>development of Nigeria, particularly in the South East region (CBN 2008). This<br>situation has been of great concern to both government and the Organized<br>Private Sector (OPS) at various levels considering the fact that over 70% of<br>the Nigerian population are found in this category.</p><p>Despite the apparent significance<br>associated with these enterprises and the numerous policy initiatives<br>introduced by government in the past decade to accelerate the growth and<br>survival of small businesses, the performance has been disappointing. A study conducted<br>over thirty years on micro enterprises in the Eastern Region of Nigeria found out<br>that half of the MSEs in Nigeria do not<br>survive beyond a tenth of a century. The alarming rate of business failure<br>gives the Nigerian economy cause for concern and has made unemployment reach an<br>embarrassing level. This loss of employment opportunity has led to frustration,<br>insecurity and uncertainty about the future due to low performance of the<br>existing micro enterprises in Nigeria hence, the prevalence of chronic poverty.</p><p>According to the Manufacturers<br>Association of Nigeria (MAN), more than 100,000 jobs have been lost between<br>2001 and 2007 due to continuous closure of small businesses. Small businesses<br>in Nigeria at present experience a lot of problems and hardship. These<br>bottlenecks include serious undercapitalization with difficulty in gaining<br>access to bank credits and other financial markets, corruption and very high<br>bureaucratic costs and government seeming lack of interest in small businesses.<br>All these have great damaging effects on the economy. Furthermore, inconsistencies<br>in government policies, natural disasters, and global economic downturn<br>combined to ensure the dwindling growth of micro enterprises in Nigeria. These<br>dwindling performances have necessitated this study which is geared towards<br>assessing the extent to which micro enterprises help in poverty reduction<br>despite dismal performance in Nigeria.</p><p>Of greater concern to all stakeholders<br>is the fact that despite the acclaimed strong focus on this critical segment of<br>the economic foundation by policy makers, the sub-sector has fallen short of<br>expectations in terms of profitability and thus employment generation. The<br>situation becomes more scaring when compared with other developing economies<br>with similar profile in human and material resources like Nigeria. It has been<br>shown in the literature that there is a high correlation between the degree of<br>poverty, hunger, unemployment, economic well-being of the citizens of nations<br>and the effectiveness of the MSEs in the economic activities of the nation. If<br>Nigeria were to record a significant success towards attaining the Millennium<br>Development Goals (MDGs) for 2015, it would be important to vigorously pursue<br>the development of the micro and small scale enterprises sub-sector of the<br>economy. Attainment of the MDGs by 2015 may indeed be a mirage unless the micro<br>and small scale enterprises participate actively and effectively in the<br>economic life of our nation.</p><p>Micro enterprises have been described as<br>an engine of economic empowerment and growth. MSEs are not just job creators but creators of wealth in<br>the society. While it has been argued that a small business can only make a<br>minor contribution to the economy as a result of its size, many micro enterprises<br>can make substantial contributions collectively. For example, according to data<br>from the European Observatory (CBN 2008), SMEs employing up to 250 people<br>accounted for 68 million jobs in the European Union in 1995. Again, available<br>data from some African countries shows that in 2003, small enterprises in Kenya<br>employed 3.2 million people, accounting for 18% of the national GDP. In Nigeria,<br>according to Manufacturers Association of Nigeria (MAN), small enterprises are<br>the backbone of the economy; they account for 95% of formal manufacturing<br>activities and 70% of Industrial jobs.</p><p>Though lack of capacity, inadequate<br>coordination and synergy, poor networking, isolation, lack of detailed<br>articulation of stakeholders roles in the sector operations and policy shortfalls<br>have been identified as major problems of the sector, at the center of it all<br>is lack of access to formal credits. According to CBN (2008), less than 5% of<br>total credits to the private sector were allocated to micro and small scale<br>enterprises. It is therefore evident that MSEs do not have adequate access to<br>formal credit facilities and this situation had restricted the sector to<br>informal financing through traditional credit supports like <em>Isusu</em>, trade credits, cooperative<br>societies, market associations, Non-Governmental Organizations (NGOs),<br>government grants and interventions, etc.</p><p>The inadequacies in these forms of<br>credit facilities like reliability volume, training, standards, spread and<br>repayments have limited the performance of such enterprises and hence, their poor<br>contributions to the economic growth and development of the industrial clusters<br>in the South East and the nation as a whole.