One of the major challenges plaguing Micro, Small and Medium Scale enterprises (MSMEs) globally is access to cheap funds. But the irony however is that this hardly comes cheap. In Nigeria, it remains the second most critical challenge the MSMEs face besides electricity. Research firms like the Enhancing Access to Finance, (EFInA) and investment houses like Afrinvest have agreed that lack of access to finance was scuttling successes of MSMEs in Nigeria.
Most Nigerian MSMEs are highly unsustainable as they are run as family outfits, making it difficult for them to access credit.
Studies also validated the position that most MSMEs lacked access to credit due to high interest rates and stiff lending conditions by the banks and development finance institutions like Bank of Industry (BoI) and the Nigerian Export Import Bank (NEXIM).
The Nigeria Bureau of Statistics (NBS) projected that Nigeria has about 37 million MSMEs but experts say the figure is far from being accurate as the NBS only did a hypothetical projection rather than a census. However, planning about MSMEs still rely on this data, at least for now.
However, the Chairman, Development Bank of Nigeria (DBN), Dr Shehu Yahaya had last year told Queen Maxima of Netherlands and the United Nations Secretary-General’s Special Advocate for inclusive finance for Development in Abuja that employment needs in Nigeria will be 30-40 million jobs by 2030, mostly to be provided by MSMEs. He said currently, 50 per cent of Nigeria’s GDP is attributed to SMEs and expected to grow to 70 percent by 2050.
He said less than 5 per cent of the over 37 million small businesses have access to credit. The DBN chairman noted that MSMEs are collectively the largest employers in many low-income countries including Nigeria, yet their viability is threatened by lack of access to risk management tools such as savings, insurance and credit. Their growth, he said, “is often stifled by restricted access to credit, equity and payments services.”
On a brighter note, however, he noted that “global pursuit of financial inclusion as a vehicle for economic development has had a positive impact in Nigeria to some degree as the exclusion rate reduced from 53 percent in 2008 to 46.3 percent in 2010.”
To add to the renewed interventions in providing credit to small businesses in Nigeria at a cheaper cost, the Bankers’ Committee partnering the Central Bank of Nigeria (CBN) has set aside N26billion to finance agric businesses and other small informal businesses under the Agribusiness/Small and Medium Enterprises Investment Scheme (AGSMEIS).
AGSMEIS, an initiative of the Bankers’ Committee, was introduced at its 331st meeting on February 9, 2017. Under the initiative, all deposit money banks (DMBs) will set aside five percent of their annual profits after tax to fund the scheme. The fund which has peaked at N26billion is expected to grow to N60billion before the end of this year.
The core objective of the initiative is to improve access to affordable financing for MSMEs, particularly those operating in the informal sector.
Thankfully, the Governor of Central Bank of Nigeria (CBN), Mr Godwin Emefiele had last April flagged off the disbursement of the funds to the first set of beneficiaries in Abuja during the Bankers’ Committee meeting. At least 300 young small enterprises benefitted from the first tranche. Emefiele said the design and funding is aimed at reducing the huge financing gap for MSMEs.
According to him, the first batch of beneficiaries were youth who had 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.
Unlike practices where physical funds were disbursed to beneficiaries, Mr Emefiele said beneficiaries, upon completion of their vocational training, were provided with the specific implements needed to practice, procured under the scheme.
He said the beneficiaries’ details, including their Biometric Verification Numbers (BVN), were equally forwarded to the deposit money banks to confirm that they were their customers before accessing the fund.
Citing recent employment statistics from the NBS, he said the unemployment challenge was one that could be adequately tackled with unity of purpose from stakeholders.
While disclosing that beneficiaries under the three components of AGSMEIS- Direct, Indirect and Developmental-would access the fund at the rate of five per cent per annum, he said no bank would be allowed to shortchange beneficiaries.
Furthermore, the governor stressed that the interest rate of 5 percent per annum being offered further attested to the unflinching commitment of the deposit money banks to support entrepreneurs to actualize their dreams and ensure that the twin goals of increased employment and poverty reduction are attained.
Recalling his pledge on assumption of office in June 2014, to create a professional and people-centered Central Bank, with a focus on Development Financing, and the CBN acting as financial catalyst by targeting predetermined sectors that can create jobs on a mass scale and significantly reduce import bills, he asserted that much had been achieved besides the initiatives of the Bankers’ Committee.
He said the Anchor Borrowers’ Programme (ABP) has achieved tremendous success in terms of outreach and coverage, making the scheme one of the most successful CBN Development Finance initiatives to date, adding that about N80 billion had been disbursed to over 358,000 small holder farmers in 34 states, cultivating eight commodities.
He also expressed optimism that the National Collateral Registry (NCR), which was introduced to unlock access to credit, would have tremendous impacts on MSMEs lending in the foreseeable future, particularly in the implementation of the AGSMEIS.