A RESEARCH PROPOSAL

BY
NAME: OSUNSAMI, OBAFEMI ADEDEJI.

MATRIC NO: PG/12/2105

MBA-BUSINESS ADMINISTRATION

AREA OF SPECIALIZATION: ENTREPRENEURSHIP AND SMALL BUSINESS

MANAGEMENT

AREA OF INTEREST: ENTREPRENEURIAL FINANCING

 SEMINAR 1

PRESENTED TO:
PROF. ASIKHIA, DR. BINUYO, DR. SOETAN, & DR. AKINLABI
 CHAPTER ONE

1.1 Background to the study

Finance has been identified in many business surveys as the most important factor determining the survival and
growth of small and medium sized enterprises in both developing and developed countries. Access to finance is
the ease with which SMEs can get finance to undertake productive investments to expand their businesses and to
acquire the latest technologies, thus ensuring their competitiveness and that of the nation as a whole (UNCTAD
2002). While performance is the process or manner by which SMEs execute their function. SMEs performance
can be measured with different indicators, such as profitability, and growth in employment, production level, or
even sales. In addition, firms also have their own performance indicators (Meyanathan & Munter, 1994;
McCormick & Atieno, 2002; Okech, Mitullah & Atieno, 2002).
In developed countries, financial institutions assess SMEs loan applicants using information supplied by credit
bureaus (Deakins, 2008). In emerging markets, however, strong credit bureaus and other financial infrastructure
often do not exist. Instead, banks rely on time-consuming methods to obtain credit histories directly from loan
applicants (Morck & Yeung, 2010). Incomplete financial records and unverifiable client information further
increase the cost of assessing SME loan applications, making banks reluctant or unable to lend to SMEs
(Ayyagari, Asli & Vojislav, 2012). However, the SME sector in many developing countries is large and
represents a very promising frontier for lenders. To capitalize on this, some banks have begun implementing
innovative screening mechanisms to reduce the cost of lending (Deakins, 2008; Morck & Yeung, 2010).
Banks traditionally require that clients provide collateral such as land or real estate to secure their loans.
However, many creditworthy SMEs do not have the type of collateral required by commercial lenders and
therefore have trouble accessing needed financing. To remove this barrier, some governments and financial
institutions are relaxing collateral requirements or eliminating them altogether (Osmani, 2009). For instance, the
Colombian government, with support from the International Finance Corporation, introduced a new Secured
Transactions Reform that provides a legal framework for accepting movable collateral such as vehicles,
machinery, accounts receivable, and inventory (Deakins, 2008). The reform has two main pieces. First, it
establishes a unified online registry for all movable assets used as collateral, so that potential creditors can verify
whether assets offered as collateral are subject to other obligations. Second, the law improves enforcement in
cases of default. By reducing banks’ risk in accepting alternative forms of collateral, the reform is expected to
increase access to credit for SMEs (Villoria, 2009).

