Only 4.2% of 37m MSMEs Access Credit
The above headline is real.
According to official estimates, only 4.2 percent of 37.07 million MSMEs in Nigeria have been able to access loans or overdrafts from financial institutions. For new entrants or start-ups, it is practically impossible for them to access finance from banks.
The shock here is what the headline means in real terms. It represents a clear break with the flow of news and information regarding the supposed availability of funds for starting and growing a micro, small or medium business in Nigeria.
There is no gainsaying the fact that there is an increasing number of funds earmarked for Micro, Small and Medium Enterprises (MSME). A casual glance at the daily headlines gives the impression, albeit not exactly according to the facts on ground, that the nation is awash with investible monies, ready, waiting and available for entrepreneurs in need.
A short listing will suffice.
In a firm determination to bridge the huge financing gap which remains a challenge to their optimal performance, the Central Bank of Nigeria (CBN) launched the Micro, Small and Medium Enterprises Development Fund (MSME) on August 15, 2013, with a share capital of N220 billion.
The scheme proposes to channel 10 percent of the Fund to grants, capacity building and administration costs while 90 percent is slated for Participating Financial Institutions at two percent, for on-lending to MSMEs at a maximum interest rate of nine percent per annum. The broad objective of the Fund is to enhance by MSMEs to finance, increase employment and create wealth.
The Bank of Industry (BOI) in 2015 kicked off its Five-Year N310 billion SME Funding Programme. Under the programme, the Bank manages not fewer than 30 national development schemes and intervention funds on behalf of public, private and foreign agencies, which include, in parts, the CBN N220 billion MSME Fund and the Dangote Foundation N5 billion Fund.
Enters the Development Bank of Nigeria (DBN). With its asset base of over USS1 billion, with its wholesale term funding and risk-sharing advances through eligible commercial banks, micro-finance banks, retail development finance institutions and leasing companies, with its flexible loan repayment tenure of up to 10 years and a moratorium of up to 18 months, DBN seems uniquely positioned to alleviate the financing constraints of Micro, Small and Medium Enterprises (MSMEs).
Just this past week, at a dinner/maiden edition of the MSMEs Award 2018 held at the State House Banquet Hall, Abuja, Acting President, Prof. Yemi Osinbajo, said the Federal Government is working towards providing Micro, Small and Medium Enterprises (MSME) with a collateral-free credit facility. Under this plan, MSMEs would be able to borrow between N2m and N10m for tenors of Five to Seven years at an interest rate of Five percent.
All that an MSME needs is to provide the Credit Committee with a bankable business proposal and guarantor!
While the foregoing indicate efforts at developing a new breed of entrepreneurs, it cannot be said that the funds are achieving their desired objectives of making credit ready and available to the nation’s small business owners.
What could be responsible for this lacuna between efforts and results? The Central Bank of Nigeria and the Bank of Industry, two of the major repositories of MSME funds, have been telling potential beneficiaries, times without number, that they are not qualified to access credit! These major lenders say, with some truth, that MSMEs suffer a wide variety of disabilities, which account for their poor access to funds domiciled in financial institutions, chief among which are lack of proper documentation, absence of financial history and inability to structure their businesses. In summary, there is an acute shortage of what lenders would call good bankable proposals.
Needless to say, this creates a debilitating disconnect between the Lenders and Small Business Owners. What to do? The time has come to think and act beyond throwing money, and money alone, at the problem. Now is the time to address, with equal commitment, the twin needs of entrepreneurship education and enterprise development. Training, backed with money, not the other way round.
Business is a calling. It is difficult, and near impossible, for a person to succeed in business by the mere accident of birth or the acquisition of a general education. Business must be learned. Aspiring entrepreneurs cannot assume that they know and understand business when, in fact, they do not. Such persons must realise that business requires specialised learning. Any person who has a business idea must first learn the art and science of business. He or she must get interested in entrepreneurship and learn business as a discipline.
This should be the real focus of our funding initiatives. It is the trained cadre of entrepreneurs emerging from this concentration that will produce the change makers who possess the absorptive capacity to make good use of the funds now being thrown at our entrepreneurial challenge. To act otherwise will be putting the proverbial cart before the horse!