</p><p>The introduction of micro finance banks<br>by CBN in 2005, associated microfinance institutions, microfinance institutions<br>and development finance institutions have not bridged this gap of inequality in<br>credit accessibility in Nigeria after close to 10 years of their operations. It<br>becomes imperative to evaluate the effectiveness of both the formal and informal<br>sources of microfinance to Micro and Small Enterprises (MSEs), especially in<br>the South East of Nigeria. It is therefore believed that understanding these<br>micro credit problems and providing practical solutions for them would be the<br>right step towards making micro and small scale enterprises contribute<br>effectively towards growth and development of the industrial cluster in South<br>East, Nigeria and the nation as a whole, like their counterparts in other<br>countries. </p><p><strong>1.3 &nbsp; &nbsp; Objectives of the Study</strong></p><p>The<br>major objective of the study is to evaluate the effectiveness of the<br>microfinance sources on the profitability of Micro and Small Enterprise (MSE) clusters<br>in South East, Nigeria.</p><p>The<br>sub-objectives are:</p><ul><li>To assess the impact of formal<br>microfinance sources on the profitability of enterprise clusters in South East<br>of Nigeria,</li><li>To ascertain the impact of informal<br>microfinance sources on the profitability of enterprise clusters in South East<br>of Nigeria,</li><li>To examine the determinants of the<br>choice of the microfinance source by enterprise clusters in south East,<br>Nigeria,</li><li>To assess the level of support of microfinance<br>providers for the sustenance of profitability of enterprise clusters in South<br>East, Nigeria.</li></ul><p><strong>1.4 &nbsp; &nbsp; Research Questions</strong></p><p>The<br>following are the research questions:</p><ol><li>To what extent do the formal microfinance sources affect<br>the profitability of enterprise clusters in South East of Nigeria?</li><li>&nbsp;To what extent do the informal microfinance<br>sources affect the profitability of enterprise clusters in South East of<br>Nigeria?</li><li>What are the determinants of the choice<br>of the microfinance sources by enterprise clusters in South East, Nigeria?</li><li>How much is the level of support of<br>microfinance providers for the sustenance of profitability of enterprise clusters<br>in South East, Nigeria?</li></ol><p><strong>1.5 &nbsp; &nbsp; Research Hypotheses</strong></p><p>The<br>following research hypotheses are presented in their null forms.</p><ol><li>There is no significant impact of the formal microfinance sources on the profitability of Micro and Small Enterprise clusters in South East of Nigeria,</li><li>There is no significant impact of the informal microfinance sources on the profitability of enterprise clusters in South East of Nigeria,</li></ol><ol><li>There exist no significant determinants (i.e. amount, interest, extent of protocols including collateral availability, relationship with the provider) of the choice of microfinance sources by enterprise clusters in South East, Nigeria,</li><li>There is no high involvement of the microfinance providers for the sustenance of profitability of enterprise clusters in South East Nigeria.</li></ol><p><strong>1.6 &nbsp; &nbsp; Significance of the Study</strong></p><p>The<br>significance of this study cannot be overemphasized. It is so significant in the sense that;</p><ul><li>It will help to<br>expose the various micro financing strategies employed in the development of<br>industrial clusters in Nigeria, with particular interest in the South-Eastern<br>part of the country. In addition to the<br>above, it will help in examining the strengths and/or weaknesses and relevance<br>of these micro credit strategies to the development of the industrial clusters<br>in Nigeria, particularly, in the South East.</li><li>Since the microfinance<br>supports for the development of industrial clusters in Nigeria, with particular<br>interest in the South East cannot be effectively/efficiently carried out<br>without active participation of stakeholders, the study will therefore help to<br>ascertain the contributions of various stakeholders, and their levels of<br>commitment in terms of relationship and willingness in ensuring that the goals<br>and objectives of the micro credit supports for the development of industrial<br>clusters in Nigeria, particularly in the South East are actualized. Informal<br>micro financing sources are (a) Esusu (b) Self Help Group Contribution (SHGC)<br>(c) TFM – Trust Fund Model, (d) family and friends, (e) Non-Governmental<br>Organizations (NGOs) (f) others</li><li>The study will<br>bring to the knowledge of the major stakeholders in the development of<br>industrial clusters and MSEs in Nigeria,<br>i.e. the government, the microfinance banks, the micro-business operators<br>themselves, the national and international donor/aid agencies etc., the<br>efficacy of establishing and developing industrial clusters in the country, the<br>kind of impact (negative or positive) the industrial clusters development would<br>make on the economy, which eventually will enable them formulate favourable and<br>positive policies and implement fully the developed strategies that would help<br>the micro credit scheme, aimed at eradicating poverty achieve its goals and<br>objectives. </li><li>Finally, this<br>study will help to add to the already existing literature, especially in the<br>developing counties, which Nigeria is part of, and this will surely serve as a<br>reference material for scholars who may want to embark on further studies on<br>this subject matter or those related to it.</li></ul><p><strong>1.7 &nbsp; &nbsp; Scope of the Study</strong></p><p>This study focuses mainly on the impact of microfinance<br>sources on the profitability of Micro and Small Enterprises (MSEs) in Nigeria with<br>particular interest in the South-East, Nigeria using Micro and Small Enterprise<br>(MSE) clusters at Onitsha, Aba, and Nnewi. Profitability as a key objective of<br>every business is measured by return on investment. Micro enterprises would be<br>the target group based on the objectives and the information required from the<br>questionnaires. The study covers the period between 2013 and 2014.