Small and Medium Scale Financing, a catalyst to Economic Growth in Nigeria
Micro, Small and Medium Enterprises (MSMEs) have been identified as a potential catalyst for meeting the nation’s growing economic and social challenges associated with youth unemployment. The Managing Partner/CEO, R&S Consulting Limited, Lagos, Dr. Samuel Olufemi, made this assertion at the Covenant University’s Banking & Finance Department’s 6th Town & Gown seminar held on Tuesday, January 26, 2016.
Dr. Olufemi, who was the guest speaker at the seminar, stated that MSMEs, apart from contributing to economic growth, are platforms for industrialisation, technological advancement, enhanced revenue generation, wealth creation, employment generation, utilisation/development of local resources, wider spread of development and innovation as well as the arrest of rural-urban migration.
According to him, the need to diversify Nigeria’s economic base and structure has never been more pronounced than it is now. He commented that SMEs hold the key to redress the growing challenge of socio-economic inequalities and take more people out of the poverty bracket.
He observed, however, that low access to finance is a major constraint for Nigerian MSMEs, stating that other constraints include electricity shortage and poor transportation network, according to World Bank Investment Climate Assessment (ICA) study in 2008. The World Bank study, Dr. Olufemi said, showed that only 5 percent of firms have access to a loan, despite the fact that 80 percent of SMEs seek financing.
Dr. Olufemi described the major constraints to financial access as issues relating to supply and demand, which include, sectorial bias against MSMEs; Short-termism of available debt financing; limited or narrow basket of financial products; risk perception without an effective guarantee scheme and limited or acceptable forms of collaterals, and then, ‘Crowding out’ by LEs, traders and contractors in the area of supply.
He also mentioned the issues of low financial literacy, leading to ineffective demand; weak Business Development Services (BDS) market; poor understanding of the complex bank lending processes; limited awareness of alternatives to debt financing, such as leasing, supplier credit, value chain, angel finance, franchising, factoring, etc, in the area of demand.
He cited some initiatives in Nigeria geared towards boosting MSME Finance such as the N200 billion Small and Medium Scale Enterprises Guarantee Scheme (SMECGS), the N200 billion SME Restructuring /Refinancing Fund, the N100 billion Cotton, Textile and Garment (CTG) Fund (FGN/CBN) etc. “These,’ he said, “are all channelled through banks.”
In his remarks at the occasion, the Dean, Professor Francis Iyoha, represented by the Sub-Dean, Dr. Oluwole Iyiola, appreciated the guest speaker for his support of the vision of the university to create a platform for robust skills, and industry-based educational experience for its students. He commended the members of the Department of Banking & Finance for their commitment and consistency in driving the vision of the institution.
Earlier in his opening remarks, the Head of Department of Banking & Finance, Dr. Ochei Ikpefan, welcomed the guest speaker and enjoined the students to be attentive in order to maximise the opportunity and privilege of having an instructor with his level of experience as a guest lecturer. He also reminded the members of the department to lay aside their qualifications and glean something from the lecture as everyone should still be open to continuous learning and improvement.
Dr. Ikpefan buttressed the need to be focused on the University’s goal of becoming a world class institution by the year 2022; stating that striving towards excellence and quality delivery of both individual and collective assignments was one sure way to get there.
Also present at the occasion were members of the College of Business and Social Sciences, members of the Department of Banking and Finance, and members of the Directorate of Media and Corporate Affairs.