Banks, Operators Differ On SMEs Funding | Independent Newspapers Limited
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Banks, Operators Differ On SMEs Funding

Posted: Oct 2, 2015 at 12:01 am   /   by   /   comments (0)

By Ikechi Nzeako


Small and medium enterprises (SMEs) play very important roles in the development of the Nigerian economy because they possess potential to generate employment, improve local technology, develop indigenous entrepreneurship and enhance integration with large-scale industries.

However, the SMEs in Nigeria have not contributed optimally to the development of the economy because of many factors, some of which are within and others outside their control.

Some of the challenges that SMEs face in the country are unfriendly business environment, poor funding, low managerial skills and lack of access to modern technology.

However, poor funding has been identified as the most difficult challenge facing SMEs because commercial banks have shied away because of the risks and uncertainties associated with the sub-sector and this has made SME operations costly and inefficient.

To improve access to finance by SMEs, the Central Bank of Nigeria approved the investment of N220 billion-debenture stock to be issued by the Bank of Industry (BoI) with effect from May 2010.

But this has not changed the fortunes of SMEs in the country, as they are still grappling with issue of shortage of funds.

According to founder/project manager, Ready Foods Enterprises, Sagamu, Ogun State, Chief Oladipo Oyewole, Nigerian banks are very difficult to deal with. In an interview with Daily Independent, he said banks make impossible demands on clients before granting loans to them. He said he had sought loans from some banks and was unable to secure any loans because of the stringent conditions that were attached to the loan.

Oyewole, who manages a 50-hectare farm, argued that the attitude of the banks was undermining the growth and development of SMEs and Nigerian economy at large, called on banks to make loans accessible to the sector in the interest of the nation.

Also speaking on the issue, Lateef Fasasi, who runs an engineering firm in Lagos State, said his experience regarding loans with Nigerian banks left much to be desired. Fasasi said after many futile attempts to secure a loan from a commercial bank, he approached and secured a loan from a micro-finance bank, which interest rate, he said was very high.

According to him, “the interest rate was very high and it almost ruined my business and defeated the purpose the loan was meant to serve and since then, I am wary of seeking bank loans.

“Again, the business environment is very harsh and it is very difficult to do a profitable business given the short tenures of commercial bank loans in the country.”

Another Lagos-based businessman, who runs a restaurant, Lawrence Iheanacho Ezebili, said that only persons with connections could access loans from commercial banks in the country, adding that the difficult conditions banks attach to loans were a factor hindering access to loans by entrepreneurs. He stated that there was a need to relax the conditions so that SMEs could thrive, and that this would lead to a reduction in the number of unemployed persons in the country.

However, the banks said they are doing all they can to finance SME operations in the country, adding that there other sectors competing for funds. They also stated that what they have are deposits from customers, which could not be given to SMEs who require long-term loans. They are also citing instances where they have made efforts to promote SMEs.

The Bank of Industry (BoI) has put in place programmes that will enable sme operators to access funds from the bank. Apart from that, it is partnering with ten big banks in the country to help SMEs access small medium business people access funds at low interest rate. Apart from that, the bank has also organised a group of experts in business development to advise sme operators on how to write bankable business plans at minimum costs.

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

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

Managing Director, Ecobank Nigeria, Jibril Aku, said the empowerment for the SMEs was 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.”

Access Bank also unveiled a series of capacity development initiatives for SMEs through innovative partnering that seeks to provide strategic solutions to enhance their operational efficiency.

The bank’s Executive Director, Business Banking Division, Mrs. Titi

Osuntoki, said “The bank aims to be a tier 1 SME bank and seeks to achieve this through integrated partnership and provision of proactive business banking solutions which makes our contractors winners on all fronts.”

She said the banking solutions were designed to redefine contractors-banking relationship experiences, which are aimed at growing their businesses and increase their capacity to handle big projects without financial encumbrances.

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

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

Executive Director, Lagos and Southwest, 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

Fidelity Bank has is also 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 was 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.

Others also said that they have programmes that support the growth and development of SMEs in the country.