Thursday, July 4, 2013

Access to loan, still a nightmare for SMEs operators -Association

From Ayodele Samuel,Lagos

For Small and Medium Scale enterprises and businessmen in Nigeria, ability to access funds in banks and other microfinance institutions has continued to be a nightmare.
Despite various promises and commitment from government agencies, various groups, including operators of small businesses, traders, market women and men, regretted that they were not able to perform due to lack of access to credit facilities in banks, calling on the industry regulators to prevail on banks and microfinance banks (MFBs) to lend to the sub-sector.

Speaking at summit held at the palace of the Ezeigbo of Mushin, Oba John Chukwudi Nwosu, , the President of the Market Leaders Association of Nigeria, Deacon C.F.C. Obih, said over the years, small and medium scale enterprises were believed to be catalysts for economic growth and national development in Nigeria, regretting that the sector had been experiencing retarded growth due to many factors which include lack of easy access to funding/credit which could be traced to reluctance of banks to extend credit to them.
"We have approached banks individually and collectively to assist us with loans but most of us are usually disqualified due to lack of knowledge of the process. Moreover, banks do not have enough personnel to train all SMEs on the rudiments. That is why we have gathered ourselves together on the platform of a summit to be educated on how we can access loans to improve on our businesses. Unfortunately, most banks are still not supportive but we are optimistic in helping ourselves to grow our business and Nigerian economy," he said.

Also, Managing Director of Mayakorp Nigeria Limited, Mr. Martins Ndigwe revealed that SMEs sector had the most need for financial loans to boost their businesses, stressing that they also needed to be educated on the process of obtaining such loans.
"Unfortunately, the banks are not helping much to enlighten them on how to grow their businesses. The small businesses are perhaps faced of inadequate human capacity; poor and inadequate documentation of business proposals; lack of appropriate and adequate collateral, high cost of administration and management of small loans as well as high interest rates," he said.
However experts identified ignorance of the SMEs operator as one of the major reasons why financial institutions refuse to give credit to the sector.
Faculty member of the Lagos Business School and member of the Monetary Policy Committee of the Central Bank of Nigeria Dr. Doyin Salami said entrepreneurs have to take their businesses from the realm of religion and unrealistic belief of succeeding to where people understand the analysis they are doing.
He said beyond the challenges of finance, infrastructure, human capacity development, prevalent in the Nigeria business environment, the lack of business understanding was a possible reason why a lot of SMEs in the country are struggling to survive.
He also noted that over time, SMEs in Nigeria had not performed creditably well and hence had not played the expected vital vibrant role of being the spine of economic growth and development.
He noted that SMEs contributed 46.54 per cent of Nigeria's gross domestic product in nominal terms, according to the 2012 Enterprise Baseline Survey.
"This compares with approximately 60 per cent in China, at the end 2011, and 70 percent in neighbouring Ghana, according to a University of Ghana study. Estimates show the level of contribution in South Africa lying between 52 per cent and 57 percent," he said.
"A 2013 outlook on Nigeria's SMEs envisages capacity development, need to help people build sustainable businesses and access to finance, as key challenges the sub-sector will face in the ongoing year. Although loans and advances by deposit money banks (DMBs) are recovering considerably, prevailing lending rates put borrowing from DMBs out of the reach of most SMEs, and therefore they have to resort to micro financing", he concluded.
He, however, noted that funding for micro, small and medium enterprises (MSMEs) has, for many years, been the bane of growth of the sub-sector.
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