Leveraging digital banking to support SME development

Access to finance is often cited as the major challenge faced by small and medium scale enterprises (SMEs) in Nigeria. Though financing remains a major challenge, it does not reflect the multi-faceted challenges business owners face. With the significant infrastructure challenges, business owners often struggle to run efficient operations, and incur a high cost of doing business.

“Business owners in emerging markets like Nigeria are real heroes. They generate their own power, create their own logistics structures, and still have to worry about running their businesses. With such challenges, it isn’t surprising that over 70percent of businesses in Nigeria don’t survive beyond the first five years,” said Akintunde Oyebode, who is responsible for Stanbic IBTC’s SME Banking team.

Apart from access to finance and operational challenges, SMEs also need to enhance capacity, which is one of the main impediments to growth. Many SMEs struggle with book keeping, which means lenders or investors struggle to assess the business viability. In addition, an inability to determine their target markets and execute the appropriate strategy means resources are dissipated without delivering the desired objectives.

“Most SMEs have poor record keeping and a lot of them do not have any corporate governance and business plans,” Director, Strategic Partnership and Liaison, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Friday Okpara, stated at a recent forum. In truth, finance is only one challenge among many others. However, various stakeholders are proffering solutions to help remove the bottlenecks. In the last few years, several initiatives like the Central Bank of Nigeria’s MSME Development Fund, various lending programmes by the Bank of Industry, and the new wave of angel investors and venture capital firms have reduced the financing gap. The Special Assistant to Yemi Kale, statistician-general of the National Bureau of Statistics (NBS), Folahunmi Aina, said many SMEs suffer from a lack of information. “There is also the problem of awareness. Some SMEs do not have access to micro finance because they are not aware,” Aina said.

This explains why recent interventions by both government and established private sector players to develop a strong and sustainable SME sector have largely been geared towards capacity building. Stanbic IBTC Bank, for instance, organized nationwide SME workshops in Abuja, Port Harcourt, Aba, Lagos, Ibadan, and Kano, with plans to extend to other cities and major towns soon. “The SME sector is pivotal to the economic growth and development of any nation and Nigeria is no exception, which is why the seminar was developed to provide innovative marketing, financial and management skills that are useful to their businesses and provide the skillset needed for their businesses to grow,” said Obinnia Abajue, executive director, Personal and Business Banking, Stanbic IBTC Bank.

Indeed, SMEs need to have a strong hand that would steady them as they take their first tottering steps. For instance, in the 80s, the British government led by Margaret Thatcher embarked on massive enterprise development and promotion. Policies such as loan guarantee schemes and tax incentives formed the pillar of the government’s SME growth drive. Perhaps, the most telling policy was the linking of SMEs with appropriate technologies and educational institutions. What this did for the businesses was to reduce the burden of sourcing human capital and technology as well as enable them tap into a steady stream of vital related research works that they could use. The result was impressive. Britain witnessed a massive increase in business enterprise and the number of self-employed people, among other forms of transformations, during that time.

Nigeria is in a similar situation today, and the British example is very relevant. Businesses need cash; they equally need advisory services, business and networking opportunities, as well as human capital and marketing. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), established in 2003 by the federal government, was set up as a coordinating agency for SMEs, helping to link ideas with finance while exposing businesses to opportunities. With a survey that shows Nigeria is home to 17 million SMEs, providing a structure for those businesses to thrive becomes a priority.

Stanbic IBTC Bank’s approach is very interesting. The bank has developed a unique value proposition to support small businesses, with transactional products; savings and investment solutions; lending products; and wealth protection solutions. Underpinning all these is an investment in technology, which is designed to make banking easier for its SME clients. Apart from using best-in-class payment solutions, the bank recently launched an internet banking offering specifically for SMEs.

“To help clients improve operations,” Oyebode stated, “we believe a migration to digital banking will reduce the challenges faced by customers and help them run more efficient businesses. Instead of spending time travelling to visit our branches, we have created a platform called SME BizDirect for customers to fulfill their banking transaction by telephone and email.”

The SME BizDirect allows businesses in the country as well as from all over the world interact with the bank. The BizDirect, which is a virtual centre from which well-trained bankers interact with customers by telephone and email, is the first of its kind in Nigeria. According to Oyebode, “It is a testament to the bank’s focus on SMEs that it created a fully dedicated centre to handle enquiries, requests and all other banking needs for SMEs.”

Head of Business Banking at Stanbic IBTC, Lloyd Onaghinon, says, “SME BizDirect will change how banks interact with their clients. The era of depending on physical branches to serve clients is disappearing, and technology will be the major driver of customer engagement in the future.” The future of banking is certainly interesting, and with innovative solutions like BizDirect, the future of SMEs in Nigeria is certainly bright.

Adebola is a consultant with XLR8.

Adebola, Adebayo