Stakeholders unhappy as SMEs, farmers get only 3.7% bank funding

Stakeholders are dissatisfied that despite the economic and job potential of small businesses and agriculture, only 3.7 percent of total bank funds is channelled to these critical sectors.

The stakeholders say this situation does not bode well for Africa’s largest economy which is struggling to diversify away from oil and take unemployed youths off the streets.

“Our strong comparative advantage in agriculture and MSMEs has not fully been fully explored, leaving these sectors too poorly developed to deliver value,” said Godwin Emefiele, Central Bank of Nigeria Governor, represented by Olaitan Mudashir Adeola, acting director of development finance, at the private sector forum ‘in Lagos.

“A meagre 3.5 percent of bank finance flows to agriculture and 0.2 percent to SMEs, and virtually nothing to exports. This is inspite of the fact that agriculture contributes about 22.9 percent to GDP; MSMEs contribute 48.47 percent and 7.27 percent of exports,” Emefiele said in his paper entitled, ‘Accelerating  Entreprise Competitiveness and Growth in Nigeria’.

Emefiele suggested that MSMEs should tap into pension funds and the third-tier securities market meant for them, adding that there is the need to strengthen development finance institutions to promote affordable and long-term finance.

Nigeria currently has 37 million MSMEs, according to a recent survey conducted by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in collaboration with National Bureau of Statistics (NBS).

These MSMEs account for 48 percent of the country’s gross domestic product, while providing 60 million jobs.

“This sector is crucial to the country’s development,” said Friday Okpara, director, strategic partnership and liaison, SMEDAN.

“But banks often talk about collateral. But I think cash flow puts them better in assessment,” Okpara said, in the event co-hosted by  African Management Services Company (AMSCO) and the National Planning Commission of Nigeria (NPC).

Okpara suggested that SME owners should have better record keeping and business plans, while also ensuring they have corporate governance, if they are desirous of accessing funds.

Paul Malherbe, CEO & MD, AMSCO, enumerated three key issues that require special attention for Nigeria to reach its private sector development agenda as a change of focus from youth education to youth entrepreneurship, increased interventions that promote gender empowerment and directly developing SMEs with limited skills.

“Our business landscape can only improve if we don’t wait, but rather place our lens on collaborations to develop human capital at SME level, matching the right skills to the right jobs, training the management of those businesses and helping them access financial capital to reinvent themselves,” said Malherbe.

Waheed Oolagunju, executive director for SMEs at the Bank of Industry (BoI), said solutions to SME problems have always been supply-driven. Olagunju said most SME owners, in trying to access funds, find it hard to answer questions relating to the supply gap, technology and market, among others.

“The easiest way to lose money is to venture into an area you know nothing about. In lending, the issue of integrity comes in. People come to our bank with the mindset that they want to collect their share of the national cake, but this is not right. You need to prove to us that you are genuine,” he stressed.

ODINAKA ANUDU