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More funding options open for 41.5m SMEs amid COVID-19 scourge

More opportunities to access credit have opened for Nigeria’s hard-hit micro, small and medium enterprises (MSMEs) to recalibrate their operations and plan for recovery amid coronavirus scourge.

However, the 41.5 million MSMEs must have a good credit history, excellent book-keeping, structured documentation, adequate technology to drive the business and credibility, according to Tunde Popoola, managing director/CEO, CRC Credit Bureau.

“Banks are looking at your cash flow, audited accounts, and they are looking at whether you have the technology to drive your business, and if you have a good credit history,” he said on Wednesday at a webinar tagged ‘Exploring Access to Finance Opportunities in a Pandemic World’ organised by the Lagos Chamber of Commerce and Industry (LCCI) in collaboration with the Credit Bureau Association of Nigeria (CBAN).

The Federal Government’s MSME Survival Fund portal (survivalfund.ng) was opened on Monday to provide payroll support for 500 vulnerable MSMEs, business registration assistance to 250,000 new businesses and general grant support for 100,000 businesses.

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The Central Bank of Nigeria (CBN) had earlier launched a N50-billion Targeted Credit Facility for service providers in the health, trading, households and MSMEs hit by the pandemic. About 3,256 MSMEs were among the first batch of businesses that accessed the facility, said Abubakar Kure, managing director, Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), in May.

About N10.5 billion out of central bank’s N100 billion for the health sector had been disbursed by late May, CBN governor, Godwin Emefiele said.

There are also other funding options for small businesses, which have been made easily accessible as the Nigerian economy dips. Apart from the Anchor Borrowers Fund for farmers and processors, Nigeria has the Non-Oil Export Stimulation Facility set up by the CBN and domiciled in banks; CBN’s Real Sector Support Facility; CBN’s Youth Enterprise Development Programme, and University-Based Poultry Revival Fund.

Others are Commercial Agriculture Credit Scheme, CBN’s Creative Industry Financing Initiative domiciled in banks, Bank of Industry’s (BoI) Bottom of Pyramid Fund, BoI’s Youth Entrepreneurship Support, Solar Energy Fund and Nollyfund. MSMEs also have the opportunity to tap equity and debt financing.

According to Popoola, earlier cited, Nigerian banks had upped their game in credit financing since 2008, with credit to businesses rising 231 percent since then, from N8 trillion to N27 trillion. He urged small businesses who earlier borrowed from banks to restructure their loans to avoid default driven by the pandemic.

Jameelah Sharrieff-Ayedun, managing director/CEO, CreditRegistry, said due to Covid-19 pandemic, MSMEs must take loan restructuring seriously rather than run away from it, as doing otherwise would affect their ability to attract investors and access future credit.

“When investors want to invest, they do not just look at credit history, but they also look at individuals behind the business,” she said.

She explained that small businesses must take their credit ratings and history seriously to have access to future credit opportunities and solidify their reputations in and outside their domains.

Nigeria’s small businesses, however, complain of lack of cheap and long-term funds that will enable them expand. Fewer than 2 million MSMEs had access to credit out of 41.5 million entities, according to a report covering 2013 to 2017 done in 2019 by the National Bureau of Statistics (MSMEs) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

PwC Nigeria, in a new report, estimated annual financial gap for Nigerian MSMEs at N617.3 billion. MSMEs contribute 50 percent to Nigeria’s GDP and accounts for 86.3 percent of jobs (59.6m jobs in 2017), according to the report. The CBN on Tuesday reduced the Monetary Policy Rate (MPR), which is a benchmark interest rate, to 11.5 percent from 12.5 percent, a move expected to make more credit available.

But Jon Tudy Kachikwu, former chairman, LCCI SME Group, said in a recent interview with BusinessDay that the real problem was that many MSMEs were unable to access the funds because banks were often reluctant to lend to small businesses and demanded unnecessary documentations.

Oladimeji Peters, acting managing, FirstCentral Credit Bureau and CBAN chairman, explained, however, that it was easier for people to spend borrowed funds recklessly, but cautioned that defaults could hamper chances of accessing future credit and investments.

He explained that investors would run away from a business whose credit ratings were low, stressing the need to build strong credibility and reputation.

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