CBN, BoI, LSETF Say Many SMEs Unqualified to Access Cheap Funds
The Central Bank of Nigeria (CBN), the Bank of Industry (BoI) and the Lagos State Employment Trust Fund (LSETF) say there are many funds available for the micro, small and medium enterprises (MSMEs), but many business owners are not qualified to access them.
They say lack of proper documentation, absence of financial history, and inability to structure businesses, among others, are responsible for poor access to funds at financial institutions.
Mike Oye, head of SME Funds at BoI, said many Nigerians set up businesses without thinking that they would ever take loans, which is why many of them do not take documentation seriously.
“Take for instance, someone makes shoes and comes asking for a loan. He says he sponsored himself through school from producing shoes. I believe him because when I ask him questions like, where do you source your leather? How do you sell? He is answering me off the top of his head, so I know really that he has been in the business for like five or six years, but unfortunately, my computer is completely emotionless, as he does not have sales record, bank account, and receipts,” Oye said at an event organised by the Arts and Civics Table Organisation (TACT), a non-governmental organisation, themed, ‘SME Sustainability & Growth Conference 2018’.
Adebisi Adedeji, head of development finance office at the CBN, said there is some kind of disconnect between the lenders and the SMEs.
Adedeji said there are several ways of looking at the challenges.
“It is an orientation and a training problem, orientation problem because I have had instances where I spoke to Nigerian graduates who had been home for five, six years waiting to get a white collar job and doing nothing. Nigerians are not trained to create their own jobs. Most people’s mind-set is to get out of school and get a job. That is the first primary challenge.”
He stressed the need for an average young Nigerian to have a change of attitude tailored towards starting up businesses.
Charles Anyanwu, head, SMEs at LSETF, cited lack of entrepreneurial training on the part of most graduates, stating that some accounting graduates cannot even draft business plans.
Anyanwu explained that CBN has encouraged institutions to factor in entrepreneurship in their curriculum and a few of them have done so, especially private universities.
“You are running a business for ten years, no documentation, no paper trail, no bank account for the business. All transactions are in person. It does not enter your bank account and you want to access a facility. So, these are the things that we really need to engage people about,” Anyanwu said at a panel conversation.
On the way to go for SMEs in Africa’s largest economy to be eligible for loan funds, the stakeholders in the conference raised different ideas which included formalising their businesses to enable them gain recognition by government.
According to the survey from the conference, only 4.2percent of 37.07 million MSMEs in Nigeria have been able to access loans or overdrafts from financial institutions while new entrants or start-ups find it practically impossible to access finance from banks.