Research has shown that Small and Medium Enterprises (SMEs) are less likely to be able to obtain bank loans than large firms. Their funding is generated internally from friends and family members. The International Finance Corporation (IFC) estimates that 65 million firms, or 40 per cent of micro, small and medium enterprises (MSMEs) in developing countries, including Nigeria, have unmet financing need of $5.2 trillion yearly. However, manyNigerian banks are showing new commitment to supporting government’s growth and development agenda through SMEs funding, writes COLLINS NWEZE.
Banks need to be at the heart of the Small and Medium Enterprises (SMEs) – providing support, capital and innovative solutions to help them prosper.
This is because SMEs play a major role in most economies, particularly in developing countries. They account for the majority of businesses worldwide, and are important contributors to job creation and global economic development. They represent about 90 per cent of businesses and more than 50 per cent of employment worldwide.
Formal SMEs contribute up to 40 per cent of national income (GDP) in emerging economies. The numbers are significantly higher when informal SMEs are included. According to World Bank estimates, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world.
In emerging markets, most formal jobs are generated by SMEs, which create seven out of 10 jobs. However, access to finance is a key constraint to SME growth, it is the second most cited obstacle facing SMEs to grow their businesses in emerging markets and developing countries.
That explains while FirstBank of Nigeria (FBN) Limited has continued to identify with SMEs as the engine of the economy, whilst promoting its growth and contribution to the national economy. For instance, the bank has provided financial support/dedication to the SMEs lending N170.3 billion to SMEs from 2017 to date. Also, the number of SMEs supported by the bank over the last three to seven years are 70,703 SMEs among other milestones.
As part of the launch of its specialised SME propositions, the bank convened its 2019 SME Week during which customers and non-customers of the bank participated in a wide range of events and activities designed with the SME in mind.
The activities range from the SME Masterclass themed “Designing and Implementing a Growth Strategy for your Business” to specialised one on one sessions with renowned business coaches and the launch of seven unique pillars which make up our SME propositions available via SMEConnect – The FirstBank SME portal.
The highlight of the week was the launch of the SME portal, a platform through which SMEs can access the bank’s unique propositions that have been designed to equip them with the essential tools needed for the growth of their business.
The SME portal is also designed to help SMEs identify various gaps that hinder their business growth leveraging our innovative Business Diagnostics Tool, with a view to proffering tailored solutions and creating opportunities for business improvement, profitability and sustainability.
Following extensive research by the bank over the years, it identified these seven strategic pillars to be essential for the sustainability and growth of the SMEs. These include – access to infrastructure, access to talent, capacity building, policy and regulation, access to resources, access to market as well as access to finance. This has duly informed our strategy and propositions for our SMEs going forward.
The bank said its sole aim for the programme was to ensure it met customers’ business needs. This means having a better understanding of what their business requirements are and providing more tailored and relevant solutions for them.
It said the programme gave its customers and SMEs the opportunity to participate in a one-on-one coaching sessions with renowned SME experts.
It was also opportunity for participants to take advantage of the personalized coaching sessions for selected SMEs at designated branches.
“At the closed sessions, SME Experts reviewed business diagnostics results with SMEs and discuss improvement opportunities based on focused areas, while at the open sessions, SME owners were able to walk into selected branches, take the Business Diagnosis Test and have their results reviewed by a resident coach”.
Other activities include one on one coaching advisory sessions, to be simultaneously held across six locations in Lagos, Abuja, Rivers, Oyo, Kano and Owerri. The weeklong event rounded off with a live webinar facilitated by Gbenga Shobo, the bank’s Deputy Managing Director.
Shobo said: “FirstBank has over the years, been at the forefront of supporting Businesses, especially the SMEs as we recognise that the SMEs are the engine of the economy. We are committed to ensuring that we leave no stone unturned as we connect with them in their continued contribution to national development in terms of the employment opportunities they create as well as their contribution to the nation’s GDP amongst many economic values.”
