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| A Small Holder Organic Tropical Banana Farm in Lagos, Nigeria |
The Year 2011 promises to be an excellent one for Micro, Small and Medium Enterprises (MSMEs) operators and entrepreneurs. It appears particularly promising for those whose visions and growth plans had been discouraged in the recent past by the lack of access to credit or finance. The President Goodluck Jonathan Administration and Mallam Sanusi led Central Bank of Nigeria (CBN) appear very determined to offer them practical solutions to the problem. Their public pronouncements on the issue lead me to believe that this is a “must win battle” for these two leaders. Perhaps this is one field in which they wish to leave their footprints in the sands of time.
Some of the common reasons why MSMEs operators and entrepreneurs are not able to secure finance or gain access to credit include:
1. A pervasive perception that it takes a “miracle” to access credit from a Nigerian bank.
2. The enduring poor credit standing or rating of MSMEs in general by lending institutions.
3. The inability of most MSMEs to provide collateral and credit guarantees.
4. Weak business plan documents and proposals.
5. The high cost of MSMEs credit administration and management.
I find a lot of hope in the on-going efforts of CBN, Bank of Industry (BOI) and their partner organizations to address these issues using a multi-pronged approach. I believe the solutions to these problems are nothing like rocket science. The bigger part is “political will” and the present crop of leaders seems to have that in good measure. The MSME operators and entrepreneurs must also play their roles in this regard because it is simply not enough to remove the supply-side obstacles. The demand-side challenges also need to be overcome and this has to be done by the MSMEs operators and entrepreneurs themselves. Sources of finance and credit to MSMEs that should be seriously and carefully considered in 2011 include:
1. The Small and Medium Enterprises Equity Investment Scheme (SMEEIS)
2. The National Automotive Development Fund
3. N100 Billion Cotton, Textile and Garment Industry Revival Scheme
4. CBN N500 Billion Intervention Fund
5. USD 200 Million Fund for the Entertainment Industry
6. N200 Billion Re-financing and Restructuring of Banks’ Loans to the Manufacturing Sector.
7. N200 Billion Small and Medium Enterprises Credit Guarantee Scheme (SMECGS) for Promoting Access to Credit by SMEs in Nigeria.
Let me conclude by warning fellow entrepreneurs that a key consideration in choosing a source of business finance or credit is to strike a balance between equity and debt in order to ensure that the funding structure is appropriate for your particular business. There are no one size fits all in this regard. Please remember that Mallam Sanusi (CBN Governor) is a professional risk manager! The overall objective in raising finance is to ensure that the financial risks carried by your MSME are maintained at an optimal level.
Uzo Nduka
Lagos, Nigeria
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