In Africa, the major challenges facing SMEs include: lack of a supportive governance framework. SMEs suffer
due to lack of legal framework that protects interests, harassment from local authorities’ unsupportive tax regime
and exposure to corruption (Kakuru, 2013). The second reason is lack of adequate access to credit. SMEs have
little access to finance, which thus prohibit their emergence and eventual growth. This has not been easy for
SMEs due to the stringent credit terms offered by financial institutions (Obura & Matuvo, 2011). Most SMEs do
not have access to finance due to lack of minimum requirements from commercial banks, and these banks are
hesitant in lending to SMEs due to lack of collateral, credit history, financial statement and banking history
(Wanjohi, 2010).
The main sources of capital for SMEs in Africa are retained earnings, borrowings from friends,
family capital and informal savings, which are unpredictable, not very secure and have little scope
for risk sharing. Access to final finance is poor because of the high risk of default among SMEs and
due to inadequate financial facilities (Kauffmann, 2010).
SMEs have become important players in the Kenyan economy, but at the same time they continue to
face constraints that limit their development and financial performance. Lack of access to financial
services as observed is one of the main constraints for SMEs, and it is brought about by the
segmented and incomplete nature of financial markets (Gatari, 2012). This increases transaction
costs associated with financial services. On the supply side, most formal financial institutions
consider SMEs un-creditworthy, thus denying them credit. Lack of access to financial resources has
been seen as one of the reasons for the slow growth of firms. Difficulties in accessing credit has held
back the SME sector in Kenya as most financial institutions view them as unstable and often place
tighter lending requirements before advancing credit (Atieno, 2009).
Improving access to funding for small and medium-sized enterprises is crucial in fostering
entrepreneurship, competition, innovation and growth in Kenya. Access to sufficient and adequate
capital to grow and further develop their activities is a difficulty faced by many Kenyan SMEs
(Gatari, 2012). This situation is compounded by the difficulties in accessing finance as SME
financing is considered by many financial providers as a high risk activity that generates high
transaction costs and/or low returns on investment. Moreover, SMEs need to meet the challenge of
adapting to the changing financial environment and the increasing complexity and extent of
financial acquisition (Wanjohi 2009).
In Nigeria, SMEs had received little attention whereas they provide employment for approximately triple the number engaged
in large scale manufacturing as well as playing their roles of crucial importance to our developing economy. There have been
numerous opinions and write-ups on the roles banks should play in financing and advising the small and medium size
enterprises since the federal government shift in policy with greater emphasis towards SMEs in the achievement of self-
reliance.
Afolabi (2013) noted that a major gap in Nigeria’s industrial development process in the past years has been the absence of a
strong and virile SMEs sector attributable to the reluctance of banks especially commercial banks to lend to the sector.
Commercial banks through their intermediation role are meant to provide financial succor to SMEs. For SMEs to perform their
role in the economy, they need adequate funds in terms of short and long term loans (Olachosim, Onwuchekwa & Ifeanyi,
2013). It is pertinent to know that financing strength is the main determinant of small and medium enterprises growth in
developing countries. There is no gainsaying that finance would boost the performance of SMEs if adequately and optimally
utilized. The financial systems in every country play a key role in the development and growth of the economy, although the
ability to play this role effectively largely depends on the degree of development of the financial system. The traditional
commercial banks which are key players in the financial systems of nearly every economy, have the potential to pull financial
resources together to meet the credit needs of SMEs, however, there is still a huge gap between supply capabilities of the
banks and the demanding needs of SMEs.

