By Obinna Chima
Micro, small and medium scale enterprises (MSMEs) play a major role in most economies, particularly in developing countries.
In fact, MSMEs contribute up to 45 per cent of total employment and up to 33 per cent of national income (GDP) in emerging economies, according to a report by the World Bank.
According to estimates, 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and sub-Saharan Africa.
In emerging markets, most formal jobs are with SMEs, which also create four out of five new positions. However, access to finance is a key constraint to SME growth, as without it, many SMEs languish and stagnate.
Clearly, 50 per cent of formal SMEs don’t have access to formal credit. The financing gap is even larger when micro and informal enterprises are taken into account. Overall, the World Bank report indicated that approximately 70 per cent of all micro, small and medium scale enterprises in emerging markets lack access to credit. While the gap varies considerably between regions, it’s particularly wide in Africa and Asia.
The current credit gap for formal SMEs was estimated to be $1.2 trillion; the total credit gap for both formal and informal SMEs as high as $2.6 trillion.
Furthermore, a World Bank Group study suggests there are between 365-445million micro, small and medium enterprises in emerging markets: 25-30million are formal SMEs; 55-70 million are formal micro enterprises; and 285-345 million are informal enterprises. Moving informal SMEs into the formal sector can have considerable advantages for the SME (for example, better access to credit and government services) and to the overall economy (for example, higher tax revenues, better regulation). Also, improving SMEs’ access to finance and finding solutions to unlock sources of capital is crucial to enable this potentially dynamic sector to grow and provide the needed jobs.
For Nigeria, the significant drop in crude oil revenue has compelled policy makers to continue to fashion out strategies to support the non-oil sectors, with increased focus on SMEs and the agriculture sector.
Over the years, successive governments had developed quite a number of strategies, programmes and promises to make this very critical sector work. The outcome, however, had not made much impact. But as part of its commitment to the sector, the federal government led by President Muhammadu Buhari, recently commenced series of MSME clinics around the country.
The Vice President, Professor Yemi Osinbajo inaugurated the exercise in Abuja. The initiative was structured to focus on finding a one-stop-shop which addresses different challenges confronting operators in this sector. And the move was to bridge the information gap between the authorities and MSMEs with the aim of encouraging small businesses to be more efficient and capable of competing at the global level. Though many would say, let this charity begin at home whereby these small businesses are seen to have successfully taken-off properly, with some breath of life, competing among one another locally, the effort of the government should not be disregarded.
Championed by the Corporate Affairs Commission (CAC), with a number of government agencies such as, Nigerian Investment Promotion Council (NIPC), Nigerian Export Promotion Council(NEPC), Small and Medium Enterprise Development Agency (SMEDAN), FIRS, BOI, Customs, Ministry of Trade and Investment, among many others, these agencies are getting mobilised to ensure this agenda delivers its objectives.
This strategic initiative is being organised in 21 cities across the six geo-political zones of the federation.
Due for quality applause for waking up to full consciousness of the fact that total hope on oil is not sustainable, the government is indeed not pretending about the fact that agric value chains and manufacturing, (largely MSME segments), are the way to go.
Also, the Central Bank of Nigeria (CBN) had launched the MSME Development Fund with a share capital of N220 billion, in other to support operators in the sector. The fund was said to have been established in recognition of the significant contributions of the MSME sub-sector to the economy and the existing huge financing gap.
First City Monument Bank (FCMB), comes to mind. The establishment has taken financial intermediation to this key sector of the economy as one of its operational areas of strength. This can be buttressed by the fact that the bank’s intervention has resulted in better access to financial resources by needy individuals, women owned firms and empowerment outfits as well as small and medium scale businesses and organisations.
FCMB has continued to deepen its support to Small and Medium Scale Enterprises (SMEs) in Nigeria by disbursing over N3 billion to such businesses in the last 18 months. The development has led to an increase in the number of SME operators that have benefitted from the funding support of the bank across the country. The lender is one of the top participating banks appointed by the CBN to drive the N220billion MSMEDF.
But beyond the funding, FCMB had put in place, various initiatives and capacity building programmes that have fast-tracked the growth of SMEs, thereby up-scaling their contributions to the development of the country.
Apart from training sessions organised for owners of SMEs, the bank has brought its team of experts in the sector closer to the people by having dedicated loan officers at some of its branches nationwide. These officers are trained and equipped to provide SMEs with the best and most effective advice and support.
In addition, the bank has established an empowerment programme, called Cluster Marketing, for operators of SMEs. The initiative was designed to enhance their financial, marketing and management skills.
In the same vein, FCMB has continued to aggressively support women managed businesses in line with the MSME fund scheme by collaborating with women involved in small businesses for the provision of funding, sponsorship and advisory services.
These interventions were in line with the bank’s value as a helpful bank committed to enhancing the growth and achievement of the personal and business aspirations of its customers and the nation in general.
Speaking on the feat recorded by the bank in the MSMEs space, the bank’s Divisional Head, Retail, Mr. Olu Akanmu, said: “SMEs are the bedrock of any country’s economic development. It can hardly make good progress except the SMEs excel. Therefore, being a forward looking bank with the appropriate desire for growth, we have decided to provide this sector with maximum support.”
He reiterated the commitment of the financial institution to support its customers operating in the SMEs space to overcome the challenges they usually face, especially at the take-off stage, ‘’because we want to be part of their success story.’’
Akanmu advised SMEs to re-examine their operations and effectively position themselves to take advantage of the opportunities within the country.
According to him, ‘’there are huge intervention funds from both government and multi-national agencies focused on supporting SMEs. Some are focused on helping with affordability, in other words reducing the cost of borrowing, while others are focused on accessibility, in other words helping to mitigate those risks that make small and medium scale businesses fail credit acceptance tests or requirements. Unfortunately, a good number of the outfits do not know the difference and therefore adopt the same strategy for accessing both. This will rarely work.’’