“The FirstBank SME Week is driven to promote the Bank’s SME proposition, thereby having SMEs across the country optimally enlightened on how to plug in. We believe this will help SMEs bolster their contribution to the growth and development of the economy” he concluded.
Likewise, Fidelity Bank Plc, Nigeria Export Promotion Council (NEPC) and Lagos Business School (LBS) have united to unlock export potential of 100 Micro Small and Medium Enterprises (MSMEs) in the North.
The institutions are supporting the bank in training over 100 Small and Medium Enterprises (SMEs) at the Export Management Programme (EMP) held in Kano.
Guaranty Trust Bank (GTBank) Plc also partnered the Development Bank of Nigeria (DBN) to disburse N25 billion funding to entrepreneurs in Nigeria’s Micro, Small and Medium Enterprises (MSMEs) sector. The funding is the single largest disbursement by the DBN to any financial Institution in Nigeria since it commenced operations.
Other milestones
Findings showed that over the last three to seven years, FirstBank has supported over 70, 703 SMEs, while it continues to partner with government and big financial technology (Fintechs) companies to bring banking services closer to the people.
FirstBank has been providing technology-enabled services and richer user experiences to petty traders.
In turn, those firms can devote more time and energy to running their businesses. The SMEs as defined by the Central Bank of Nigeria (CBN) are economically independent companies with about 11 to 300 employees and an annual debit turnover of between N5 million to N500 million.
“First Bank has over the years, been at the forefront of supporting Businesses, especially the SMEs as we recognise that the SMEs are the engine of the economy,” said Gbenga Shobo, deputy managing director, First Bank of Nigeria Limited.
“We are committed to ensuring that we leave no stone unturned as we connect with them in their continued contribution to national development in terms of the employment opportunities they create as well as their contribution to the nation’s GDP among many economic values.”
Following extensive research by the First Bank over the years, it identified these seven strategic pillars to be essential for sustainability and growth. These include, access to infrastructure, access to talent, capacity building, policy and regulation, access to resources, access to market as well as access to finance.
Lack of stable power supply from the national grid has been a major stumbling block to small businesses and artisans, who make up the informal sectors and a lot of them have closed shop because they can’t continue to spend money on fuel to run generators.
Stakeholders say the opaqueness of the venture makes it difficult for banks to extend loans to them. Also, the large chunks of operators in the informal sector do not keep proper books of account, making it difficult to ascertain their cash flows.
Despite these monumental challenges, the industry is paramount to the country, as it is the largest employer, but experts have agreed that a lot needs to be done by government and the private sector in reviving it.
According to the Ministry of Industry, Trade and Investment, over 37.07 million, small and medium-scale enterprises, MSMEs, account for more than 84 per cent jobs in the country.
The ministry further stated that about 48.5 per cent of the gross domestic product (GDP), as well as about 7.27 per cent of goods and services exported.
Of the total number, micro-enterprises account for the bulk of the MSMEs in Nigeria, with 36,994,578 enterprises, about 99.8 per cent, while small enterprises took 68,168, and medium enterprises 4,670.
FirstBank and Microsoft had, within the year, partnered to provide supporting technology solutions at a discounted rate to over 40 million SMEs. The aim was to encourage them to embrace technology in their operations.
Nigeria said the target was to reach about 40 million SMEs and interested individuals.
“The SMEs can buy some of the Microsoft solutions at discounted rates, pay in naira as against the dollar, thereby removing the stress of exchange rate which is sometimes a challenge for the SMEs. They now have a portal where they can ask for advice on the products and some extra sales support we can also get Microsoft to give them,” he said.
“The SMEs segment is so important to the livelihood of many Nigerians, and we have seen that SMEs have the ability to grow. One million new devices will be coming online in 2020 while 60 per cent of computing will be in public cloud in 2025, adding that 25 per cent of workers’ time is wasted by information overload,” according to Microsoft.
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