The government, through the Bank of Industry, is turning attention to the Small and Medium Enterprises subsector as Nigeria seeks rapid economic recovery, Anna Okon writes
The Small and Medium Enterprise subsector has become pivotal to the economic revival of Nigeria as the country braces for change under President Muhammadu Buhari.
In his inaugural speech on Friday, May 29, the president stressed that the SMEs would be central to government’s efforts to revive the economy and provide employment for the teeming youths.
One corporate organisation that has been at the vanguard of support for the SMEs is the nation’s premier development finance institution, the Bank of Industry.
Prior to when the BoI started supporting the SMEs, the subsector was a no-go area for banks and other financial institutions.
Operators lamented daily their inability to access loans from banks that could not make provision for lower interest rates and longer moratorium which they badly needed.
An SME operator and chairman of the Yaba Industrial Estate Occupants Association, Adetunji Adeosun, said, “The interest is very huge and the banks always insist on collecting their administrative charges upfront.”
But as Nigeria continues to seek avenues for diversifying its economy, the government and corporate organisations are becoming aware of the huge potential of SMEs.
While reviewing the impact of the BoI in the industrial sector in the past one year under the management of the Managing Director, BoI, Mr. Rasheed Ola Oluwa, the Executive Director, Small and Medium Enterprises, Mr. Waheed Olagunju, remarked that from 2001 to 2014, the bank had dedicated less than 10 per cent of its risk asset to SMEs.
He noted that with a higher percentage of its risk asset going to the sector, the bank would have been able to create more jobs.
He said the situation informed the decision of OlaOluwa to set up a separate directorate for tackling the needs of SMEs on his assumption of duty as the bank MD.
He said, “We realised that if we came up with a risk asset of N608bn and creating over 1.8 million jobs with less than 10 per cent of that amount going to SMEs, we probably would have been able to create more jobs if we had approved 30 per cent of our risk asset to SMEs because the developmental impact of SMEs per unit of investment is higher than what we have in large enterprises.”
Olagunju observed that in other parts of the world, the SME subsector played a very important role, adding that challenges like lack of funds and lack of access to market prevented the SMEs in Nigeria from measuring up to the level of their counterparts globally.
The BoI SME ED therefore urged the government to activate policies that could create market for the subsector.
He said, “In other parts of the world, there are provisions that 35 to 45 per cent of government procurement should be from SMEs.
“We are in a transition now and politicians are becoming more accountable. The media should play an advocacy role to ensure that public policies are made in such a way that they can help market items produced by SME operators.
Anticipating the volume of job creation that could come from investing in the subsector, the BoI, according to Olagunju, decided that by 2019, about 30 per cent of its risk asset would be accounted for by SMEs.
Olaoluwa stated that the bank had disbursed over N127bn to SMEs in the last one year.
He said, “Since we did that, a lot of things have been happening.”
The BoI MD stated that the bank had identified SME clusters all over the country and planned to design products to target specific clusters.
In keeping with the promise of designing new products for SMEs, BoI launched five digital products for the subsector.
Olaoluwa explained that the SME-centric digital product offerings were inspired by the new age of Internet and the need to take advantage of the digital age and offer customers the benefit of speed, mobility and convenience that comes with it.
He noted that with the number of Internet users in Nigeria growing to 83.3 million, and the number of active mobile subscribers standing at 145.5 million, it only implied that people were living in a digital mobile world and the situation called for a repositioning of the bank’s services to take advantage of that development.
According to him, one of the products, the SME Mobile APP, provides users easy access to information on their mobile phones about the key activities and products of the bank as well as how to avail themselves of the services.
He said, “The Bank is leveraging the opportunity provided by Nigeria’s high GSM teledensity and improved Internet access.”
Another product, the SME Accounting Application, developed in partnership with Kinesis Consulting Limited, enables users to keep proper record of business transactions and generate requisite financial statements.
The Online Loan Application Portal, also one of the five products, according to Olaoluwa, shortens the loan process for customers by allowing them to fill and track their loan application forms from their homes as opposed to going to the bank for that purpose.
He added that the online loan portal also shortened the loan processing turn-around time of the bank.
Another digital offering, the Loan Application Tracking System, will enable customers to obtain online real-time updates on loan request submitted to the bank through an innovative loan status tracker on the bank’s website.
The BoI MD explained that the Information Technology product was developed to enhance customer service delivery to SME loan applicants at the bank.
The fifth product, the SME Customer Portal, according to the bank, is a platform that provides information about the bank’s SME customers in terms of their contact details and value propositions.
Olaoluwa said of the SME CP, “The main objective is to enhance the visibility of the SMEs and showcase their products thereby providing business-to-business linkage opportunities among SMEs and between SMEs and their key partners such as suppliers, distributors, Large Enterprise off-takers, etc.”
Also, other banks have been contributing their quota to the development of the subsector.
Some of the banks, classified as SME-friendly by operators, offer concessions in loans and interest rates to the operators.
A few of them have gone beyond just giving loans to organising capacity building seminars that will help equip operators for the business world.
One of such seminars was organised recently by Skye Bank PLC in Lagos.
The bank, which had in the past organised such seminars in Onitsha and other states in the South Eastern part of Nigeria, hosted more than 200 SME operators to the Lagos edition of the business seminar.
The Group Managing Director, Skye Bank, Mr. Timothy Oguntayo, also stressed that SMEs were major contributors to employment anywhere.
He said, “Skye Bank wants to facilitate knowledge sharing and offer banking solutions that will help businesses.
“There is no way for multinationals to employ all the teeming young people who are seeking employment, therefore, the role of SMEs in employment cannot be overemphasised.”
Vice Chairman of Tantalizers, Mr. Folu Ayeni, shared his success story with the operators at the seminar, recalling how his business started from a small living room and grew to a large scale venture with 53 outlets nationwide.
He said Skye Bank provided the initial N2.5 million seed capital that was used to start the business.
Analysts and operators have expressed hope that with the renewed interest in the sector, it is just a matter of time before the country will experience the economic recovery being sought.
Findings by Economist Intelligence Unit, a leader in global business intelligence, noted that the Federal Government supported SMEs by reducing the costs of registering a business and through the provision of SME-targeted funds.
The researchers however, recommended a look at the tax system noting that Nigerian SMEs were subjected to complex and overlapping rules which needed to be streamlined and simplified.
It added, “In addition, import and customs charges are often unpredictable and costly, placing an additional burden on businesses, with no recourse available through official channels.
The findings suggested further that attention should be given to finance which was a long-standing problem for SMEs, who relied on angel investors, personal networks or savings.
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