SMEs: It’s time to stop flying blind
The past few years have seen considerable emphasis on the need to develop the Micro, Small and medium Enterprises (MSME) sector of the Nigeria economy. Lack of funding seems to have been ranked very high in the scheme of handicaps of the sector.
Accordingly, there has been a plethora of financing packages intended to boost operator’s economic activity. The Central Bank has led the way with several on-lending facilities, including the Micro, Small and Medium Scale Enterprises (MSME) Fund lunched in 2013 with a seed fund of N220billion. It is lent to beneficiaries at a maximum rate of 9 per cent per annum. Other terms are a tenor of one to three years and a minimum and maximum loan size of 5 and 50 million. These terms are by any standard juicy.
To fast track SME finance, particularly the growth of the SME manufacturing sector, the CBN had in 2010 introduced a N500 billion debenture stock issued by the Bank of Industry. The package was such that the sum of N300 billion was meant to be applied to the power sector for its projects while N200 billion was intended for the refinancing and the restructuring of the existing loan portfolios of banks advanced to the SME sector and manufacturing activity. These facilities are just a small part of the many other funding opportunities in the SME sector.
Recent developments in the international arena have led to massive drops in national revenue and compelled “a desire” to shift attention from oil to the non-oil sector. By shifting attention to the non-oil sector, especially agriculture, public policy is directed in favour of the SMEs that dominate the agricultural space. This shift of emphasis has also resulted in even further financing facilities for the benefit of operators in the SME sector.
However, available evidence does not indicate much positive impact on the sector, suggesting either that funding is not the problem or that it is yet to yield the desired results. It is important to restate here that while finance may be an important element in the matrix of key success factors for MSMEs, it is by no means the most important challenge. There is more to a vibrant SME sector than availability of funds. Besides, there is a danger of political manipulation in the administration of publicly funded and managed interventions, such that the core objective of impacting the SME sector may become side-lined. This is a global and not a Nigerian challenge.
There are other equally, if not more important challenges to the sector. That Nigerians are mostly illiterate, socially and financially, is one of our national realities. Many people can hardly read, to say nothing about understanding materials. But this is not the picture painted of the NSME sector by its 2013 National survey. According to the survey of MSMEs in Nigeria, 69.9 percent of the operators had NCE or National Diploma or more. Those who had no education were less than 5 percent. So even if Nigerians are mostly illiterate, it is not so with these entrepreneurs. This seems to confirm the fact that business education is different from general education. The relevant education is one that enables one to understand minor financial procedures, like ways of keeping financial records, obtaining loans or accessing financing facilities.
I would like to say that the emphasis we have put in the provision of lending facilities is commendable. However, these facilities will continue to decorate the vaults of banks for as long as our business people and entrepreneurs remain handicapped in financial education. This is where I believe we need to dig deeper. Of late, there has been a modicum of renewed business optimism – a major ingredient for ending a recession. This is likely to progress to a rhythm as the economy comes out of recession. People are once again going to get excited at the prospects of increased economic activity. Sooner than later, we are likely to have a rebound or upsurge in our currently moribund MSMEs. There is need for operators to spend more time on housekeeping, including learning as much as they possibly can about finance and administration.
We are in an era where technology continues to expand the scope of opportunities in the financial services sector with new products and instruments. Several years back, we saw advertisements saying that the future belonged to plastics. That future has already come and gone. We are now actually racing towards the clouds, where neither pen nor paper and not even plastics would have much role. We have moved from the stage where we kept our money in electronic purses (plastics) to that where we no longer need any purses at all, electronic or leather, because we neither see nor touch our money. Our money is in the clouds and all we need to do is to say the word: Open sesame; as in Ali Baba and the Forty Thieves, and money flies around the world. This will require a little more than thumb printing on what your banker has written for you. Some level of financial education is needed and this need will increase over time.
The world is changing fast. Even in Nigeria with its famed disregard for education and the educated, things are changing. Who could believe that JAMB exams could become computer-based and we do away with fake JAMB results. Unfortunately, many of us who are yet to apprehend the nature and content of the first technology revolution are being confronted with and expected to participate in the current digital revolution, which is several versions ahead of the first revolution. This is what I think those of us interested in the MSME sector and indeed Nigeria’s future should now spent time to decipher.
The level of management and financial illiteracy in the country needs to be addressed. It is a nation-wide challenge and not just a matter for the SMEs. We have done enough in the creation of financial packages for the sector. It is time to find out how prepared the operators are to understand and take advantage of the many financing schemes. There has been a seeming apathy to the many facilities. Disbursement has been low and some people blame the banks. My position is slightly different. While the banks may have their own challenges, the bulk of the drive to access the facilities should come from the potential beneficiaries, who sadly are ill-equipped to grasp their own role.
We need to press on in the direction of education and training, not only in the area of finance and management but even more. Undoubtedly, there is a limit to which illiterates can be supported with training facilities at later ages. Certainly we don’t want to continue the hand-to-mouth type of entrepreneurship, with practitioners unable to feed themselves from their daily enterprise. Therefore, we need to promote entrepreneurial education. Nigeria has the highest number of out-of-school children in the world. This should embarrass any leader. Ultimately, this shameful statistic is at the root of the challenges faced by the SME sector in particular and Nigeria in general. The fact is that these children grow up to become entrepreneurs without any capacity. It’s time to stop flying blind.
Emeka Osuji