Micro, small and medium scale enterprises (MSMEs) play a major role in most economies, particularly in developing countries.
In fact, MSMEsÂ are recognised globally as the nucleus of sustainable growth, job creation and poverty reduction.Â They 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.Â
In emerging markets, most formal jobs are withÂ MSMEs, which also create four out of five new positions. However, access to finance is a key constraint toÂ MSME growth, as without it, many SMEs languish and stagnate.
MSMEs account for a significant share of employment and GrossDomesticÂ ProductÂ around the world, but, when they have limited access to finance, the economy suffers a series of negative consequences: Economic and social opportunities are restricted, enterprise creation and growth are restrained, households and enterprises are more vulnerable to threats, and payments are costlier and less safe, according to the World Bank.
In Nigeria, the greatest challenge of the 17.3 million MSMEs in operation is the poor access to affordable financing, leading to an estimated financing gap of about N9.6 trillion.Â And since theÂ drop in crude oil revenue,Â policy makersÂ in Nigeria haveÂ continuedÂ to fashion out strategies to supportÂ operators inÂ the non-oil sector, with increased focus onÂ MSMEs and the agriculture sector
This was why last weekâ€™s decision by the Bankersâ€™ CommitteeÂ to commenceÂ the disbursement of theÂ Agribusiness Small and Medium Enterprises Investment Scheme (AGSMEIS), an initiative designed to improve access to affordable financing for MSMEs, particularly those operating in the informal sector of the economy, has been commended.
The AGSMEIS fund, which was derived from an initiative by the banks to set aside five per cent of their profit after tax in a year, from its current value of N26 billion, is expected to hit N60 billion by the middle of the year.
All the deposit money banks, voluntarily agreed to set aside and contribute five per cent of their profit after tax (PAT) annually to finance eligible projects under the Scheme.
The Central Bank Governor, Mr. Godwin Emefiele, disclosed that most of the beneficiaries of the funds are youths who had beenÂ been trained on various entrepreneurship, vocational and management skills across the country by Entrepreneurship Development Institutions and Centres, such as Fate Foundation, Lagos Business School, House of Tara and Thrive Agric.
UponÂ theÂ completion of their vocational training, the specific implements needed to practice their vocations would beÂ procured under the scheme.
â€œThe beneficiariesâ€™ details including their Biometric Verification Numbers (BVN) are forwarded to the deposit money banks to confirm that they are their customers before accessing the fund.
â€œIt is indeed an auspicious occasion as the outcome of todayâ€™s engagement is expected, in no half measures, to significantly, reduce youth unemployment and restiveness, increase social cohesion and drive inclusive economic growth,â€ Emefiele explained.
Clearly, this initiative if pursued genuinely and made transparent, would go a long way in supporting the federal governmentâ€™s quest to diversify the economy.
Indeed, access toÂ financeÂ can boost job creation, raise income, reduce vulnerability,Â increase investments in human capitalÂ as well as engender inclusive growth.
ThatÂ is why this initiative by the Bankersâ€™ Committee deserves thumbs up.