Abstract
The study was carried out to determine the financial resources management practices of micro, small and medium agricultural enterprises for sustainable development in Enugu State, Nigeria. Six research questions and six null hypotheses guided the study. The study adopted descriptive survey research design. The population for the study was 243 made up of 162 micro,79 small and 2 medium entrepreneurs in the study area. The entire population was studied due to the manageable size of the population. Structured questionnaire was developed by the researcher and utilized to collect data from the respondents. The questionnaire was face validated by three experts from the Department of Agricultural Education, University of Nigeria, Nsukka, and one from Department of Technology and Vocational Education, Enugu State University of Science and Technology, Enugu. Cronbach alpha reliability method was used to determine the internal consistency of the instrument and an overall reliability coefficient of 0.81 was obtained. Six research assistants helped to administer the questionnaire to the respondents. The data collected were analyzed using weighted mean to answer the research questions while ANOVA statistic was used to test the null hypotheses at the probability level of 0.05. The study found out that 11 items were sources of funds; 9 items for allocating funds; 18 items for financial control measures; 8 items were evaluation of funds; 12 items were constraints to effective financial management and 17 items were strategies for enhancing the financial management practices of micro, small and medium agricultural enterprises in Enugu State. The study also found that there was no significant difference in the mean ratings of micro, small and medium agricultural entrepreneurs on the. The study recommended among others that micro, small and medium agricultural entrepreneurs should use the identified strategies for enhancing the financial management in their enterprises. The study also recommended that micro, small and medium agricultural entrepreneurs should use the financial control measures identified in the study for effective utilization of funds in their enterprises in order to achieve sustainable development in the State.
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CHAPTER ONE
INTRODUCTION
Background of the Study
The development of agricultural enterprises is an imperative advantage for the survival of citizens in terms of food security and improved standard of living. Agriculture is the cultivation of crops, rearing of animals and processing of farm products for human sustenance. According to Reviczky (2011), agriculture is the cultivation of soil for production of any commodity such as maize, yam and raising of livestock for meat and other products. In this study, agriculture means the cultivation of soil for the production of crops and livestock, and carrying out activities in agriculture related enterprises to boost food security for humanity.
An agricultural enterprise, in the opinion of Bareja (2014) means farming in all its branches such as dairying, production, growing and harvesting of any agricultural products, aquaculture, floricultural or horticultural commodities. It also involves raising of livestock including horses as commercial enterprise, keeping and raising of poultry, swine, cattle and other domesticated animals used for food purposes. Similarly, Fuchs (2010) noted that agricultural enterprises include all activities concerned with the production, processing and marketing of specific agricultural products. In this study, agricultural enterprise means any activity aimed at producing, selling, providing or servicing agricultural goods for profit. The enterprises can be involved in forward or backward linkages, such as production and preparatory work, as well as in processing and marketing of products. Bareja (2014) stated that an agricultural enterprise involves the cultivation of soil to grow plants and the raising of animal for human needs. The author opined that the word crop and livestock are also used. Bareja observed that crops should clearly mean plants (with exception as in mushroom) which are useful to man while livestock applies to both domesticated animals and poultry. The author further stated that
the practice of agriculture is based on systemized body of knowledge and requires skill.
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Daugherty (2014) noted that the skill and knowledge can be acquired through agricultural education programme. The author explained that students who take advantage in agricultural education programme are more valuable to potential employers as they compete with other candidates in their career field. Young (2014) indicated that teachers have key roles to play in order to support teaching and learning of young people with the right mix of enterprise and employable skills. The skills acquired help in the growth of the enterprise in future.
