70% of SMEs lack access to medium-longer-term finance — Heritage Bank boss

By PETER EGWUATU

Lack of access of medium to long term finance has been identified as factor militating against the growth of Small and Medium Scale Enterprises, SMEs.

Managing Director/Chief Executive Officer of Heritage Bank, Mr. Ifie Sekibo, who was a guest Speaker at the 2nd US-Africa Trade & Investment Forum/Africa Investment & Development Awards which took place at St. Regis Hotel, New York, USA observed that in Sub-Saharan Africa, SMEs are more credit-constrained and this typically affects growth possibilities as significantly low number of start ups who apply for financing actually succeed.

Studies, he noted, indicate that more than 70% of the SMEs lack access to medium-longer-term finance, creating an SME funding gap of more than $140 billion in Africa alone.

“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” he said.

He further revealed that in Nigeria, most SMEs die within the first five years of existence while another smaller percentage goes into extinction between the sixth and tenth year, with only five to ten percent 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 economics, Complicated and Unstructured Legal framework/Regulation, Inadequate business information, Infrastructure & Business environment and Human capital factors, among others.

“Having identified these mounting challenges, it is instructive to note a few ways in which banks have tried to intervene in building a formidable economy driven on the wheel of SMEs

One notable and unique approach is the Heritage Bank MSME Clinic. The Bank, as a way of cushioning the effect of capacity building and fund management, introduced the Micro Small and Medium Enterprises (MSME) Investment Protection Fund to assist the growth and rejuvenation of the sector “Sekibo noted.

Analysts say the Heritage Bank MSME Investment Protection Fund is a strong differentiating indicator of the Heritage Bank’s Approach to SME growth in the country.

According to a Lagos-based investment banker, “the Heritage Bank MSME Clinic should be applauded as a unique holistic bailout strategy for SMEs in the country.

It consists of services such as business diagnostics, advisory services, financial literacy and entrepreneurship development, customized product development for each customer and market knowledge development backed up by the bank’s innovative MSME Investment Protection Fund (InPF), which is a non-collateralized funding option with embedded insurance for the default risk inherent in the scheme”.

He added that the package has huge potential to enhance MSME capacities and strengthen business management skills, in addition to offering other support programmes that could greatly achieve the aim of developing the SME sub-sector in the country.

Investigations show that apart from other areas of supports for various sub-sectors, the Bank also engages with customers at stages of expansion, modernization, production process & capacity improvement and restructurings through the carefully various products like term loan, lease financing facility, overdraft facility, LPO, invoice discounting, supply contract financing, distributorship financing scheme, group Leading to registered associations, MFIs/MFBs Whole-Leading, advisory & business support as well as market access and value chain services, among others.

Culled from www.vanguardngr.com