First Bank emerges top SME lender on KPMG survey

First Bank, Nigeria’s largest lender by assets, has emerged as the most popular bank among MSMEs for both deposit transaction and credit/loan activities in a new KPMG survey on the sector.

First Bank was identified by 26 percent of SMEs as an institution where they currently have a loan or have obtained one in the past, with the next highest bank (UBA) being mentioned by10 percent of SMEs.

First Bank also was named by 36 percent of SMEs as the bank where they carry out their transactions.

According to KPMG, banks in Nigeria may have began, albeit cautiously, to identify the MSMEs as an important sector of the economy and are taking different steps to deepen their understanding and play in this segment.

This realisation is not unconnected to the thinning margins in transactions with large corporate and the increased determination of various governments to drive economic growth and development agenda through the MSME segment.

Insights from the study revealed that for Nigerian banks, MSME financing has gone beyond a social objective and for a few banks, MSMEs are a critical part of the banks’ strategy.

In Nigeria, about 80 percent of the banks surveyed have constituted a dedicated unit to serve the MSME segment since 2011. Majority of the Tier 1 banks that have a dedicated SME units operate the unit under the Retail/Consumer Banking or Commercial Banking division.

Banks in other emerging markets also operate dedicated units for MSMEs; according to a World Bank survey (2006), 88 percent of banks in Chile, 100 percent in Columbia and 88 percent in Serbia had dedicated units for SMEs.

Nigeria however lags behind other African nations when it comes to banking the MSME segment. A 2013 World Bank report estimates the share of MSMEs in the credit portfolios of banks in Nigeria at 5 percent, much lower than other African markets, such as Rwanda (17%), Kenya (17.4%) and Tanzania (14%).

The survey revealed that only about five Nigerian banks have SME business managers in their branches, however, focusing largely on financial targets (revenue, deposits and loans), instead of developing products that address the needs of MSMEs.

The Micro, Small and Medium Enterprises (MSME) Study in Nigeria – titled: Strengthening access to finance for MSMEs in Nigeria, is a collaborative effort of KPMG Nigeria and Enterprise Development Centre, a centre of the Pan Atlantic University.

The survey, which polled over 3,000 entrepreneurs, 18 banks and government/multilateral agencies, was conducted between November 2013 and March 2014.

“The survey reflects both the SMEs and banks’ perspectives on the primary issues affecting the growth of this critical sector,” said Bisi Lamikanra, partner/head management consulting, KPMG.

The MSME segment is an important engine of growth, employment and social cohesion in Nigeria. However, similar to MSME experience globally, the sector continues to face harsh business environment.

The MSME study in Nigeria was geared towards investigating the critical challenges faced by this segment, the factors limiting key stakeholders from supporting the segment and government’s initiatives to develop this critical sector.

The study also identified the three top challenges facing MSMEs operating in Nigeria as: non- conducive enabling environment (80%), inconsistent government policies (56%), and lack of access to finance/capital (45%).

 

PATRICK ATUANYA