SMEs are essential catalysts for economic development of any country. In a well-functioning financial system, efficient
intermediary functions of financial institutions promote economic growth by bridging the gap between the net savers and the
investors. This entails that the success of SMEs also depends on efficiency of the financial system in channeling credit to
where it is most needed, and where productivity is generally higher. Unfortunately, the banking system shows apathy lending
to SMEs. They often see lending to entrepreneurs as risky, the conditions for borrowing is unusually stringent. Majority of
entrepreneurs are not literate and may not.
SMEs are essential catalysts for economic development of any country. In a well-functioning financial
system, efficient intermediary functions of financial institutions promote economic growth by bridging the
gap between the net savers and the investors. This entails that the success of SMEs also depends on
efficiency of the financial system in channelling credit to where it is most needed, and where productivity is
generally higher. Unfortunately, the banking system shows apathy lending to SMEs. They often see lending
to entrepreneurs as risky, the conditions for borrowing is unusually stringent. Majority of entrepreneurs are
not literate and may not be able to follow through all the rigorous paper works. Secondly, virtually,
borrowers have no asset or collateral to secure credit needed to start their business.
Obviously, SMEs do not have access to public capital markets. As a result, they basically depend on banks
for funding. Relying on banks makes them even more helpless because shocks in the banking system can
significantly affect credit supply to SMEs (Ogujiuba, Ohuche & Adenuga, 2004). For this reason, SMEs
look for internal source of finances, which could help but might be insufficient to keep them at optimal
efficiency.
Realizing the importance of SMEs to the growth of Nigeria’s economy, this study therefore sets out to,
among others, examine the various sources of financing SMEs in Nigeria as well as assess the problems
these SMEs faces in the formal and informal financing of their activities.
1.2 STATEMENT OF PROBLEM
According to Wanjohi, (2010), SME’s are a key component of the economies throughout the world. In
Nigeria, SMEs have the potential to contribute significantly to economic growth and poverty reduction
through increased production and employment. This role has long been recognized by the Federal
Government of Nigeria. One of the pillars that was defined to spur growth of SMEs is financial pillar
that led the government to set up a scheme for entrepreneurs, however, the difficulties that SMEs
encounter when trying to access financing can be due to a great range of reasons like the firm’s
characteristics, financial characteristic and entrepreneurial skills and experience. Other reasons may be
due to inadequate financial products and services, regulatory rigidities or gaps in the legal framework,
lack of information on both the bank’s and the SMEs’ side (Gatari, 2012).
Lack of education on the part of SME owners and inadequate facilities in agricultural, purchasing and
supply sector has been a big challenge to SME’s (Ukwuagu 2002). Onwuka (2015) saw the problem
facing SMEs as inadequate funding on the part of the commercial banks and other financial institutions
and poor management on the part of small business owners. On the other hand, government has failed to
provide stable macro-economic environment and adequate physical infrastructural facilities to the SMEs.
Having known all these, the study embark on identifying the various means for SMEs in the
procurement of finance, the contribution of SMEs towards the growth and development of Nigeria’s
economy. These and many other reasons prompted the researcher to embark on the course to study the
effect of entrepreneurial financing on the performance of small and medium enterprises in Ogun State,
Nigeria.
1.3 Objectives of the Study
The main objective of the study is to evaluate the effect of entrepreneurial financing on
SMEs performance of selected SMEs in Ogun State, Nigeria. Other specific objectives of
the study are to:
• evaluate the effect of bank loan on the productivity of the SMEs in Ogun state.
• investigate the effect of government grant on the sales growth of SMEs in Ogun State.
• establish the effect of venture capital on market share of SMEs in Ogun State.
• determine the effect of personal savings on the Profitability of SMEs in Ogun State.
1.4 Research Questions

The proposed study would answer the following research questions:

• What is the effect of bank loan on the productivity of SMEs in Ogun state?
• What is the effect of government grant on the sales growth of SMEs in Ogun State?
• What is the effect of venture capital on the market share of SMEs in Ogun State?
• What is the effect of personal savings on the profitability of SMEs in Ogun State?
1.5 Research Hypotheses

The hypotheses for the proposed study are as follows:

H0₁: Bank loan does not have significant effect on the productivity of SMEs in Ogun state.
H02: Government grant does not have significant effect on the sales growth of SMEs in Ogun
state.
H03: Venture capital does not have significant effect on the market share of SMEs in Ogun state.
H04: Personal saving does not have significant effect on the profitability of SMEs in Ogun state.
1.6 Operationalization of Research Variables
Y = f(X)
Y = Dependent Variable
X = Independent Variables
Where:
Y = SMEs Performance
X = Entrepreneurial Financing
Y = (y₁, y2, y 3, y4)
X = (x₁, x2, x3, x4)
Where:
y₁ = Productivity (PDT)
y2 = Sales Growth (SG)
y3 = Market Share (MS)
y4 = Profitability (PFT)
x₁ = Bank Loan (BL)
x2 = Government Grant (GG)
x3 = Venture Capital (VC)
x4 = Personal Saving (PS)
β0 = intercept of the model
ß1 – ß4 = coefficients of the independent variable
e = error term
1.7 Operationalization of Research Variables

Y=f (X)

y1= f (x1)
y2= f (x2)
y3= f (x3)
y4= f (x4)
Regression Model

The econometric model of the research are stated in Eqn. (i)-(iv)

y1 = β0 + β1x1 + e .……………………………… Equation 1
y2 = β0 + β2x2 + e ……...………………..……… Equation 2
y3 = β0 + β3x3 + e ...…………………………… Equation 3
y4 = β0 + β4x4 + e ……………………………… Equation 4
Y= β0 + β1x1 + β2x2 + β3x3 + β4x4 + ei
 
1.8 Scope of Study
The study will focus on Entrepreneurial Financing and SMEs Performance of
selected SMEs in Ogun State.
Identified variables Entrepreneurial Finance would be examined as well as that of
SMEs Performance.
The target respondent for the study consists of the entrepreneurs, the owners of
the small and medium enterprises.
1.9 Significance of Study

