Realising the overarching effect of unemployment on the security of Lagos State and more importantly, its economy, the state government set up a trust fund to tackle the problem headlong and practically. The fund, called Lagos State Employment Trust Fund, is chaired by Mrs. Ifueko Omoigui-Okauru. In an interview with Kunle Aderinokun and Gboyega Akinsanmi, Omoigui-Okauru, who was the executive chairman of Federal Inland Revenue Service (FIRS), speaks on the motive behind the fund, its impact on the lives of the people, issues and challenges as well as projections and aspiration
Lagos State Employment Trust Fund has been operating for almost three years. What inspired the establishment of the Fund?
The Lagos State Employment Trust Fund is the brainchild of His Excellency, Governor Akinwunmi Ambode. The Fund was established by The Lagos State Employment Trust Fund Law 2016 to provide financial support to residents of Lagos State, to tackle unemployment through job and wealth creation.
The Fund was set up based on the governor’s vision to create a platform that promotes job creation by improving access to finance, strengthening the institutional capacity of MSMEs and formulating policies designed to improve the business environment in Lagos State. In addition, the Fund is expected to train and place unemployed Lagos residents in jobs; while also focusing on programmes designed to drive innovation within the Lagos ecosystem.
Given the alarming rate of unemployment in Nigeria, especially in Lagos State, what impact has the Fund made so far?
The Lagos State Government has recognised unemployment as one of the major challenges affecting Lagos State, and, therefore, a critical focus area of the current administration. According to the National Bureau of Statistics, Nigeria is currently plagued with a combined unemployment and underemployment rate of 40 per cent within the active working population, while Lagos State’s rate stands at 33 per cent. This is a clear sign that job creation needs to be the focus of any responsible Government, and this informed the governor’s decision to set up the Employment Trust Fund.
To date, LSETF has created over 20,000 new jobs by supporting beneficiaries of the loan and employability program. The current figures are set to rise with the reopening of our loan application portal for micro enterprise loans, and our continued intervention in technical and vocational training. We have provided loans worth N5.8 billion to almost 8,000 businesses through our loan programme and trained over 3,000 people under our employability programme.
The Fund was set up to support small and medium enterprises in Lagos State. What are the conditions of giving such support?
First, we are keen to support people who live and run their businesses in Lagos. In addition to this, the business must be their main source of income and demonstrate viability. Apart from these critical conditions, the standard compliance conditions such as a clean credit check, evidence of tax compliance, evidence of residency in Lagos (demonstrated by ownership of a LASRRA number) are necessary. Once these conditions are met, the Fund will assess viability and affordability of the business, and successful applicants are made loan offers. Once a loan offer is made, the applicant must pay five per cent of the loan amount as a security deposit, and ensure the loan is guaranteed by at least one person or company, before the loan is disbursed into the nominated bank account.
In the last three years, how many SMEs have been supported by the Fund?
Since inception and commencement of operations of the LSETF in 2016, the Fund has supported a total of 7,826 business as at August 2018 These include 1,001 small and medium enterprises; 6,264 micro enterprises; and 561 microenterprise startups. In addition, we have also provided workspace vouchers to 50 technology startups under our Lagos Innovates programme that looks to support the technology ecosystem in Lagos State.
How many jobs have been created through the SMEs that received support from the Fund?
Based on our interim impact assessment, the Fund has helped create over 23,000 jobs with over 20,000 of those coming from microenterprises. However, the Fund’s management has finalized plans to engage in an expanded assessment and will present the outcome to the public once it’s available.
What is the strategy the Fund put in place to monitor and evaluate the growth of the SMEs that have received support from the Fund?
The Fund has a mandatory business clinic that all beneficiaries must attend before their loans are disbursed. These clinics help the beneficiaries understand not only how to run the businesses better, but also the implication of not meeting their repayment obligations. In addition to this, we also have business development partners who periodically visit the beneficiaries, and also help them resolve any problems or challenging they are facing. Finally, the Fund also provides an opportunity for beneficiaries to utilize value-added services like free legal clinics, social media marketing training, and access to fairs and exhibitions; which not only ensure they get specialist support where required but also improve their access to markets.
What is the level of compliance among the beneficiaries with the terms and conditions for accessing facility from the Fund?
We don’t compromise on compliance with our requirements, and any application that doesn’t meet the minimum requirement is declined. Even when an application is approved, the loan is not disbursed until the necessary conditions before disbursement are met.
Are there cases whereby beneficiaries of the Fund disappear after loan disbursement or situations whereby their SMEs suffered a major setback?
There will always be such isolated cases. However, we carry out a detailed Know Your Customer (KYC) exercise before disbursing our loans to minimize such cases; and also insist that all beneficiaries and their guarantors must be duly registered with the Lagos State Residents Registration Agency (LASRRA). Also, where the business suffers setbacks, we are able to restructure the loans, and also encourage all our beneficiaries to ensure their business premises and assets are insured against fire, burglary and theft.
In a situation whereby a beneficiary cannot repay his loan, what will the Fund do to address such a situation?
While it is important that all loans granted by the fund are repaid as and when due, the first step in such situations is to understand why the beneficiary cannot repay the loan. So, our first task is to understand if the reason for defaulting is due to an unwillingness from the beneficiary, or a genuine inability to repay due to unforeseen negative changes in the business. If the reason for default is genuine, we advise the client on strategies to improve the business and restructure the loan to reflect the current realities of such a business. However, if the reason for default is simply unwillingness, we will report both borrower and guarantor(s) to the Credit Bureaus; and now, we are finalising plans to take defaulters to the Small Claims Court, recently set up by the Lagos State Government, to resolve commercial disputes that don’t exceed N5 million.
How has the partnership between the UNDP and the Fund impacted on employment generation and wealth creation in the state?
The partnership between UNDP and LSETF aims to increase the pool of skilled manpower in Lagos State, and ensure these trainees are linked to private sector jobs in the relevant sectors. The project in intervening by training people in Manufacturing, Health Care, Construction, Entertainment, and Hospitality; and aims to train and place 10,000 people before the end of 2019.
The Fund has achieved the following outcomes since inception: trained 3,187 individuals; certified 2,867 individuals and placed 519 individuals in various jobs.
At the outset of the Fund, what are the set targets in statistical terms?
The Fund’s strategic targets are to create at least 133,000 direct and 217,000 indirect jobs, support at least 28,000 businesses, and add over 150,000 new taxpayers to the Lagos state tax register by 2019.
What is the projection of the Fund in the five years?
Our goal is to create 350,000 jobs by 2019, and at the end of next year, we will measure our impact and reassess the Fund’s objectives going forward. Ultimately, our vision is to create employment and entrepreneurship opportunities for all Lagos residents, and we will continue to support initiatives that help us achieve the Fund’s vision.
If prompted, will the state government allow others to borrow from this idea or are there plans to replicate this initiative in other states, nay at the federal level?
Peer learning is an important part of what LSETF aims to improve, and we have already shared our strategy and experience with those responsible for job creation in Edo, Ondo and Bayelsa states. Apart from sharing insight, we are also exploring ways to partner with them, to broaden the impact and create sub-national linkages, where possible. We are also exploring opportunities with existing Federal Government initiatives like N-Power to build the required national and sub-national synergy needed to put people in jobs.