Stakeholders charge SMEs on governance structure, credit management

Stakeholders, including the Lagos Chamber of Commerce and Industry (LCCI) and commercial banks, have urged small businesses to embrace a strong governance structure and proper credits management to address funding gaps in the sector.

According to the stakeholders, many micro, small and medium enterprises (MSMEs) have continued to struggle with the risk assessment criteria of lenders, poor accounting records, failure to provide required documentation, inadequate collateral, weak governance structure, a cash flow crisis among others.

Speaking at the Chamber’s financial services group webinar themed, ‘Addressing the Funding Challenges for your Business’, LCCI President, Toki Mabogunje, noted the importance of SMEs to economic development.

Mabogunje, represented by the Vice President, Gbenga Ismail, said it was difficult to access affordable finance and that funding continued to impede the growth of the sector.

“The objective of this webinar is to provide a veritable platform to facilitate discussion and interface between managers of loanable funds and businesses, especially the MSMEs on the huge financing gaps that still exist in the economy despite the various intervention measures,” she said.

Also, the Chairman, Financial Services Group, LCCI, Obinna Anyanwu, stressed that inadequate funding inhibiting scale-up, competitiveness, and sustainability of MSMEs, was further compounded by the COVID-19 pandemic.

Anyanwu said that a survey conducted by the Pan-Atlantic University and Development Bank of Nigeria in 2018, reported that the rejection rate of SME loan applications was pegged at 50 per cent.

He urged the banks on the provision of practicable and innovative solutions to the issues of funding in Nigeria.

The Group Managing Director of Zenith Bank Plc, Ebenezer Onyeagwu, charged small businesses to be conversant with the five principles of credits to boost chances of accessing funding.

Onyeagwu, represented by an Executive Director of the bank, Dr. Temitope Fasoranti, listed the five principles as character, capacity, capital, collateral, and conditions.

He said that the principles were used to measure the business credit history, ability to repay loans, and other parameters to influence the lender’s desire to finance.

He said that having a continuity and succession plan, knowing types of funding available to specific businesses, and educating the banks on the business model would also improve access to funding.

“The challenges MSMEs face are from the unfriendly business environment, poor funding, low managerial skills, lack of modern technology, poor governance, lack of succession planning but among these, shortage of finance is central.

“According to the World Bank Doing Business in Nigeria Report 2020, Nigeria scores a low 15 out of 100 for ease of getting credit.

“However, notwithstanding the evolution of the banking industry and digital disruptions, the five C’s of credit are sacrosanct in the bank’s lending decisions,” he said.