• The result of this study will be of immense benefit to the banks. It will help the
commercial banks recognize the role SMEs play in the economy and when to
provide them with enough fund so as not to hinder the growth and development
of the economy.
• Through this study, the small business owners will be able to recognize the best
or appropriate means to procure loans and be educated on the various ways
loans can be obtained and the equivalent collateral to give in exchange for loan.
• Also, the study will enable the government to know the necessary areas to
improve in terms of funding to small businesses and the areas of SMEs that
needs enlightenment through programmes and seminars etc.
• Lastly, the study will also serve as a guide to any person(s) carrying out a
similar research work.
 CHAPTER TWO
LITERATURE REVIEWS
2.0 Introduction
Globally SMEs sector has been reporting difficulties in access to finance. (Bebezuk, 2004; Slotty,
2009; Balling, 2009; Irwing & Scott, 2010; Yongqian, 2012). Access to external finance to SMEs
has become more costly and troublesome while their accessibility has sharply declined. SMEs
financial constraints limit their investment opportunity and stagnant growth. Access to finance is
widely perceived to an essential factor for firms, and especially SMEs to maintain their daily
business operation as well as to achieve long term investment opportunities.
Entrepreneurial financing entails the understanding of the importance along with the distribution of
resources and its application to startups (Maleki, 2015; Kerr, Lerner & Schoar, 2014; Cumming,
2007). The domain of entrepreneurial finance has helped in resolving significant questions that
confront all entrepreneurs in respect of how much finance to raise; when should it be sourced and
where, as well as how much will be considered appropriate for the new venture; and how should
the financing be structured? (Maleki, 2015; Salamzadeh, 2015; Winton & Yerramilli, 2008).
 2.1 Conceptual Review
Entrepreneurial Finance
Finance is a need to all businesses. Lack of access to finance has been identified as one of the
major constraints to small business growth, (Carpenter, 2002). Businesses use capital to acquire
all resources.

Accessibility of capital enables the start and running of business, and lack of it may lead to
business failure. Factors related to initial working capital and credit accessibility are the most
critical issues in SMEs growth and development. With insufficient financial flows into the
business, many businesses cannot grow because they cannot get capital, they cannot buy raw
materials and pay workers.
Conceptual Review
2.1.1 Bank Loan
Banks are external finance that takes the form of loans that are borrowed by an
entrepreneurial firm to help its business activities (Mitter & Kraus, 2011). After, founders,
family and friends capital come bank loans which stand as a basic source of funding to
entrepreneurial firms (Fatoki, 2014). While, Winton and Yerramilli (2008) have
hypothetically demonstrated that venture capital funding is preferred over debt financing
especially under conditions of high risk and uncertainty, DeBettignies & Brander (2007)
on the other hand, argued that entrepreneurs‟ preference for debt over equity occurs most
especially when the interest of the entrepreneur is aligned and the cost of capital is lowered
for the entrepreneur.

Ernst and Young (2014) argued that though bank loans are considered as the most
traditional form of funding for new ventures; it is also observed that naturally, banks like
limiting their risk by lending to firms that offer some form of collateral.
Conceptual Review

2.1.2 Government Grants and Subsidy

There are many sources of funding that are available to young entrepreneurs to
access that are offered by government organisations. Some of these schemes are
provided by Nigeria export processing council, Nigeria export processing zones
authority, Bank of Industry, and Central bank of Nigeria. However, experience has
shown that meeting up with the requirements has been an uphill task and must
have accounted for the reasons while a large number of new venture
owners/promoters have been prevented from accessing such facilities (Ernst
&Young, 2014).
Conceptual Review
2.1.3 Venture Capital
Mitter and Kraus (2011) explain that venture capitalists are organizations that provide capital
funding to institutions. They are private or subsidiaries of publicly quoted companies or
corporate venture capital firms. Venture capitalist can be said to be proficient asset managers
known for investing capital got from institutional investors, or wealthy persons, into
encouraging entrepreneurial firms that are likely to grow (DaRin, Hellmann, & Puri, 2011).

