Paucity of Funds and Small Scale Businesses in Rural Areas: Evidence from Oyo State of Nigeria

Small scale businesses occupy a place of pride in virtually every country of the world. They have been recognized to be the main engine of economic growth in developing economies like Nigeria. Despite the various benefits accruable from the development of small scale industries (SSls), little attention has been paid to their improvement by the Nigerian government, especially in the area of financing. This problem was as a result of the inability to access loans from the formal financial institution where they exist. Therefore the thrust of the paper is to access how far the small scale businesses in the areas surveyed have been thriving in the face of financing problem confronting them and the effects of such constraint on their performances and how the problem can be reduced in order to improve the social economic development of the citizens at the grassroots. The sample of the study consists of small scale enterprises from AFIJIO Local Government area of Oyo State. The local council is predominantly of villages and towns which can be regarded as real rural areas and the major enterprises being practiced is the small scale type, Questionnaires were used to collate data. The data gathered were analyzed with the use of simple percentages and the formulated hypotheses were tested with the use of t-test statistic and chi-square (x2) and it was revealed from the analyzed data that majority of the small scale business entrepreneurs have no access to funds from the formal financial institutions (banks) due to non-availability of banks in these areas and where there are few of the banks, the formality of processing loans and the interests on such loans have been very discouraging. Hence, nearly all the respondents surveyed took solace in non-bank financial institutions to get the needed funds, though in a limited way. It is suggested that the government should make the environment more conducive for small scale industries in order to encourage more entrepreneurs, and the small scale business entrepreneurs are advised to organize themselves into cooperative societies or partners in order to pool their resources (funds) together to boost their businesses and in turn reducing the unemployment rate and help to grow the economy.