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Small Businesses Need Structured Finance System To Access Credit Facility

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SME Finance-Lucy Ekpenyong
Lucy Ekpenyong

Lucy Ekpenyong is the centre manager, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) Akwa Ibom State office. She x-rays the challenges facing small business operators and how the obstacles can be overcome.

Question: What would you say has been the major challenge facing small businesses in Akwa Ibom State?

 

Answer: I think the greatest challenge for now is the issue of power; lack of electricity supply has been a huge problem for small businesses here and that has directly and indirectly impacted on the running cost of small businesses. As you can see recently, you’ve seen a lot of small businesses closing down, businesses that you used to see, are no more in existence. The running cost is too high because of the issue of electricity. By the time you buy fuel, you can’t break even, so power is the greatest problem. And we also have the issue of finance. A lot has actually been done in case of finance and the Federal Government has been very supportive. We have seen several funds being provided by the Federal Government through the bank of industry.

 

 

Lately, you have seen the Conditional Grant Scheme that was targeted at the informal sector. And we have seen the support government is giving to micro finance institutions in the country just to provide funding to Small businesses. But there is also need for the state government and local government to have a structured finance system that will take care of enterprises in their locality. Most of these people are still not able to access funds and part of it is not that the funds are not available; part of it is that they don’t have a structure, they don’t meet with the requirements for accessing these funds, and so funding is also an issue.

 

And right now in Nigeria, we don’t really have where you can just walk into to access funds to start a business. The funding available is just for those who have already started something which is also kind of limited. A lot of renovation and breakthrough that we would have had, unlike countries like India where they have agencies that you can actually go to take funds to start your business, we don’t have where we can go in Nigeria so that small businesses that want to start can actually go and access funding.

 

You mentioned power as a major challenge; how can that be addressed since it is beyond the capacity of the small business operators?

I will suggest that private organisations should come up with solutions such as the establishment of power plants, that would complement what the government is already doing, I remember sometime ago, I think in Ebony State, I think there was a time United Nations Industrial Development Organisation (UNIDO) was partnering with some private agencies to work on their hydro-power plant and all that.

 

So apart from that, I think that if government can actually solve the power problem, if government can pay attention to the power problem, we will have a situation whereby the unemployment would be reduced, cause like now a lot of people are back home, still the economic situation has not improved and then the power issue has yet to be resolved. There are business areas that have not seen electricity for one month, two months and they are running on generators, so apart from hydro-power issue, I think the SME themselves would also look at the situation of using other alternative sources like solar, the use of solar and other alternative that maybe available within the system.

 

Question: What about the issue of capacity, are the small business operators well equipped to break even?

 

Answer: Lately, SMEDAN rolled out the conditionally grant scheme but the scheme was not just to provide grants to informal sector, it was also to upgrade them from the informal level to the formal and you know there are a lot of advantages associated with being a formal business operator, operating at a formal level, you can bid for job, you can do a lot of things but when you are operating informally, you are just limiting yourself, you have excluded yourself from a whole lot of incentive from government, from donors and all that, so the issue of capacity is there but it is being addressed.

 

You know we are capacity building agency, so what we have been doing and we are still doing is to continually train both formal and informal people to meet with the standard in operating business but that will also require some kind of support from even the private organisation because you may be aware that the government alone cannot actually do all these things. We also need support to step up in our training programme. We have counselling programmes; we have mentoring programmes; we have the capacity building, that is, the training on management on enterprises that is on a monthly basis we organise it for many groups of people.

 

Question: What improvements have you noticed among SMEs in terms of their responses?

 

Answer: The responses have not been very impressive, because people feel like, what they need most in businesses is money. Everything you hear from SME operators is that money is the problem but by the time they come and you take them through the steps and all that, you notice that money is no longer the problem. It is just that they are not properly positioned, they don’t even have the capacity to access the opportunities that are available, because opportunities are available everywhere and every day. So we are continually training, we have a robust curriculum for different categories like I have mentioned, the literate, the none literate, the graduates, the elderly, the school leavers and all that.

 

We are continually training them, upgrading their knowledge because you need to upgrade your skills as far as running business is concerned. We are doing that and then, we also connect the SMEs to even assisting agencies and development organisations.

 

Question: How do you relate with the Uyo chamber of commerce or other trade organisations in building the capacity of the informal business operators?

 

Answer: Yes, we’ve had a long standing relationship with the Uyo Chamber of Commerce, Mines and Agriculture. As you know we came in to the state in 2007. We also have a long standing relationship with business groups including the National Association of Small Scale Industrialists (NASSI) and even the upcoming youth entrepreneurship bodies in the state. And right now we are even extending operation to cater for people in the faith-based organisations because you know we have a lot of people in the church and therefore the church will be interested in people getting out of poverty and one of the ways of getting out of poverty is to have something to do with your hands, so we are doing that.

Source: Business Day

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