Federal Government, banks partner on new funding mechanism for SMEs

Minister of Trade and Investment, Mr. Olusegun Aganga

The Federal Government is partnering with commercial banks across the country to fashion out a new funding mechanism that will give SMEs increased access to cheap funds.

Minister of Trade and Investment, Mr. Olusegun Aganga, disclosed this during a meeting with SME Desk Managers of Banks in Abuja.

Aganga noted that the new initiative was aimed at removing barriers militating against banks’ lending to MSMEs  as part of  renewed efforts  to increase their capacity to create jobs, generate wealth and transform the country’s economy.

“The rate of unemployment in Nigeria is becoming alarming and staring us in the face. There is no gainsaying the fact that the best way to checkmate the situation is to have a virile Micro, Small and Medium Enterprises sub-sector. The recent survey conducted by SMEDAN, in conjunction with the National Bureau of Statistics, revealed that we have close to 20 million MSMEs in Nigeria.

“The figure represents over 80 per cent of the total number of enterprises in the country and accounts for 75 per cent of Nigeria’s total employment base. If we don’t create an enabling environment for this important sub-sector to thrive, we will all suffer its negative consequences,” he said.

He noted that the MSME community has been complaining bitterly of not being able to access cheap funds from the banks, adding that they have also said that where services are available, it takes the banks ‘forever’ to process  them.

He said the vision of the Ministry of Trade and Investment is to increase the contribution of SMEs to the nation’s Gross Domestic Product from 10 per cent to 30 per cent and increase export earnings through SMEs from three per cent to 25 per cent within the lifetime of this administration.

“To be able to achieve this, we have identified commercial banks and development finance institutions and are partnering them to come up with SME-friendly products or re-design existing products to enhance access to finance by SMEs.  We want to partner the banks to remove the barriers inhibiting them from lending to SMEs at a reduced interest rate,” he said.

Aganga said that SMEDAN was currently carrying out an SME Rating Project to minimise the risks associated with SMEs by training and re-training them to become more competitive and attractive for funding by commercial banks.

He noted, “I am aware that banks’ problems with SME operators border on perception of SMEs as high risk largely due to their informal nature; inability to prepare bankable business plans; poor record keeping and discriminatory cultural practices, among other things. SMEDAN is championing the SME Rating project which will minimise the risks usually associated with the sub-sector.

“Though SMEs are known to be high risk areas, they also hold the key to sustainable banking if properly understood and funded. We are prepared to take up the challenge of training and re-training MSMEs to ensure that they become more competitive and attractive to funding. To this end, SMEDAN is being refocused to constantly monitor and provide business development support services to MSMEs to ensure that they conform with conditions attached to loans,” he said.

In attendance at the meeting were the Director-General, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), and representatives of commercial banks.

DAILY INDEPENDENT