Govt, banks mull new funding mechanism for SMEs

AgangaIF the latest pronouncement from the Federal Government on the issue is anything to go by, then small and medium enterprises (SMEs) in the country would soon receive a much-needed lifeline in the form of easy credit facilities from banks.

Minister of Trade and Investment, Olusegun Aganga, gave that much assurance yesterday in Abuja at a meeting with the desk managers in charge of SMEs in banks.

Aganga stressed that the problems associated with funding for small businesses would soon be a thing of the past in the country.

He directed the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) to take up the challenge of training and re-training of SMEs to ensure that they become more competitive and attractive to funding.

He disclosed that his ministry had initiated a partnership with commercial banks in the country to fashion out a new funding mechanism that would give SMEs access to cheap funds.

Aganga stressed that the new initiative would remove factors stopping banks from lending to SMEs as part of renewed efforts to increase their capacity to create jobs, generate wealth and transform the country’s economy.

His words: “The rate of unemployment in Nigeria is becoming alarming. There is no gainsaying in the fact that the best way to checkmate the situation is to have a virile Micro, Small and Medium Enterprises sub-sector. The recent survey conducted by SMEDAN, in conjunction with the National Bureau of Statistics, revealed that we have close to 20 million MSMEs in Nigeria .

“The figure represents over 80 per cent of the total number of enterprises in the country and accounts for 75 per cent of Nigeria’s total employment base. If we don’t create an enabling environment for this important sub-sector to thrive, we will all suffer its negative consequences.”

Aganga added: “The MSME community has been complaining bitterly of not being able to access cheap funds from the banks. They have also said that where services are available, it takes the banks ‘forever’ to process them. The vision of the Ministry of Trade and Investment is to increase the contribution of SMEs to the nation’s Gross Domestic Product from 10 per cent to 30 per cent and increase export earnings through SMEs from three per cent to 25 per cent within the life-time of this administration.

“To be able to achieve this, we have identified commercial banks and development finance institutions and are partnering them to come up with SME-friendly products or re-design existing products to enhance access to finance by SMEs.

“We want to partner the banks to remove the barriers inhibiting them from lending to SMEs at a reduced interest rate.”

The minister also disclosed that SMEDAN was currently carrying out an SME rating project to minimise the risks associated with SMEs by training and re-training them to become more competitive and attractive for funding by commercial banks.

He stated: “I am aware that banks’ problems with SME operators border on perception of SMEs as high risk largely due to their informal nature; inability to prepare bankable business plans; poor record keeping and discriminatory cultural practices, among other things. SMEDAN is championing the SME rating project, which will minimise the risks usually associated with the sub-sector.

“Though SMEs are known to be high risk areas, they also hold the key to sustainable banking if properly understood and funded. We are prepared to take up the challenge of training and re-training MSMEs to ensure that they become more competitive and attractive to funding.

“To this end, SMEDAN is being refocused to constantly monitor and provide business development support services to MSMEs to ensure that they conform with conditions attached to loans.”


Please enter your comment!
Please enter your name here