For any enterprise to grow there is need to acquire certain level of education and previous working experience by the owner/manager which will stimulate the growth of the firm, thus having an impact on survival of the enterprise (Woldie, Lieghton and Adesua (2008). Ganyaupfu (2013) indicated that managerial competence, educational qualification, work experience, size of firm, period of operation have positive effects on the success of the enterprise despite scale/class
Small and Medium Enterprises Development Agency of Nigeria (2015) National Policy on micro, small and medium enterprises adopted the classification of micro, small and medium enterprises based on dual criteria of employment and assets (excluding land and buildings). The report stated that micro enterprises are those whose total assets (excluding land and buildings) are less than 10 million naira with workforce of less than
10 employees while small enterprises have a total assets (excluding land and buildings) of
10 million to less than 100 million naira with total workforce of 10-49 employees while medium enterprises have a total asset (excluding land and buildings) of 100 million to less than 1 billion naira with workforce of 50-199 employees. Small and Medium Enterprise Development Agency of Nigeria (2013) National policy on micro, small and medium indicated that the estimated number of micro enterprises in Nigeria is 36.99 million with a minimum employment of 57.84 million people. The report noted that a micro enterprise is operated by a proprietor/manager aided mainly by unpaid family
workers and occasional paid employees and apprentice. According to the report, output of these enterprises is very low. However, with the entry of many unemployed school leavers including secondary school leavers and graduates of tertiary institutions, there is much scope for upgrading technology and skills set for existing enterprises and the rise for new technology. Asia Pacific Cooperation classified micro, small and medium enterprises (MSMEs) as enterprises with less than 100 people. The medium sized enterprise employs between 20 and 99 people, a small firm employs between 5 and 19, and a micro firm employs less than 5 employees which include self employed managers/entrepreneurs (Evbuomwan, Ikpa, Okorowa and Akinyosoye, 2013).
Entrepreneur, according to Micheal (2007), means a person who organizes and manages any enterprise, with considerable initiative and risks. In the view of Nelson (2012) an entrepreneur is one who organizes, manages and assumes the risks of a business enterprise. Therefore, an entrepreneur is a person that bears the risk resulting from business management.
Management, according to Emenike (2003), refers to social interaction process involving sequence of coordination of events such as planning, budgeting, controlling and organizing to ensure the efficient use of available resources in achieving desired objectives. Udeozor (2007) defined management as the process of creating, maintaining, stimulating, controlling, and unifying resources within a unified system to accomplish predetermined objectives. Oboegbulem (2011) explained management as the co- ordination of all the resources of an organization through the process of planning, organizing, directing and controlling to attain the organizational goal. The author further stated that for any enterprise to accomplish its objectives, the basic management functions must be applied in the operations of the business. Such management functions include: planning, organizing, directing and controlling activities. Management could further be
in the area of administration, personnel management, risk management, material and financial resources management. In order to achieve the objectives of any business, the entrepreneur/ manager should be skilled on how to manage the financial resources properly.
Financial resources, in the view of Bessons, Ubana and Udo (2012), connote the purchasing power of an organization, or enterprise. The purchasing power could be in form of cash or credit available to the enterprise. Vitez (2013) defined financial resources as funds needed for starting or continuing business operations. In this study, financial resources mean cash or credit available to agricultural enterprise for starting and running the agricultural business. For agricultural enterprise to acquire or posses the purchasing power for successful starting and running its business, it must have an entrepreneur that has the knowledge of financial management.
Financial management, according to Maheshawari (2011), is concerned with raising financial resources and their effective utilization towards achieving the organizational goal. Massie (2014) noted that financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation. The author further stated that financial management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of enterprise. It means applying general management principles to financial resources of the enterprise. Financial management, according to Akinsulire (2002) is concerned with factors which affect the acquiring of adequate finance and subsequent profitable use of cash or credit within the organization. The author further stated that the essence and genesis of management is based on the fact that resources such as people, material and financial resources needed to be utilized to achieve the objectives of enterprise are limited; hence there is need for managing them in order to attain the predetermined goals. Financial management, according to Kadam (2012) means planning,
organizing, directing and controlling the financial actions like procurement and deployment of funds of the venture. It involves applying general management principles to financial resources of the project. Kadam emphasized that strong financial management through the allocation of scarce resources amongst competing business opportunities creates value and management ability. Financial management practices involve sourcing funds, allocating funds, financial control measures, and evaluation methods among others. Financial management in this study means the creative ways by which agricultural enterprises make wise use of financial resources available in the enterprise to increase production and maximize profit, thereby achieving the business objectives of the enterprise.
