Poor SMEs Development Challenges Commitment Of Banks In Nigeria’

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Banks have the capacity to reverse the ugly trend and myriad of challenges besetting the Small and Medium Enterprises (SMEs) sector in the country and put it on the path of sustainable growth.

Besides being a duty that may be incorporated into business model, it is also a business development strategy, as effective support to the sector is always mutually beneficial.

The Head, Personal and Business Banking, West Africa, Standard Bank, Lincoln Mali, SMEs in Nigeria are constrained in three major areas- management, finance and business environment.

He said that management issues include skills shortage ,management expertise,financial management, business support and access to markets, while in the area of finance, the SMEs are confronted by cost of capital, lack of collateral, information requirements ,regulatory impact and culture clash.

According to him, the issues of business environment are poor infrastructure,energy problems, tax regime, red tape, transport costs and economic uncertainty.

Speaking on the topic, “Bringing SME in from the Cold,” Mali noted that SMEs have underperformed despite the fact that they constitute over 90 percent of Nigerian businesses, and their contribution to the nation’s Gross Domestic Product is below 10 percent.

Also, Micro, Small and Medium Enterprises are estimated to contribute 10 percent of the employment level in Nigeria, a level well below that of several other countries, including the UK at 54 percent; United States, 50.3 percent; Bangladesh, 80 percent; India, 80 percent; Belgium, 66.6 percent; South Africa, 60 percent; Malaysia, 57.7 percent; and China, 58.8 percent.

Enhancing financial inclusion, Mali stated, is a major driver for moving SMEs from survivalist mode to formal entrepreneurship, and this is where banks have a pivotal role to play.

Among other areas that banks can make the difference, according to Mali, include facilitating basic business training and various capacity development programmes; up-skilling relationship managers to become professional business advisors; providing various lending solutions and linkages between corporates and the SMEs in their value chain, and strong partnership with MFIs to drive inclusive growth.

Others include having a real financial inclusion focus with the capacity to understand the market and properly de-risk it; providing some infrastructure to identified SME clusters as CSR (internet access, warehouses, trade portals); advocating for standardized measures of taxation and levying of SMEs in local markets; and leveraging on international affiliations to sponsor knowledge sharing between local SMEs and their foreign counterparts.

Source: TheGuardian