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Banks increase financial support to SMEs

Posted: Apr 1, 2015 at 2:30 am   /   by   /   comments (0)

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Small and Medium Enterprises (SMEs) have been described all over the world as the bedrock of every nation’s economic success as they account for the income of the larger percentage of the population.

Stakeholders in the Nigerian economy have also severally argued that the Small and Medium Scale Enterprises (SMEs) sub sector has the capacity to provide massive employment opportunities and can also transform the economy if given the necessary encouragement.

Based on the importance of this sub sector, stakeholders have expressed the need to provide adequate funding for the growth of the Micro, Small and Medium Enterprises sub sector of the economy. Access to fund, according to industry experts, has been the bane of development of the sector, which many believe has the capacity to create enormous job opportunities.

For instance, Governor Ibikunle Amosun of Ogun State noted recently that the development of small and medium scale enterprise is the bedrock of any flourishing economy, advising that government at all levels must work hard towards developing the sub-sector. Amosun, who made this submission when he hosted the national leadership of the Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA) in his office, stressed that the real sector must take the large chunk of the Gross domestic product (GDP) of the country, urging NACCIMA to continue to sensitize the people and government at all level on the importance of commerce and industries in the economic growth of a nation.

According to the Deputy Director of the Enterprise Development Centre (EDC), Nneka Okekearu, there are more than 17 million SMEs in Nigeria, which employ more than 30 million people.

However, the emergence and growth of SMEs in Nigeria are being stifled because they are inadequately funded.

Governor of Central Bank of Nigeria (CBN), Godwin I. Emefiele, said the MSMEs are globally recognized as the critical engines of economic growth due to their potential to create jobs; boost production, generate income, and reduce poverty.

Emefiele, who said this at the signing of a memorandum of understanding (MoU) Ceremony between the CBN and State Governments on the N220 billion MSMEs fund provided by the CBN, lamented that despite this recognition, MSMEs in Nigeria do not have the adequate financing needed to play this pivotal role in the country’s development trajectory.

Industry experts had also noted that in spite of the acclaimed financial resources available to the sub-sector, many operators are still grappling on how to survive in the economy.

At the initial stage, commercial banks, which were suppose to be one of the mediums through which this problem is addressed were not fort-coming in supporting these SMEs. This is due to several reasons including the high risk of financing SMEs, poorly articulated business plans, inadequate loan collaterisation, and the short-term nature of funds held by commercial banks.

But that perception might soon be a thing of the past as many banks now appear to be taking the development of Small and Medium Enterprises (SMEs) in the country more seriously as they have developed series of initiatives to attract patronage from operators in the sub sector.

Apart from the N220 billion established by the Central Bank of Nigeria (CBN) for Micro Small and Medium Enterprises (MSMEs) last year, SMEs have increasingly become the focus in the banking industry, with banks introducing products and services targeted at attracting patronage from them.

For instance, Ecobank recently unveiled the SME Club, which offers preferential business support, products and services to its teeming SME customers across the country.

The SME Club also serves as a platform for adding value to Small and Medium Enterprises (SMEs) through information mining, networking and capacity building.

According to the Managing Director, Ecobank Nigeria, Jibril Aku, the massive empowerment for the SMEs is in line with the Bank’s vision “to contribute to the economic development and financial integration of Africa. There is no better way to grow Africa and her component countries other than by empowering our SMEs, the engine of growth. Today our bank, the Pan African bank celebrates our SMEs as we recognize your impact and contributions to the growth of our economy.”

Executive Head, Business Banking, Ecobank Nigeria, Kingsley Aigbokhaevbo, while giving an overview of the project, explained that the objectives of developing the SME Club are along the path of developing a cohesive and enduring strategic framework that focuses on growing and tracking the progress of the SMEs, adding that the SME club members will become catalyst to economic growth and transformation of the country.

Head of SME, Ecobank Nigeria, Sunkanmi Olowo, explained that the SME Club offers preferential business support, products and services. “The benefits to customers are numerous. It offers business/capacity development and technical assistance; provides business, accounting, tax, legal and other services and platforms; business to business linkage across Africa; access to market information, economic updates, exchange rate information; international markets and finance; online marketing/sales; active support from government backed organisations and quarterly working sessions led by experts.