According to Wushuxing (2010), small and medium enterprises are being faced with financial management problems such as separation of management from ownership, lack of financial planning and control by financial managers, insufficient administration, too much influence by enterprise leadership/proprietor and weak accounting foundation, among others. In view of Mashenene, Macha, and Donge (2014) unfavorable legal and regulatory framework, undeveloped infrastructure, poor business development services, limited access of SMEs to finance and low quality products have been identified as hampering the development of SME sector. Kadiri (2012) indicated that finance has been viewed as a critical element for the development of small and medium enterprises (SMEs). In view of this, Zhengjin (2011) recommended that there is the need to find solutions to problems of SMEs especially on how to enhance financial management of the enterprise. The author highlighted some of the strategies for enhancing the financial management of SMEs as perfect accounting system, establishment of management enterprise pattern, training employees, involving professional financial team and hiring persons who are professional, among others.
In Enugu State many farmers engage themselves in one agribusiness or another. According to Enete and Musa (2010) more than 70 percent of foods eating in Nigeria are
produced by rural population. It is expected that there should be varieties of food in the market. However, as a result of low productivity in the State, foods are brought in from other States of Nigeria. Many people switch from one business to another, or close their shops because of low profit. When businesses are not doing well, they will collapse. Abiodun (2013) noted that most small and medium entrepreneurs have inadequate skills, inadequate information resulting to low level of development. According to Onyemenam (2013) financial problems of small business in Enugu State include: inadequate planning, poor accounting and record keeping, management incompetence and financial indiscipline which affect sustainable development. Ugwuanyi and Ebe (2012) observed that in many enterprises in the State, there exist poor accounting practices which hinder their performances.
The researcher visited some agricultural enterprises to access their performance and observed that many entrepreneurs have problems of sourcing funds from banks for their businesses because some lack access to credit, collateral and also have to contend with high interest rates charged by banks. This was in line with Ehiakhamen (2010) that lack of bank account, collateral and information regarding the procedure for accessing credits from banks limit access to credit from formal institution. Also in the study area, the researcher observed that agricultural enterprises are not performing as expected in terms of record keeping, financial management among others. Some entrepreneurs find it difficult to employ financial managers who have the skills to manage the financial records of the enterprises. Some of the entrepreneurs handle the financial records of the enterprise by themselves resulting to inappropriate financial resources management practices. Onyemenam (2013) noted that financial problems of small business in Enugu State include: inadequate planning, poor accounting and record keeping, management incompetence and financial indiscipline. Nwoye (2006) revealed that lack of experience, poor planning, and poor record keeping among others affect small enterprises in the Eastern States of Nigeria. In support of this, Ositnmelin, Akulabi and Olajide (2012)
noted that lack of management skill; weak accounting foundation, poor record keeping and financial problems hamper effective performance of micro and small enterprises in Nigeria. Fiji (2010) indicated that many micro, small and medium enterprises are faced with financial problems; namely inability to obtain external financing, inability to obtain internal financing, insufficient capital, among others. This prevents the enterprise from carrying out proper financial obligations. Nto and Mbanasor( 2015) pointed out that high cost of production, finance related problems, poor infrastructure, macroeconomic related problems and lack of security among others are constraints hindering effectiveness of agribusiness firm operation. Furthermore, Onuoha (2009) indicated that businesses in South – East are not professionalized because of the challenges and problem such as unincorporated enterprises, lack of succession plan, unawareness of government policies on entrepreneurship development, high operational cost, financial constraints, poor infrastructures, inadequate financial record keeping, high interest rate on bank loan, inadequate skills, poor accounting practices among others. These problems result to inability of the enterprises to satisfy human needs which was the basic for establishing these businesses. Therefore, the people in the State experience low standard of living, unstable health and uncondusive environment for healthy leaving. The enterprises within the State find it difficult to utilize resources efficiently and advance in long term economic competitiveness. It therefore means that these problems hinder sustainable development in the State.
