Leasing association partners organisations to support MSMEs

In a bid to contribute to the growth and development of the Nigerian economy, the Equipment Leasing Association of Nigeria is working with relevant organisations to empower Micro, Small and Medium Enterprises (MSMEs) in Nigeria.

The development of Micro, Small and Medium-Size Enterprises is an essential element in growth strategy of most economies as MSMEs contribute to improved living standards, bring about substantial local capital formation and higher level of productivity and capability.

Nevertheless, in spite of the relevance of MSMEs to economic development, the sector continued to be plagued by numerous challenges, key among which is poor access to finance. The sector attracts little share of lending from financial institutions. Latest statistics indicate that only 5 percent of total lending of Deposit Money Banks (DMBs) get to MSMEs. This is perhaps due to the high risks associated with lending to MSMEs.

In order to address the fundamental issue of inadequate funding in the sector, government at all levels initiated various intervention programmes geared at enhancing development in the sector.

These initiative notwithstanding, MSMEs are still incapacitated by the paucity of finance. It must be pointed out that the various attempts aimed at ensuring adequate funding for the MSME sector have continued to focus on the traditional sources of finance.

No doubt, the provision of capital assets is crucial to the success of any productive venture and in our peculiar circumstances, it is imperative that reasonable access to credit is at least guaranteed. A major way of achieving this is through equipment leasing, a financing option that can be utilised for the purpose of enhancing capital formation.

The relevance of leasing to MSMEs was re-echoed by ELAN at a stakeholders conference organised by the Partnership Initiatives for Niger Delta Development (PIND) recently in Edo State. Making the submission, Kehinde Lawanson, chairman of the Association, stated: “Globally, leasing has been recognised and established as a creative financing alternative that provides an innovative means for delivering increased domestic investment within the economy.”

In Nigeria, leasing is even more relevant, given the tough economic conditions where access to productive assets is increasingly difficult, especially to MSMEs.

According to him, “equipment leasing has over the years, paved its way into the world’s capital markets.

The appeal of leasing lies in the fact that it meets the diverse needs of the equipment user. At present, the industry accounts for an annual turnover of about $750 billion and in Nigeria outstanding lease portfolio in 2012 stood at N671 billion.

“In the United States of America, leasing remains the single most widely-used method of external

finance, representing 30 percent of investment in capital equipment. Today, it is the largest external source of finance for capital investment.

“Indeed, leasing has become the single most important source of external finance for micro, small and medium enterprises and has been regarded in most quarters as the last resort to MSMEs.”

He stated few of the advantages of leasing to MSMEs to include: Cash management/cash considerations; flexibility and convenience; obsolescence hedge; less restrictive form of financing; end-of-term options; absence of collateral/security; favourable financial reporting, etc.

The whole essence of leasing therefore is to enhance the planning, improvement and development of any economy. The fact that leasing facilitates long and convenient access to capital equipment goes to show the unique role of leasing in building and supporting productive ventures, especially to those that do not have significant asset base. Thus, a company can conserve its funds for other productive purposes rather than spending heavily on the purchase of assets

ELAN has been working with various MSMEs associations and groups across various sectors of the economy, to facilitate easy access to productive equipment for their members as part of empowerment and wealth creation initiative.

Lawanson called on MSMEs to maximise the varying products opportunity of leasing, to meet their equipment needs thereby promoting their businesses and contributing to the growth of the entire nation. ELAN is prepared and willing to facilitate the easy access to the required equipment.

He urged the government to utilise leasing in the implementation of the various intervention funds for MSMEs, giving leasing strong attribute as an innovative financing alternative that can effectively meet the capital requirements of MSMEs.

Also, government support for the provision of leasing infrastructure, such as appropriate legal regulatory framework, better tax regime, funding windows for the industry will enhance capacity of the industry to effectively perform its catalytic role.