ĎAfrica Has $140bn SME Funding Gapí
IMAGE: Mr. Ifie Sekibo, Managing Director/Chief Executive Officer of Heritage Bank »
Although, small and medium scale enterprises (SMEs) are globally regarded as major drivers of economic growth, Nigeria and other African countries have SME funding gap of more than $140 billion.
In addition, more than 70 per cent of SMEs in the continent lack access to medium-longer-term finance.
Managing Director/Chief Executive Officer of Heritage Bank, Mr. Ifie Sekibo stated this at the second US-Africa Trade and Investment Forum held in New York, USA recently, where he spoke on "small and medium enterprise funding in Africa - a banker's experience."
Sekibo observed that in Africa, SMEs are more credit-constrained.
This, he argued, typically affects growth possibilities as significantly low number of startups, who apply for financing actually succeed.
“Using Nigeria as a case study, between 2003 and 2009, SME loans as a percentage of total credit, decreased from 7.45 per cent to 0.18 per cent. Yet by 2012, Nigeria had about 17.6 million MSMEs employing about 32.4 million people.
“Although it is generally accepted that SMEs enhance competition and entrepreneurship, and their development has a positive impact on innovation and productivity growth, policy and infrastructure factors to mitigate risk and costs that SME sector cannot internalise needs to be seriously worked upon by all relevant stakeholders,” the Heritage Bank boss added.
He also revealed that in Nigeria, most SMEs die within the first five years of their existence while another smaller percentage goes into extinction between the sixth and tenth year, with only five to ten per cent surviving, thriving and growing into established corporate status. He listed the leading cause of such sub-optimal output to include poor access to funds, weak institutional support, unstable macro- economy, complicated and unstructured legal framework and regulation, inadequate business information, among others.
However, he pointed out that with the Heritage Bank MSME Clinic, his institution has been playing a leading role in the support of small and medium scale enterprises in Nigeria.
“The Bank, as a way of cushioning the effect of capacity building and fund t management, introduced the micro small and medium enterprises (MSME) Investment Protection Fund to assist the growth and rejuvenation of the sector.
“One cannot over-emphasis the need for a workable, sound and reliable banking system that places emphasis on SME financing,” he added.
Article Credit: Thisdaylive