Sustainable development, according to Turner (2014), is the fulfillment of human needs with the protection of the natural environment. Sustainable development is the act of improving the standard of living by protecting human health, conserving the environment, using resources efficiently and advancing long term economic competitiveness. Sustainable development requires the integration of environment, economic and social priorities into policies, programs and actions at all levels- citizens,
industries and governments (Government of Canada, 2013). If finances of micro, small and medium agricultural enterprises in Enugu State are properly managed, it would help to stimulate economic growth resulting to increased food production, maximization of profits and improvement of economic status of the citizen which would result to sustainable development.
Statement of the Problem
In Enugu State, it has been noted from literature that micro, small and medium agricultural enterprises are not growing in spite of the efforts put by the government and stakeholders for their progress. Micro, small and medium agricultural enterprises in the State are not growing as expected in terms of increase in food production, poverty alleviation, employment generation, increased expansion rate, high rate of agricultural enterprise development among others. More than 70% of rural population involves themselves in one agribusinesses or another. It is expected that there should be varieties of food in the market. However, as a result of low productivity in the State, foods are being imported from other States of Nigeria. Many people switch from one business to another, or close their shops because of low profit. When businesses are not doing well, they will collapse. Entrepreneurs in the State have problems of sourcing funds from banks for their businesses because some lack access to credit, collateral and also high interest rate charged by bank. Many enterprises in the State are faced with financial problems; namely inability to obtain external financing, inability to obtain internal financing, insufficient capital, among others. This prevents the enterprise from carrying out their financial obligations. Udenu (2007) noted that small scale business operators in Enugu State have many sources of finance which are viable but the problems are inability to keep adequate financial record, high rate of bank loan and inadequate skills. Also agricultural enterprises are not performing as expected in terms of record keeping, financial management among others. Some entrepreneurs find it difficult to employ
financial managers who have the skills to manage the financial records of the enterprises while others who are inexperienced handle the financial records of the enterprises by themselves resulting to inappropriate financial resources management practices. Many studies in this area focused on financial management of general enterprises and less attention has been focused on financial resources management practices of micro, small and medium agricultural enterprises for sustainable development especially in Enugu State of Nigeria. If micro, small and medium enterprises are well managed and encouraged financially they would facilitate the growth of agricultural enterprises, making the enterprises to remain major employer of labour and a sustainable base for economic development for poverty eradication. They would also ensure promotion of agricultural productivity to meet the food needs of the growing population. Therefore, it becomes necessary to determine the financial resources management practices of micro, small and medium agricultural enterprises for sustainable development in Enugu State and then proffer sustainable measures for managing the sector well.
Purpose of the Study
The major purpose of the study was to determine the financial resources management practices of micro, small and medium agricultural enterprises for sustainable development in Enugu State. Specifically, the study sought to:
1. determine the sources of funds utilized by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
2. determine how funds are allocated by entrepreneurs in micro, small and medium agricultural enterprises for sustainable development in Enugu State.
3. determine the financial control measures adopted for effective utilization of funds by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
4. determine how evaluation of funds are carried out by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
5. determine the constraints to effective financial management in micro, small and medium agricultural enterprises for sustainable development in Enugu State.
6. determine the strategies for enhancing the financial management of micro, small and medium agricultural enterprises for sustainable development in Enugu State.
Significance of the Study
The findings of the study have both theoretical and practical significance. Theoretically, the findings of the study provided information on financial management in order to achieve stated objectives for any enterprise. This is indicated by agency theory that proper financial management practices enable entrepreneurs to have confidence in increasing investment. But in most cases, management of organizations are in the hands of the agents who have little or no experience This results to inability of the agents to manage the organization as expected hereby resulting to non- maximization of profit.