“The Club also offers VIP lounge; priority access to banking services; Ecobank Webmall, the pan-African online shop; Ecobank Omni; the pan-African corporate online banking platform and partner benefits on our loyalty programme; preferred services in over 37 countries with Ecobank footprints across Africa,” he said.

Similarly, First City Monument Bank (FCMB) unveiled an empowerment programme for Small and Medium Scale Enterprises (SMEs) to enhance their financial, marketing and management skills.

The programme, the bank said, is aimed at equipping SME operators with the necessary skills they can readily deploy to effectively operate, grow their businesses and bottom-lines.

Executive Director, Lagos and South-West, FCMB, Mr. Olufemi Bakre, said the training was conceived by the Bank to build the capacity of SMEs by exposing them to modern and innovative skills that would help them realise their objectives. This, he said was in line with one of the Corporate Social Responsibility (CSR) focal areas of the Bank and its value as a helpful financial institution.

“FCMB realises that SMEs play pivotal roles in the growth of the nation’s economy. We also understand that a number of factors combine to determine the success or failure of SMEs,” he said, assuring that the bank is focused on being a strategic partner to such businesses, considering the huge opportunities they offer in the areas of job creation, poverty eradication and economic development.

According to the bank, the initiative, tagged ‘FCMB Capacity Building Initiative: Empowering the Nigerian SMEs,” is in partnership with Shopping Internet Services Limited, which involves series of free training and radio programmes cutting across various topical issues concerning SMEs. The bank said the pilot phase of the exercise, which was christened cluster marketing, kicked-off in Lagos recently and will last for five months after which it will be extended to other parts of the country for another eighteen months.

The bank also noted that apart from Shopping Internet Services Limited, the training has been endorsed by stakeholders such as the Lagos Chamber of Commerce and Industry (LCCI), Jobberman Limited, House of Tara and Metro FM, which will broadcast the training on radio. The bank explained that the course content and the resource persons, who are highly experienced, have been carefully chosen to ensure participants derive maximum benefits from the training, noting that some of the key topics include SME Challenges and Key Skills/Knowledge of a Successful Entrepreneur; Effective marketing of SME Products or Service; Managing Distributors, Resellers, and Agents for Success; Pricing Strategies to Increase Sales; How To Make The Best Use of Your Banking Relationship; Identifying Biggest Business Opportunities, among others.

Group Head, Business Banking Group of the Bank, Mr. George Ogbonnaya, said FCMB is committed to building a strong SME base in the country, adding that apart from funding SMEs, the bank developed a product, known as FCMB Personal Business Account (PBA) to offer protection to traders and other business owners against unexpected disasters, such as fire and flood incidents.

Apart from these, other banks which have developed series of initiatives to assist SMEs include First Bank Plc with its SME product offerings; loan facilities and with interest rates, which industry watchers believe are relatively favourable. The bank is also said to have been very supportive of businesses in the agricultural sector, while a well-articulated business value proposition in the agriculture sector could be financed by First Bank Plc with single digit interest rate.

Also, Heritage Bank, which analysts described as a new player in the Nigeria’s banking sector, and carved out of the acquisition of Societe General Bank of Nigeria in 2012, has positioned itself in the market as the SME Bank. Industry observers said the bulk of its products and services are uniquely tailored to support small and medium businesses and it has actively engaged the SME sector, with the MSME Clinic, which it ran in collaboration with the Enterprise Development Centre of the Pan Atlantic University.

Fidelity bank has also been said to be one of the top banks that support SMEs. Its support services, Daily Independent learnt, goes beyond loan provision, gathering that other ways they support SMEs is evident in its SME-focused radio programme, Fidelity SME Forum, while the Fidelity Managed SMEs was said to have been structured to provide advisory services to SMEs in Nigeria.

Similarly, other financial institutions both local and foreign have also expressed their commitments to assisting the SMEs sector in the country. This, they have exemplified through numerous initiatives geared towards empowering entrepreneurs to grow their businesses.

For instance, the World Bank, African Development Bank (AFDB), International Finance Corporation (IFC) recently reiterated their commitment toward the growth of the sub sector.

The financial institutions had during a general meeting organised by the Nigerian Association of Small and Medium Scale Enterprises in Lagos recently, identified inadequate access to finance as the major challenge facing SMEs in the country.

Representative of the World Bank, Mr. Michael Wong, explained that government should provide a platform that would aid easy access to funds for the growth of SMEs in the country.