Venture capital can be made available as venture firm enters different levels in its growth
process. Conventionally, venture capitalists concentrated on the provision of funds needed for
the takeoff the business. However in some knowledge based economies there is a gradual shift
to bigger and later growth phases of the business (Aernoudt, 2005). Venture capital is
particularly important in funding the early-stage of the entrepreneurial firm as the equity
capital of the entrepreneur is expended and debt instruments are difficult to be accessed.
Conceptual Review
2.1.4 Personal Savings
This source of financing consists of the owner’s personal savings, including money collected
from relatives known as “love money”. At this embryonic stage, the equity capital made
available by the founder is the major source of funding (Mitter, & Kraus, 2011). These kinds of
funds facilitate the earliest working capacity of the enterprise. It also serves as an indicator of
commitment and a display of seriousness on the part of the owner of the new venture.

However, the longer the entrepreneur is capable of surviving on owner‟s capital, coupled with
the long hours of work (sweat equity) and the cash flow of the firm definitely minimises the
risk associated with external funding. Besides, avoiding external financing greatly reduces
undue pressure from financiers and this gives the owner more independence and the latitude to
manage the organisation better (Markova & Petkovska-Mircevska, 2009).
 2.2 Theoretical Reviews
Theories to be considered in this study are; The Pecking Order Theory, Finance
Growth Theory and Credit Rationing Theory.
2.2.1 The Pecking Order Theory
The pecking order theory of financing hypothesis, the issue of information
asymmetries whereby only firm manager is aware of the true value of the firm and the
fact that the market is unaware of the true distribution of the firms income. Because
investors assume that managers will only issue stock when they believe it to be
overvalued, this implies that a new issue of stock will be taken as a bad signal, by the
markets thus triggering a reduction in the share price. Myers (1984) extends this theory
and states that firms will meet investment and financing requirement of the firm in a
hierarchical fashion, preferring internal funds first, external debt next and external
equity as a last resort.
 Theoretical Reviews
Literature provides a number of demand-side and supply-side reasons as to why firms prefer,
internal sources of funding over external sources and Debt over equity. Stilitzand Weiss
(1981) argues that supply side constraint exist when SMEs cannot obtain the debt financing
they require at market interest rates, resulting in undercapitalization. This is viewed as an
under investment problem, where equity clears the market. Demand-side explanation as
presented by Bolton (1971) and Lecornu et al (1996) are based on the well-established fact
that SMES owners are extremely reluctant to relinquish control of their business e.g. SMEs
owners will try to meet their financing needs from pecking order of first their own’ money,
personal saving and retained earnings, second short term borrowing, third longer term debt
and preferred of all (Ciaran macan&Lucey, 2006).
Studies on small business finance have frequently suggested the problem of scarcity of funds
(Peer and Wilson, 1996, Laitinen, 1992). It is also observed that limited access to capital
markets (Gopinath, 1995) appear to confine the finance of small business to internally
generated funds. However there is a limit to which internally generated funds can contribute
to the growth of the SMEs which bring to the fore the need for alternative source of capital
for development of these enterprises.
 Theoretical Reviews
2.2.2 Finance growth theory
Berger and Udell (1998) propose a financial growth theory for small business where the
financial needs and financial options change as the business grows, becomes more experienced
and less informationally opaque. They further suggest that firms lie on a size, age, information
continuum where the smaller, younger, more opaque firms lie near the left end of the continuum
indicating that they must rely on initial insider finance trade credit and or angel finance. The
growth cycle model predicts that a firm grows; it will gain access to venture capital (VC) as
stage of growth paradigm, as the firm becomes older, more experienced and more
informationally transparent, it will likely gain access to public equity (PE) or long term debt.
Problems related to financing are dominant in the literature with small firms. There are
numerous empirical studies, describing inadequate financing as the primary cause of MSMEs
failure (Owilalah, 2007).
 Theoretical Reviews
The capital structure of small firms differ significantly from large firms because small firms
rely more on informal financial market which limits the type of financing they can receive. The
small firms initially use of internal financing creates a unique situation in which capital
structure decisions are made based on limited financing options. It is widely accepted that small
firms have different optimal capital structures and are finance by various sources at different
stages of their organizational lives (Berger and Udell, 1998). Researchers have found that
certain attributes of small firms influence the type of funds available to finance the firms
operations (Romano, 2001).
2.2.3 Credit Rationing Theory (Restriction of Credit Availability)
The underpinning theory employed in this study is the credit rationing theory. Credit rationing
theory developed by Stiglitz and Weiss in 1981 was modeled on imperfect credit market
otherwise attributed to a situation where parties to a contract lack equal information
(information asymmetry), which compels banks to commit much cash and time resources to
acquire facts about borrowers so as to monitor them. The theory assumes that when agency
problem such as information asymmetry and moral hazards (the tendency of people who are
insured against a specific hazard to cease to exercise caution to avoid the hazard) affect credit
Theoretical Reviews
availability and the capital structure of new startup SMEs, the situation is seen as
credit rationing.
This theory assumes also the existence of numerous banks that compete to
maximize profit by way of collateral and interest, as well as numerous prospective
borrowers that strive to maximize their profit through their choice of projects. The
expected project outcome is not known to the bank, but known to the borrowers
(SMEs) because of unbalanced information available to both parties (information
asymmetry). Put differently, credit rationing happen, if among loan applicants some
secure loan, while others do not for no justifiable reason. Some successful
applicants may have obtained the loan at a higher interest rate. A bank’s credit
rationing policy could be affected by the distinctive features that characterize the
borrowers, lending institutions, the loan, as well as the property used as security
against the loan.
 2.3 Empirical Review
This section will review the works of other researchers including their findings and
conclusions.
Oyedokun, (2015) evaluated the interrelationship between Small and Medium Scale Enterprise
performance in connection to the miniaturized scale money financing available to them. The
emphasis was on small scale account establishment and entrepreneurial firms in south-western
Nigeria. An aggregate of 153 enlisted little and medium and scale entrepreneurial firms were
utilized for the investigation taking after the information screening and assessment. A
purposive arbitrary testing strategy was received for the study. The information gathered was
broken down utilizing Pearson’s correlation. The discoveries uncovered that a critical and
positive relationship exists between advances gotten from smaller scale fund banks (MFBs)
and the execution of little and medium scale entrepreneurial firms.
 2.3.2 Summary and Gap in Literature
The reviewed literature in this study was found to be limited to microfinance loans,
strategy, challenges and SMEs performance in some parts of the country. This
reviewed literature indicate there is a lack of empirical evidence of studies in
entrepreneurial finance context
 CONCEPTUAL MODEL
ENTREPRENEURIAL
SMEs PERFORMANCE
FINANCING
(Y)
(X)

