MSMES: Starving in the pool of intervention funds

The market for intervention funds, in favour of MSMEs and some other sectors of the economy, is awash with cash. There are funds everywhere one looks such that it may no longer be difficult to justify the claim that finance is not the problem of our entrepreneurs. By the last count, the Central Bank has placed at the disposal of our entrepreneurs funds in excess of N2trillion for them to access and apply to the growth of their businesses. Meanwhile, there is hardly any operator in the MSME subsector that is not groaning under the weight of the consequences of poor capitalization or outright cashlessness.

Some of the financing schemes in operation, and available for utilization, include the N200billion Commercial Agriculture Credit Scheme. There is also the Micro, Small and Medium Enterprises Development Fund (MSMEDF) of N220 billion, and the Real Sector Support Facility of N300billion. We also have the SMIEES, targeting equity invested in SMEs to boost their capital funds, among so many others. With the new determination of government to expand agricultural output, considerable resources is being directed towards increasing food production. The Central Bank of Nigeria has even directed deposit money banks to set up agriculture desks in their branches. This implies a nod for increased funding to the sector by the banks. There is also a fund for intervention in the electricity market – the Nigeria Electricity Market Stabilization Facility and yet another for the aviation sector, the Power and Aviation Intervention Fund of N300 billion. These financial packages are available to our entrepreneurs to access.

The essence of these funds is to increase production and employment, and also to put the MSME sector in its rightful place as the driver of a shared economic growth. However, there has not been much improvement in the disbursement of these funds. This may probably have negatively impacted both output and employment of the sector. I am aware that this challenge has gained the attention of policy makers and analysts in the sector but we must keep the debate going until we tackle the root causes of the seeming inability of the operators in the sector to utilize the funds. It is therefore time for deeper reassessment of the way and manner these intervention efforts are being managed.

Many have outlined the weaknesses in the constitution of a regular Nigerian entrepreneur, regarding his business style, mentality and all of that. However, we cannot continue to think that the problem lies only with the operators. The usual excuse we give for this situation is that the operators in the sector are not organized enough to attract funds. We claim that they are not properly trained or educated and do not apply modern practices that help businesses to grow. Granted that they possess some peculiarities that tend to make them insular and prevent them from yielding to certain modern management practices, we cannot end it there. Thankfully, many research work have been done to better understand this quagmire. There is need to continue to seek solutions to address the challenge.

We should be clear that development financing has its own peculiar needs or character. It cannot be treated like commercial financing. There is a social side to it, which we must consider in the administration of the funding support we put forward for MSME development. This is one fact that I believe we need to give more recognition. Development financing is not only complex, it is a shared activity, involving many institutions and dimensions. It also involves the interaction of  many elements, including partnerships, co-operators, promoters, donors and so many other parties. The Central Bank recognises this fact and this informed its efforts to get other stakeholder, including commercial banks to properly buy into the programmes. The CBN did not just create funds,ithas continued to sensitize its partners, particularly the deposit money banks to help it promote development, using these funding channels.

Although the commercial banks have sometimes been blamed for the slow utilization of the resources made available for development financing by MSMEs. This view has been fuelled by the high rate at which MSME loan requests are spurned out by banks. One research put it at 50 per cent at best. However, we can no longer dwell on the factors that handicap the banks in that regard. We have acknowledged the fact that by their very nature, the formal structure of commercial banks makes it difficult for them to spearhead development financing. The profit motive and the pressure from investors make them focus a bit too intensely on their bottom lines. And this is legitimate. Our commercial banks have however come a long way in supporting development financing in Nigeria.

One of the major funding platforms provided for MSMEs, the Small and Medium Enterprises Equity Investment Scheme (SMIEES), is completely the idea of the commercial banks. It was created at the 246th meeting of the Bankers’ Committee in December, 1999, in response to the policy activism of the government, and in particular, the Central Bank, to promote entrepreneurship in that sector. It is also a solid evidence of the faith of the banks in the sector, as agents of rapid industrialization, economic development and shared growth. To put away ten per cent of their Profit after Tax for investment in the equity of SMEs is a feat for which the banks should be commended. Perhaps we need to fine tune the requirements for utilizing it so the burden is shared equitably.

In other words, the commercial banks are doing their bit. Apart from participating in the schemes championed by the Central Bank, many of them now have SME-focused programmes. These programmes aim among others, to educate operators and guide them towards more open and modern methods of operation that will promote development. I believe this is equally if not more important than merely having funds, the existence of which operators are mostly ignorant. According to the 2013 National MSME Report of 2013, carried out by SMEDAN, most of the operators are not aware of the existence of SMEDAN and it services. This should worry everyone, given the fact that this agency is totally focused of MSMEs.

We must therefore focus on the reorientation and training of our entrepreneurs. We must help them to learn the new ways of doing business. There are many cultural practices that prevent MSMEs from benefitting from government efforts to promote the industry. To think that even in this day and age some people still believe that using only their own funds to do business is something to be proud of is disturbing. Even worse is the idea that a business is only good when one person owns it is still a prevalent malaise. The way forward is education and training.

Emeka Osuji