Practically, the findings of the study would be of great benefit to entrepreneurs, financial institutions, educational institutions and agricultural extension services. The study would provide useful information to entrepreneurs on methods of sourcing, allocating, controlling and evaluating funds in their businesses. The study would also provide information to entrepreneurs on constraints to effective financial management and strategies for enhancing financial management. The entrepreneurs could utilize the information to improve their business performance by practicing what the study indicated in the recommendation.
The information provided by the study would assist financial institutions on methods of controlling and evaluating funds allocated to entrepreneurs. The financial institutions could utilize the information to control and evaluate funds issued to customers
by requiring the entrepreneurs to provide accurate financial records of their enterprise before they can take loans from financial institutions.
The study would provide information to educational institutions on methods of sourcing, allocating, controlling, and evaluating funds. The educational institutions could utilize the information to update their curriculum for teaching financial management especially with regards to micro, small and medium enterprises.
The study would also provide information to agricultural extension services on methods of sourcing, allocating, controlling, evaluating funds, constraints and strategies for enhancing financial management. The extension services could utilize the information to educate and disseminate information to agricultural entrepreneurs.
Research Questions
The study was guided by the following research questions:
1. What are the sources of funds utilized by micro, small and medium agricultural enterprises for sustainable development in Enugu State?
2. How are funds allocated by entrepreneurs in micro, small and medium agricultural enterprises for sustainable development in Enugu State?
3. What are the financial control measures adopted for effective utilization of funds by micro, small and medium agricultural enterprises for sustainable development in Enugu State?
4. How are evaluation of funds carried out by micro, small and medium agricultural enterprises for sustainable development in Enugu State?
5. What are the constraints to effective financial management in micro, small and medium agricultural enterprises for sustainable development in Enugu state?
6. What are the strategies for enhancing the financial management of micro, small and medium agricultural enterprises for sustainable development of Enugu state?
Hypotheses
The following null hypotheses (Ho) were tested at 0.05 probability level.
HO1: There was no significant difference in the mean ratings of micro, small and medium agricultural entrepreneurs on sources of funds utilized by micro, small and medium agricultural enterprise for sustainable development in Enugu State.
HO2: There was no significant difference in the mean ratings of micro, small and medium agricultural entrepreneurs on how funds were allocated by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
HO3: There was no significant difference in the mean ratings of micro, small and medium agricultural entrepreneurs on financial control measures adopted for effective utilization of funds by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
HO4: There was no significant difference in the mean ratings of micro, small and medium agricultural entrepreneurs on how evaluation of funds were carried out by micro, small and medium agricultural enterprises for sustainable development in Enugu State.
HO5: There was no significant difference in the mean rating of micro, small and medium agricultural entrepreneurs on educational qualification as constraints for sustainable development in Enugu State.
HO6: There was no significant difference in the mean rating of micro, small and medium agricultural entrepreneurs on experience as constraints for sustainable development in Enugu State.
Scope of the Study
This study focused on the financial resources management practices of micro, small and medium agricultural enterprises for sustainable development in Enugu State. The content area covered include: sources of funds, allocating funds, financial control measures adopted for effective utilization of funds, evaluation of funds, constraints to effective financial management and strategies for enhancing the financial management practices of micro, small and medium agricultural enterprises for sustainable development in Enugu State. The opinions of the micro, small and medium agricultural entrepreneurs were solicited to accomplish the objectives of the study
This material content is developed to serve as a GUIDE for students to conduct academic research
FINANCIAL RESOURCES MANAGEMENT PRACTICES OF MICRO SMALL AND MEDIUM AGRICULTURAL ENTERPRISES FOR SUSTAINABLE DEVELOPMENT IN ENUGU STATE NIGERIA
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