BANK LOAN G1 PRODUCTIVITY

(x1) (y1)
G2
GOVERNMENT SALES GROWTH
GRANT(x2) (y2)

VENTURE CAPITAL G3
MARKET SHARE
(x3) (y3)

PERSONAL SAVINGS G4
PROFITABILITY
(x4) (y4)

Source: Researcher’s Conceptual Model (2019) 29

 CHAPTER THREE

METHODOLOGY

3.1 RESEARCH DESIGN

The design that will be adopted for this study is the cross-sectional survey research
design. Cross-sectional survey research design was used in the study because it
involves collection of information from a given sample of population only once and at
different location and at the same period of time .

3.2 POPULATION OF STUDY

The population to be used in this study includes the management staffs as well
supporting staffs working at the top, middle and lower management level within the
SMEs in Ogun State.
The number of the total population is 1794. These SMEs will be considered because
they have been established by SMEDAN as the SMEs by the state.
3.3 SIZE DETERMINATION
In order to determine the sample size for the study, Roasoft Sample Size calculator will be
used. The reason for adopting this formula is that, it provides accurate result of the necessary
sample size that will be adequate for the research study since the population for the study is
a finite one. Adopting this formula increases the level of precision and the confidence level
of taking less risk in determining the actual sample size necessary for the study.

