Nigeria lags behind Brazil, Ghana, Kenya in SME access to finance as CBN moves to bridge N9.6trn financing gap

Nigeria lags well behind other countries like Brazil, Ghana, China, Kenya and South Africa in terms of access to finance by the Small and Medium Enterprises (SMEs), Rasheed Olaowuwa, managing director/CEO, Bank of Industry (BoI), said, based on survey of MSMEs in 2014 by World Bank.

A breakdown of the access rate shows that Ghana has the highest record of 36 percent, Brazil and China 30 percent each, Kenya 24 percent, and South Africa 21 percent.

Olaowuwa, who was represented by Abdulganiyu Olariwaju of BoI, at the 2015 annual conference organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos, said access to finance was the major challenge confronting SMEs, and banks hold the key to addressing that challenge.

However, the Central Bank of Nigeria (CBN) has expressed its commitment to bridging the N9.6 trillion financing gap in the SMEs sub-sector of the economy.

Ibrahim Mu’azu, CBN’s director of corporate communications, said at the weekend that disbursement of significant part of the N220 billion Micro Small and Medium Enterprises (MSMEs) instituted by the regulator remained part of its commitment to providing improved financing opportunities for small businesses.

Mu’azu, who spoke at the conference, said poor access to credit remained one of the biggest limitations faced by small businesses and had to be tackled collectively by stakeholders in the financial services sector.

He said 60 percent of the fund, representing N132 billion, had been earmarked for providing credit to women-owned businesses, hence giving financial backing to one of the most vulnerable segments of the society.

The objective was to unlock the potential of small businesses through credit support and taking such enterprises to positions where they would be able to create jobs and reduce poverty among the citizenry, the CBN director said.

He said a huge channel had been created for the administration of the loans through private or state-owned microfinance institutions, finance houses, as well as commercial banks. State governments, he added, are allowed to access up to N2 billion each for on lending to eligible beneficiaries through participating financial institutions in their respective states.

The CBN’s spokesman said a maximum of 10 percent of the commercial component of the fund was being channelled to trading and commerce to ensure that productive sectors of the economy continued to attract more financing necessary for employment creation and diversification of the country’s economic base.

“The broad objective of the N220 billion MSMEs fund is to channel low interest fund through participating institutions, like banks and microfinance banks and state governments to small businesses that need it to create jobs and empower grassroots population.

“The fund has reduced cost of borrowing and created better opportunities for beneficiaries to declare better results,” he said.

He however said that successfully accessing the fund would require prospective borrowers getting them acquainted with the drawn down procedures and providing the needed information that enable their banks consider the loan requests.

But, Femi Egbesola, president, Association of Small Business Owners, said the draw down criteria were unrealistic and were beyond the reach of small business owners, saying commercial banks authorised by the CBN to disburse the funds do not see SME operators as serous people that need such funds.

Egbesola urged the CBN and commercial banks to rethink their SMEs’ funding strategy because of the huge benefits increased credit access by small businesses would add to the economy.