</p><p><strong>1.8 &nbsp; &nbsp; Limitations and Structure of the Study</strong></p><p>Like<br>all other studies, this study witnessed its own circumstantial difficulties.<br>The main fact that the study employed primary survey analysis that warranted<br>fieldwork and questionnaires introduced all the challenges that go with it.<br>First of all, the timing of the fieldwork <em>vis-à-vis</em><br>the study programme was a major concern as the rainy season could be a major<br>hindrance to the field survey. There was,<br>therefore, the need to situate the field survey in a dry and friendly season in<br>order to ease the distribution and collection of the questionnaires.</p><p>The<br>fieldwork itself had issues like every other field which include; reliability<br>of the information given, reliability of the enumerators amongst others. This<br>was however lessened with the degree of supervision and monitoring of the<br>survey. Nevertheless, this study faced peculiar issues due to the nature and<br>occupation of the respondents. The respondents (business men) had no time to<br>respond to the questions and the few that were able to respond, were still not<br>very patient and needed a lot of persuasion. The respondents were also very<br>skeptical about the use of the data. Some of them feared that the fieldworkers<br>were actually tax officials who were sent as spies. The respondents were<br>equally very nonchalant about the documents as they opined that the government<br>had done little or nothing in the past and that that was just another paper<br>framework.</p><p>Also,<br>the fieldwork was very expensive. It employed fieldworkers who went to the<br>three clusters at Aba, Nnewi and Onitsha and were supposed to cover the three<br>sectors of production that include; production, trade and services. The fieldworkers<br>had to be motivated to go to the clusters and spend some days. Also, the supervision<br>required moving to the clusters to monitor groundwork and equally implied<br>increasing cost of the field survey. The Focus Group Discussion (FGD) which was<br>intended to collect responses from &nbsp;<br>questionnaires and interviews was difficult to obtain from traders as<br>most were busy with trading transactions and had little time to sit for<br>discussions. &nbsp; &nbsp; </p><p>In<br>terms of research structure, the first chapter contains the introduction,<br>problem statement, study objectives, research questions and hypotheses; as well<br>as the study scope, limitations, MSEs background and operational definitions as<br>used in the study. The second chapter reviewed not just the conceptual<br>literature but theoretical and empirical literature. It also summarized all<br>reviewed literature and identified potential gaps and how they were covered in<br>the current study. Chapter three presented the theoretical framework and the<br>study design including study area, study population, sample size, study models,<br>estimation procedures and hypotheses testing techniques. Chapter four presented<br>all the analyses and study results as well as findings, decisions on hypotheses<br>tested and discussion of findings while the final chapter (five) summarized the<br>findings, identified policy implications and based on that made<br>recommendations. It also contains areas and issues for further research,<br>contributions to knowledge and conclusions.</p><p><strong>1.9 &nbsp; &nbsp; Background Information on Development of MSEs</strong></p><p>Microfinance institutions were created in Nigeria by<br>the Central Bank in 2005. However, before the emergence of formal microfinance<br>institutions, informal microfinance activities flourished all over the country.<br>Informal microfinance is provided by traditional groups that work together for<br>the mutual benefits of their members. These groups provide savings and credit<br>services to their members. The informal microfinance arrangements operate under<br>different names: <em>Esusu</em>, among the<br>Yoruba of Western Nigeria, <em>Utuu</em>, for<br>the Igbo in the South East and <em>Adashi</em>,<br>in the North for the Hausa (CBN, 2003). The key features of these informal<br>schemes are savings and credit components, informality of operations and higher<br>interest rates in relation to the formal banking sector.</p><p>The informal associations that operate traditional<br>microfinance in various forms are found in all the rural communities in Nigeria<br>(Otu, Ramlal, Wilkinson, Hall, and Hecky, 2011). They also operate in the urban centers. However, the size of<br>activities covered under the scheme has not been determined. The<br>non-traditional, formalized Microfinance Institutions (MFIs) are operating side<br>by side with the informal services. The financial services provided by the MFIs<br>in Nigeria include: savings, credit and insurance facilities. The major formal microfinance suppliers include the Commercial<br>Banks and Microfinance as well as the Development Finance Institutions. However,<br>microfinance suppliers exist so as to provide low and accommodative rates of<br>interest because of the existence of inequitable distribution of wealth and<br>income and to reach out to the poor. From the appraisal of existing<br>microfinance-oriented institutions in Nigeria, the following facts have become<br>evident: weak<br>institutional capacity, weak capital base, existence of a huge<br>un-served market, economic empowerment of the poor, employment generation and poverty<br>reduction, the need for increased savings opportunity, the interest of local<br>and international communities in micro-financing and utilization of the small<br>and medium enterprises equity investment (SMEEIS) fund.