Solving Funding Challenges Faced By SMEs

Funding remains a big challenge for many SMEs’ effort to thrive. Experts X-ray the problem and proffer the way forward.
Abdulhammid Salawo’s company, Natures Delight, produces agricultural goods. Though small scale, he wants to expand to be able to meet the demands of his numerous customers. “But to be able to produce in large scale, we need finance and equipment.” “I have approached the Bank of Industry to get the agricultural loan, but to no avail. So I am stuck and just trying to produce with the little money I can get from the business.” Salowo said
Another start-up, Maryam Yakubu is the CEO of Smart Looks Fashion House. She makes ready-to-wear cloths with Ankara from her home in Kuje. Though her work speaks volume for her, she needs more machines and a shop to showcase her wares. “I want this business to expand but I don’t have money to do that. The government should give us funds to enable us grow our businesses. Government should help us with machineries so we can produce in large scale. We want grants and not just loans. The grants don’t need to be big but something to put us on our feet,” she said. While interacting with operators of micro small and medium enterprises, one of the major challenges you would discover is access to finance. Seven out of 10 of them need money to upscale their businesses or start one.
Shedding light on this, the Director General of the Global Centre for Human Empowerment and Entrepreneurship Development (GLOCHEED), Mrs Rose D.S. Gyar, says the major problem of access to finance for MSMEs is accessibility, affordability and availability. “These are the key issues hindering access to finance. Government can provide finances but are they affordable, are they accessible and are they really available,” she said. Indeed, though government has made some funds available for MSMEs at the Bank of Industry (BOI) and Bank of Agriculture (BOA), to access these funds is very cumbersome.
“After going back and forth for four months, I gave up on it. For those that persisted they got the loans after two years,” she said. Gyar believes one way government can solve the problems is to have a holistic approach. “Government should have a holistic approach to solving the issue of finance for MSMEs. It’s not enough that you give finance; there has to be capacity building – entrepreneurial knowledge to manage the finance. So, if you are giving loan, it should be a total package. Capacity enhancement should be part of it, materials should be given as well as machineries. So when you give someone access to finance, the person is not going to look for money for machinery or materials. It should be a holistic approach,” she said.
“Most of the funds we have are trading funds which are not conducive for MSMEs which are into processing, production and manufacturing,” she said. Similarly, a senior economist at SPM Professionals, Mr Paul Alaje, says though government is trying to help SMEs through the Anchors Borrowers Programme for farmers and other initiative, the MSMEs should look out for grants from local and international organisations. He urged MSMEs to also explore the options of micro finance banks as well as family and friends. However, while briefing the press recently, the Special Assistant on MSMEs and Coordinator National MSMEs Clinic in the Office of the Vice President, Mr Tola Adekunle Johnson, stated that the government has approved that shared facilities be established for MSMEs in some states to solve some of their challenges.
“As the clinics have gone by, we have noticed that some MSMES come together as clusters but then they don’t have money to buy equipment for their clusters. So, what we are trying to do as a government is to partner with interested states were they will give us a facility and we as Federal Government will get equipment for at least five of the clusters per state. “Some of the shared facilities we are looking at are in leather works, shea butter processing facility and more,” he added. However, speaking on funding for women and small businesses at the Micro, Small and Medium Enterprises (MSMEs) clinic in Abuja, the Deputy Director, Development Finance of the Central Bank of Nigeria, Mr Osita Nwanisobi, said the N220 billion MSMEs’ loan could be accessed through microfinance banks, financial cooperatives and finance companies.
Nwanisobi, however, said statistics from SMEDAN and McKinsey & Company showed that Nigeria has N9.6 trillion financing gap for MSMEs. “When you see this, you begin to see the enormity of the challenges that we have. And when you borrow this money, you need to pay so that others can get it,” he added. The Project Officer, FCT, at the Bank of Industry (BOI) said for small business owners who have invested in their businesses already and have generated employment, BOI will assist and encourage such businesses. We hope this assistance will get to the likes Abdulhammid and Maryam to enable them expand their businesses.