‘Funding gap still haunts SMEs’

Despite the numerous funding programs established by the Federal Government, Small and Medium Scale Enterprises (SMEs) still can’t access funds, analyst in the SMEs space have said.
In spite of the compelling growth potential of SMEs, the Nigerian business environment is becoming increasingly tougher for these businesses.
Running SMEs in Nigeria is difficult because of numerous challenges which they face. Apart from other challenges, funding has always been the major albatross to the growth of these businesses.
“Despite numerous funding programs by the government, SMEs still can’t access funds. The government is just doing window dressing to the issue of funding,” Degun Agboade, president, Nigerian Association of Small and Medium Enterprises (NASME) told BusinessDay in a telephone response to questions.
There is a gap that exists and that is why SMEs cannot access government funds. I have a member who was able to access the central bank’s loan for small business at 12 percent interest rate with immediate effects. That is a herculean task for SMEs.
Agboade stated that in other countries, SMEs are given at least six months before they can start servicing their interest.
Entrepreneurs and small business owners cannot easily access finance to expand business and they are usually faced with problems of collaterals, high interest rates, extra bank charges, inability to evaluate financial proposals and limited financial knowledge, among others.
These have remained major impediments to growth for SMEs in Nigeria, Africa biggest economy, since most of them cannot access external finance due to their sizes.
“Most of the SMEs are not aware of government funds and how to access them. There is also a problem with the transmission mechanism of such funds, said Francis Onwumere, business and product developer,” Prowork Limited.
“The government should create a lot of awareness and a data base where information of SMEs can be collated for dissemination of information,” he said.
Only two percent of Nigeria’s adult population received loans from one financial institution in the past year, according to Findex, a global database on financial inclusion. The World Bank latest data say that only 14 percent of SMEs in the country have access to a loan or overdraft account.
“Banks are still finding it difficult to get the funds from CBN. The funds are there but access to the fund is the problem,” said Wale Fasanya, director, ED &P, SEMDAN.
The cost of doing business for SMEs and business in general has continued to increase with the new FX policy. In addition, increase in the prices of many commodity goods has spiked inflation in recent times.
Josephine Okojie