</p><p>SMEEIS, however, is said to have failed due to<br>the fact that, it required a partnership of ownership between the micro<br>enterprises and the microfinance operators as a means of involving the banks<br>fully into developing these enterprises. This effort failed partly because the<br>entrepreneurs had a jealous and, of course, protective ownership attitude of<br>their enterprises and so did not accept to get in terms with the banks. On the<br>other hand, several bureaucratic engagements that are involved in becoming<br>co-owners such as the Memorandum of Understanding (MoU) scared the banks from<br>actively getting involved. This led to the creation of the Microfinance<br>Development Fund in 2013 by CBN. This project was launched with a seed capital<br>of ₦220<br>billion, having 80% devoted to micro enterprises and 20% to small and medium<br>size enterprises. The Microfinance Development Fund that is now operational has<br>the advantage of asserting specific amounts for interest rates, sectorial loan<br>quotas, and sex ratios. Unlike the SMEEIS that compelled both banks and<br>entrepreneurs to be co-owners, the Microfinance Development Fund allows banks<br>to operate from a distance yet ensures that the modalities are moderate.</p><p><strong>1.10 &nbsp; Operational Definition of Terms</strong></p><p><strong>Micro Enterprise:</strong>&nbsp;It is a firm whose total cost including working capital and excluding cost of land is not more than ten million naira (N10,000,000) and/or with a labour size of not more than ten (10) full-time workers and/or an annual turnover of less than two million naira (N2,000.000) only.</p><p><strong>Small Enterprises: </strong>It is an enterprise whose total cost including working capital but excluding cost of land is between ten million naira (N10,000,000) and one hundred million naira (N100,000,000) and/or a workforce between eleven (11) and forty nine (49) full-time staff and/or with annual turnover of not more than ten million naira (N10,000,000) in a year.</p><p><strong>Medium Enterprises:</strong>&nbsp;It describes a company with total cost including working capital but excluding cost of land of more than one hundred million naira (N100,000,000) but less than three hundred million naira (N300,000,000) and/or a staff strength of between fifty-one (51) and two hundred (200) full-time workers and/or with an annual turnover of not more than twenty million naira (N20,000.000).</p><p><strong>Industrial Clusters:</strong>&nbsp;It refers to geographical proximate group of interrelated enterprises and associated institutions in a particular business environment linked by commonalities and complementarities. Clusters are considered to increase the productivity with which companies can compete, nationally and globally.</p><p><strong>Micro Credit:</strong>&nbsp;This means making financial services available to the poor, low income earners and Small Scale Enterprises (SSEs). The United Nations (UN) declared 2005 International Year of Micro Credit (IYMC).</p><p><strong>Microfinance Institution: </strong>This is an institution that extends small loans or microfinance to applicants who typically belong to the lowest strata of society. Loans are extended to borrowers to allow them to initiate a business, repair their homes and improve the general living conditions of their families and the community.</p><p><strong>Cluster Strategy</strong>: It is an economic development strategy that provides a coordinated and efficient way to promote economic growth. By making a cluster approach a key part of a state economic development strategy, state agencies are more likely to coordinate their efforts, avoid duplication of services, and develop a more comprehensive approach to economic development.</p><p><strong>Poverty Alleviation: </strong>Poverty alleviation (or reduction) describes strategies to ameliorate poverty. It is any process which seeks to reduce the level of poverty in a community, or amongst a group of people or countries. Poverty alleviation programmes may be aimed at economic or non-economic poverty.</p><p><strong>Economic Development:</strong>&nbsp;It refers to the sustained increase in the economic standard of living of a country’s population, improving the quality of human life through increasing per capita income, reducing poverty and enhancing individual economic opportunities by developing technology, making more productive and efficient use of physical capital, and increasing human capital.</p><p><strong>Social Development:</strong>&nbsp;This refers to the improvement in qualities of life and human well-being by organizing human governance and affairs to accomplish such tasks as the alleviation of poverty, the reduction of income disparities, the elimination of violence, the guaranteed right to clean water and health services, the increased respect for nonhuman creatures and their ecosystems, and the structuring of a just legal system and system of representation.</p><p><strong>Profitability: </strong>&nbsp;This term is used to describe the gain or<br>compensation to an entrepreneur or a firm for engaging in economic activities.<br>It is usually defined by returns on investment or assets. Profitability is<br>derived from gross earnings either after tax or before it. &nbsp;</p><p><strong>Private Sector-led Growth: </strong>This is the private sector engagement as the main driver of economic and social progress, with businesses, not governments, providing the bulk of the investment, innovation, employment and income, which can bring about the growth and productivity increases.</p> <br><p></p>