Applying the formula where:

n = sample size
Confidence level = 95%
N = Finite population size which is 1794 i.e. total number of personnel within the
population.
e = Maximum acceptable error margin which is 5%
3.4 SAMPLING TECHNIQUE
Stratified sampling technique will be adopted for this study. The justification for this is that the
study focuses only on the entrepreneurs of the selected SMEs.

SAMPLING UNIT

The sampling units for the study are the top-level, who are in charge of making policies for the
SMEs in the selected firms in Ogun state.
SMEs by size in Ogun State
SMALL 1690
MEDIUM 104
TOTAL 1794

Source. SMEDAN 2018.

3.5 METHOD OF DATA COLLECTION
For the purpose of the study, primary source of data collection will be adopted. The
primary data will be sourced using questionnaire. The questionnaires will be
distributed directly to the target respondents within the population.

3.6 RESEARCH INSTRUMENT

The study will Adapt a questionnaire that reflects the study objectives and
questions. The Adapted questionnaire will comprise of thirty-two (32) questions that
is divided into (3) sections. Section A, containing personal information of
respondents such as sex, age, marital status, educational qualification and length of
service. Section B and C will consist of likely type questions that focused on the
research variables, Entrepreneurial finance and SMEs performance.
 3.7 PILOT STUDY

A pre-test of the questionnaire will be conducted in order to evaluate the relevance

and proper understanding of the research questions. The questionnaire will be
checked by researcher’s supervisor as well as experts in the field of operations and
production management.
Furthermore, 10% of other respondents who correspond to our sample will be
accessed and interviewed to see if the questionnaire has to be modified. The pilot
study were considered necessary in order to determine the willingness of the
respondents, to have a fore knowledge of the reactions of the respondents and to
determine the reliability of the questionnaire when used in the population of the
study.
3.7.1 VALIDITY OF THE RESEARCH INSTRUMENT

The research instrument would be Adapted and tested based on references from
renowned scholars and experts in the field;
To ensure the validity of the questionnaire, the researcher will submit the
questionnaire to researcher’s supervisor, research colleagues, as well as experts in
the field of entrepreneurship and small business management for validation. This is
done to acquire their overall observations and essential suggestions on the adequacy
and sequence of the question.
3.7.2 RELIABILITY OF THE RESEARCH INSTRUMENT

Test-Retest method will be used to determine the reliability of the instrument for
this study. To gauge test-retest reliability, the test is administered twice at two
different points in time. This kind of reliability is used to assess the consistency of a
test across time. This type of reliability assumes that there was no change in the
quality of construct being measured. Test-Retest reliability is best used for things
that are stable over time, such as intelligence. Generally, reliability will be higher
when little time has passed between tests. You will also need the Cronbach’s alpha
coefficient to test internal consistency of the instrument. Reliability will be higher
when little time has passed between tests. You will also need the Cronbach’s alpha
coefficient to test internal consistency of the instrument.
3.8. Researcher’s Apriori Expectation 2019

Hypotheses MODELS APRIORI EXPECTATIONS IF;

1 y1 = β0 + β1x1 +ei………….. (i) If, p0.05: β≠ 0 Ho1 will be rejected

2 y2 = β0 + β2x2 +ei ………….. (ii) If p0.05: β≠ 0 Ho2 will be rejected

3 y3 = β0 + β3x3 + ei ………….. (iii) If p 0.05: β≠ 0 Ho3 will be rejected

4 y4 = β0 + β4x4 + ei .………….. (iv) If p 0.05: β≠ 0 Ho4 will be rejected

 3.9 ETHICAL CONSIDERATION

The researcher will ensure that eligibility and confidentiality is

maintained, will strive to be honest in the process of data reporting. The
respondents right to privacy will also be fully observed and respected.
The result of the research will also be made available to participants on
request. The researcher promises to be honest all through the course of
the study and ensured that the process of data reporting, result reporting
will be honest as well as the method and procedure that will be used for
the study
3.10 LIMITATION OF METHODOLOGY

During the administration of questionnaire, there might be low level of cooperation

from the respondents in rendering of adequate information.

3.11 INTENDED CONTRIBUTION TO KNOWLEDGE

This study intends to contribute to knowledge by establishing the effect of
entrepreneurial finance on SMEs performance of SMEs in Ogun State, Nigeria.