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How government, financial institutions can accelerate growth of SMEs


Experts have stressed the need for government at all levels and financial institutions to create institutional support for the growth of Small and Medium Enterprises (SMEs) in Nigeria, through the provision of relevant infrastructure, access to credit and appropriate regulatory framework.

They argued that financing, infrastructure and favorable policy are critical areas in need of intervention, noting that the sector constitutes a major part of industrial activity in both developed and emerging economies.

Besides, they pointed out that inadequate transfer of knowledge and information dissemination is another major factor impeding the growth of the sector in Nigeria.

According to them, if government would replicate the success recorded in other sectors to this segment of the economy, it would fast-track economic prosperity and ultimately generate more job opportunities for the youths.

Furthermore, they emphasised that operators must structure their businesses and make them eligible for various intervention scheme available for the sector.

Therefore, they suggested that government and the financial institutions must step up communication and information mechanisms to bridge the disconnect between the small business and the banks, which demonstrates a critical failure in the intermediation role of the banking system.

The Co-founder, TACT organisation, Yemi Adesanya, explained that there was need to facilitate engagement between SME operators and government to enable them benefit from any initiative aimed at growing the sector.

“Because of the manner that government communicates what they are doing and because there is no better conversation between citizens and government, the citizens do not understand what government is doing.

“Many micro-small businesses do not have access to capital, so when government says they are providing capital for the sector, many of them do not have access to these capital and some of the reason is because the SMEs have not structured their business in a way that they can be eligible for this intervention.

“The operators need to understand what they should do to enable them have access to these interventions. Again, the state of infrastructure in the country is still very poor and because electricity is poor, SMES have to provide their own power. Again, no public transportation system in place, which forms part of the challenges they face every day.

“Moreover, then the cost of capital is very high. When they want to borrow from financial institutions, the cost of credit is in double digit all the time and when they factor this in the delivery of their services, they will not be able to make profit.

“When you speak with government, they say they are doing what they can to improve infrastructure in the country. It is a long journey, but we ask government to do more in the area of electricity. Government really needs to be refocused to make big impact,” he said.

Founder of Life Bank, Temie Giwa-Tubosun, explained that that some of government’s policies stifle operators and theirsmall businesses, which hinder their ability to grow and become innovative.

“When government make policies, sometimes our regulations seems to be over protective without giving room for innovations. In creating regulations, we must consider how we can innovate and how SMEs can participate without stifling operations.

“Nigerian SMEs are working very hard, but lack capacity development opportunities and capital needed to grow and expand. So, we really need to build a working economy. We really need help,” he said.

The Lagos State Coordinator of SMEDAN, Yinka Fisher, said SME operators must structure their businesses and keep appropriate records to benefit from government’s initiatives aimed at growing the sector.

“Government has been building capacity and has provided soft loans in form of grants for the operators. They should identify the opportunities that abound in the sector to grow their businesses.

“Operators should do the right thing in terms of making sure they do their part. They must ensure that their records are up to date so that they can access this funds available in the sector.

“For instance when they want to access fund, they must make sure that they know how to prepare business plan, how to keep records and even have structures in place. Operators should understand that a lot is expected of them in terms of building capacity and doing it right,” he said.

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