As concerns are being raised over the imbalance between the Nigeria’s burgeoning informal sector and the rate of economic development, Head of SME, Stanbic IBTC Bank, Mr. Akintunde Oyebode, in this encounter with Festus Akanbi, said the contribution of the small and medium enterprises to the economy is being constrained by lack of capacity and infrastructure challenges, among others
There seems to be a consensus among financial market watchers that in Nigeria, the small and medium enterprises sector has really not grown in proportion with its potentials. It is argued that SMEs grow at almost twice the rate of GDP in most markets across Asia, Africa and Middle East, but that the reverse is the case in Nigeria. One of the most frequently raised questions at public fora in recent times is what are the major issues stifling the growth of this important sector of Nigeria’s economy? In his assessment of the situation, Head, SME Stanbic-IBTC Plc, Mr. Akintunde Oyebode, explained that the main driver of the growth of SMEs in Asia and the Middle East is the level of access to finance enjoyed by SMEs in those regions. According to him, the emergence of micro-lenders like the popular Grameen Bank has helped bridged the financing gap in Asia, thereby stimulating SME Growth. In Sub-Saharan Africa, the funding gap within the SME segment is estimated at anything between $100 billion and $200 billion, depending on who you are listening to. This implies a need to increase the current flow of finance at least four times from current levels of $25 billion.
He added that in addition to this, the lack of capacity and challenges with infrastructure impede SMEs in Nigeria. Training and advisory are two areas Nigerian SMEs are particularly disadvantaged, while high cost of doing business also takes its toll on Nigerian businesses. Speaking on the role lenders can play to improve SME’s access to finance, the Stanbic-IBTC official said: “The challenge to lenders is simple: Provide quick and properly priced funding to the SME market. Due to the nature of the segment, SMEs are usually poorly capitalised with little or no assets. Therefore, a big barrier to funding is usually the lack of tangible collateral. “Another big challenge is the absence of accurate and verifiable financial statement, with which formal lenders evaluate the credit worthiness of the borrowers.
“To solve this, lenders need to develop non-traditional methods to evaluate borrowers in this segment, and leverage on available clusters like cooperatives and market associations to provide comfort to the lenders. Lenders must also identify that finance must be supported with the right level of technical assistance. The most successful lending models are usually those backed by the right level of technical assistance to ensure the borrowers maximize the funding provided.” He believes there is a need for policy coordination and continuous engagement with financial institutions to ensure policy direction is not disconnected from market realities. He said: “The big mistake has been the constant focus on increasing the access to finance via intervention funds and guarantee schemes alone. These funds and schemes are usually temporary solutions to a long standing problem. There must be a drive to reduce the cost of doing business. For example, taxation of small businesses must be minimal and should not be duplicated; production and agriculture importers can also be given import duty waivers or incentives.
“Another area policy can be improved is the development of entrepreneurial centres to drive the monitoring and technical assistance that SMEs need to grow. These centres will also act as monitoring agents where SMEs have been given loans. In addition to this, the state and local governments need to support the development of SME clusters and cooperatives, to drive shared services and reduce the cost of doing business.”
On the prospect of listing of SMEs on the Nigerian Stock Exchange, Oyebode said “The ultimate goal for anyone involved with SMEs is to help these businesses grow into large corporate businesses, and possibly multinationals. Therefore the move to list SMEs is a welcome development, even if it is in a second tier market. This will mean SMEs will have access to cheaper and more stable equity funding. Apart from access to various funding options, the listing of SMEs will also enhance the corporate governance within the segment, as I expect listing to come with more stringent reporting requirements. It will also provide business owners the opportunity to diversify ownership, unlock equity and expand frontiers into various markets.” Since charity begins at home, THISDAY sought to know the efforts being made by Stanbic IBTC to assist SMEs through trainings that will enhance and improve business methods. He said the bank was very interested in capacity development and training. “As you correctly mentioned, one of our priorities is the provision of technical assistance to SMEs across Africa, and Nigeria is not different.
“We are corporate members of SMEDAN and we are currently in talks with the
leading indigenous and international SME Development Associations to commence
sustainable training initiatives for SMEs. We expect that this and our
innovative product suite will support the growth of the segment in the medium to
“We have identified selected indigenous and international partners
to help develop the SME segment. Some of these include a regional partnership
with the Pan-African Business Coalition to offer Health and Business training to
micro and small businesses. We are also in partnerships with leading business
schools to constantly produce SME based research, and provide various training
modules that meet the needs of businesses in various life stages.
these organisations, we also work closely with market and trade associations,
agricultural cooperatives and other clusters of SMEs to continuously understand
the needs of these businesses.
Oyebode said the SME sector is an area of significant importance to Stanbic IBTC Bank in Nigeria and Standard Bank as a group, adding that the Standard Bank group is always seeking ways to connect businesses within Africa, and also to the major trading partners outside Africa. “Nigeria’s balance of trade position clearly suggests we are a major player in international trade, with the gradual disappearance of barriers to trade. We are uniquely positioned to use our extensive regional network to connect Nigerian businesses to trade partners around Africa, and also use our global partnerships to boost the access of Nigerian businesses to the global trade network.
“As a bank present in 17 African countries, we are uniquely positioned to play a leading role in linking Nigerian businesses, especially SMEs with their regional partners. We are also leveraging our global network to bring Nigerian businesses closer to their suppliers, for importers and to their markets, for export businesses. “For example, we took selected clients on a trade mission to China as part of our plan to develop unique trade solutions for Nigerian businesses operating with Chinese partners, while leveraging our strategic alliance with ICBC, the biggest bank in China. This mission consisted of clients from Nigeria, Kenya and Uganda and involved meetings with Chinese suppliers, banks and government agencies. The aim of such initiatives is to constantly enhance the ability of Nigerian businesses to conduct businesses with their trade partners in the most efficient manner.” According to him, Stanbic IBTC’s goal is to be recognised as the leading SME bank in Nigeria within the next five years. “Our belief is that by providing the SME segment with the right type of support; we can help increase the contribution of the sector to GDP, and ultimately enhance the wellbeing of Nigerians.
Underserved Market “Our SME propositions are designed to meet the needs of the underserved market. The propositions which have transactional products and lending offerings ensure this largely underserved micro segment is serviced by our bank. We believe these offerings adequately serve the micro segment, and our goal is to significantly increase our scale, leveraging our network and mobile solutions,” he said.
Public Private Partnerships Oyebode believes PPPs offer a very effective vehicle to develop infrastructure to boost SMEs. “In line with the FGN’s Vision 20:2020 document on SMEs, PPPs can be used as a model to develop industrial parks, entrepreneurship centres and incubators to boost the development of SMEs. By using this model, government can free its finances for social and capital intensive infrastructure like education, health, power and transport. “At Stanbic IBTC, we understand the needs of SMEs better. We have the right people, and the appropriate suite of products to meet the needs of any SME that wants to run or grow its business. We are constantly seeking ways to service this segment better, and will remain in the forefront of using industry leading research and development to improve service in this area. “For example, we are the first Nigerian bank to introduce psychometric testing as a tool for creating SME Loans. Our industry leading product, SME Quick Loans is based on a psychometric test developed by our partners, and we are able to offer loans to SMEs within 72 hours with minimal documentation and hassle. By developing this product, we are now able to bridge the financing gap experienced by SMEs in a timely and stress free manner,” he said.
( Courtesy Punch & AGENCIES …….. Source …….. NEW AFRICA BUSINESS NEWS)