“Enterprise survey shows that labour is cheap but value added is low due to lots of constraints. Nigeria SMEs, access to finance is low compared to other African countries like Kenya. Most working capital is financed through internal funds,” he said, noting that the World Bank had concluded plans to launch another scheme to support SMEs in Nigeria.

Also, the African Development Bank (AfDB) signed an agreement to provide two sovereign-guaranteed multi-tranche lines of credit (LoCs) of $500 million to the Bank of Industry (BoI) and $200 million to the Nigerian Export-Import Bank (NEXIM) in order to support the modernization and expansion of export-oriented small and medium enterprises (SMEs).

The LoCs, which will include a technical assistance package to strengthen institutional capacity of BoI and NEXIM as well as their SME clients will allow local SMEs to be more competitive, scale up their operations and ultimately create more jobs in Nigeria.

The LoCs will supply multi-sector financing to address the challenge that SMEs face in accessing finance in the country.

AfDB’s Resident Representative in Nigeria, Ousmane Dore, said the AfDB combined programme will contribute to mobilize significant financial resources for Nigerian export-oriented SMEs, and will contribute to economic development, employment opportunities, foreign exchange and regional trade integration.

Managing Director, NEXIM Bank, Robert Orya, said: “Thanks to AfDB’s support through this program, NEXIM seeks important economic development achievements, including approximately 55,000 new jobs for its SME clients, $1.6 billion in foreign exchange and an overall contribution of almost seven per cent to non-oil exports, including a 10 per cent share in Economic Community Of West African States (ECOWAS) exports. This facility will provide a great opportunity for NEXIM to make available concessional long-term funding in pursuance of its strategic objectives of enhancing value-added exports and bolstering the capacity of SMEs for job creation and foreign exchange earnings.”

Diamond Bank, through its BusinessXpress Account, also offers significant value to SMEs in Nigeria. The product’s value proposition includes, Zero COT, access to business development seminars, fixed monthly fee as low as N1750, easy access to business loans, personal credit cards, access to your own website at a discounted price, financial advisory and other networking opportunities. The Bank also partnered with the IFC to provide SME development activities in Nigeria.

Diamond Bank Plc, said it has for years partnered with relevant agencies to help empower business operators from the MSME segments of the economy, noting that since 2010, it has partnered with Enterprise Development Centre (EDC) of the Pan-Atlantic University that focuses on business development and provision of support services to SMEs in Nigeria in the training of entrepreneurs under the Building Entrepreneurs Today (BET), programme.

It explained that the BET involves the training of over 50 entrepreneurs for a period of one year in which five of them will be awarded N3 million grant each to take their businesses to the next level, noting that all participants also stand a chance to acquire loan from the bank at a discounted rate.

The bank said it also recently partnered with the International Finance Corporation (IFC) on Enterprise Governance training  modules targeted at SMEs in the Africa region, which will help entrepreneurs gain the skills  needed  to  succeed  in building sustainable businesses that create wealth and jobs.

The governance modules, it explained, will be delivered to SMEs through IFC’s Business Edge partners in more than 22 countries in the region, explaining that Business Edge is part of a strategy by IFC to support smaller businesses that also include helping governments simplify business regulations in areas such as licensing, registration and taxation.

The Bank noted that the pilot scheme, which was made possible by feedback from a survey of up to 50 MSMEs in January 2013 formed the basis for the Nigerian Market Based Enterprise Governance training curriculum which was used at a recent training held at the Federal Palace Hotel, Lagos.

An SME Development Specialist with IFC, Mr. Reginald Nworka, said the partnership is a great opportunity for people to improve their lives and move out of poverty circle.

Head Retail Banking, Diamond Bank, Mr. Jude Anele, said the bank is partnering with the IFC in order to help solve the challenges that entrepreneurs in the country face in doing business, noting that the partnership also seeks to improve on the quality of products that the sector exports in order to become more competitive in the international markets.

Anele noted that the bank is planning to create an online club where owners of SMEs could advertise their products and services and share information that will add value to their businesses, calling on entrepreneurs in the country to take advantage of the programme to grow their businesses.

Managing Director, Logus Investment Limited, Mr. Innocent Eleogu, commended Diamond Bank for the vision of empowering entrepreneurs, saying that the partnership would go a long way to bring support for the SME segment of the economy, which has been long neglected.