Expert Enlightens CU Students on Economic Roles of SMEs
The Guest Speaker at a recent Town and Gown seminar of the Department of Banking and Finance, Covenant University, Ms. Bunmi Lawson, has stressed the importance of Small and Medium Scale Enterprises (SMEs) to the development of a nation, saying that SMEs drive technology change, growth in productivity, enhances entrepreneurship innovation and invention, and Catalyses private sector development.
Ms. Lawson, the Managing Director, Accion Microfinance Bank Limited, Lagos, made this assertion while presenting a paper titled, ‘Role of Microfinance Banks at Developing Micro-Medium and Small Scale Enterprises (MMSEs) in Nigeria’.
She defined Micro enterprises as those enterprises whose total assets (excluding land and buildings) are less than N5 million, with a workforce not exceeding 10 employees; and Small Enterprises as those whose total assets (excluding land and building) are above N5 million but not exceeding N50 million with a total workforce of above 10, but not exceeding 49 employees.
Medium Enterprises, she added, are those enterprises with total assets (excluding land and building) above N50 million, but not exceeding N500 million with a total workforce of between 50 and 199 employees.
According to Ms. Lawson, MSMEs in Nigeria currently employ 60 million (84.02% of the total labour force) people; and MSMEs contribute 48% of Nigeria’s GDP. “According to IFC, 96% of businesses in Nigeria fall under SMEs,” she said. “MSMEs have significant impact on the export earnings in developing countries and generate 70% - 90% of employment in middle income countries.”
She described the role of Microfinance Banks in MSME development as mainly providing access to finance, although Micro Finance Banks (MFBs) also assist in capacity development as part of the process of providing finance.
Ms. Lawson explained that, in playing the role of access to finance for MSMEs, the Microfinance banks use the following approaches: Willingness to Pay Approach and Capacity to pay Approach. However, she said, the starting point is the client’s credit worthiness, which encompasses the borrower's capacity and willingness to pay.
“These two approaches are critical and cannot be overlooked. They help to determine the credit base, and capacity to pay refers to a borrower’s capacity or ability to make good on his loan obligations. It is often called ‘financial capacity’. The measuring tools for the capacity to pay, however, are different from one financial institution to the other,” she explained.
In his remarks at the event, the Head of Department, Banking and Finance, Dr. Kehinde Adetiloye, stated that, “The problem of micro-financing in the economy is something that seems a little bit intractable. The purpose for which micro-financing was established is not being met. But the lecturer of today has spoken to that issue.”
The students, he said, appreciate the efforts of the Guest Lecturer as the topic of the day was quite crucial to their integration into the business and career world after graduation.
Also at the event were some members of faculty and staff of the Department of Banking and Finance, and the College of Business and Social Sciences.