‘SMEs in Nigeria are largely unorganised, need hand-holding’
How old is Grofin now?
Grofin started in Nigeria in 2007, but internationally it is a much older company and has been doing investment internationally, particularly in Africa over the years, but currently, Grofin has gone beyond Africa. It is also doing business in the Middle-East.
Looking at Grofin Nigeria then and now, what is your assessment of the company
Grofin Nigeria then came into a very unfamiliar terrain, started well, faced a lot of challenges, but then was still able to make a lot of investments, some of which we have exited successfully; but a number are still running. Today, we have a lot more investments. For example, we have invested in 44 SME companies. We have an investment portfolio of nearly N4 billion, which is quite a significant progress from where we started in 2007. And looking at the Nigerian investment horizon, we believe we have a lot more to do, and Grofin is committed to investing a lot more money in the Nigerian SME market.
How will you describe the Nigerian SME
It is a sector that is evolving, it is one that faces a lot of challenges; it is largely unorganised because most of the businesses in this sector are small. We actually have more micro industries in Nigeria than these small and medium businesses. And these businesses need a lot of hand-holding to give structures to them. We need a lot of organisation; we need a lot of corporate governance issues to be addressed; we need a lot of support for the SMEs. What the Nigerian SMEs need are guidance, organisation support, which are what Grofin is bringing in form of business support services in addition to providing finance.
In other words, the Nigerian SME problem is not funding per se
It is not only funding. I think that the funding problem is persisting because some financiers who see the SMEs as unorganised find it difficult to put in money, even when they find such opportunities. The funding problem is there, but the fundamental issue is that because the SMEs are not well organised, the financing that is available for them do not get to them because the providers of such consider them too risky without proper structures. That is why we are emphasising business support to give structure in addition to finance, because you need the structure to effectively deploy finance efficiently and run the operations efficiently.
How receptive are SMEs to your being involved in the running of their business
Willingness of the entrepreneur to work with us is a prerequisite to our investing in them. From the beginning, the entrepreneur has to understand our process, knows how we operate, knows what our expectations are, has an idea of the things we are going to do and what we expect from him. There are challenges, but the fact is that those who are willing to co-operate with us to run the businesses well are seeing good results – just like we have shown slides of testimonies of our existing clients concerning our relationship with them, and most of these testimonies are on our websites.
How many success stories do you have to date
We have several. We are even exiting some of these businesses. Really, the investment tenor runs between 3 and 7 years. The investments that we have exited are those that have run their full terms. There are few that we have challenges midway. Sometimes we need to restructure an investment – you invest and after two to three years you find out that some of the expectations can no longer be met. And because we have been part of the process, we sit down with the company, look at the plans going forward, revise the business plan, and then restructure our investment to meet the new plan. In such cases, you may have cause to extend the term beyond what was initially contemplated. Our financial plans are quite flexible and are designed to meet the individual needs of clients that we work with.
What kinds of funding do you offer
We provide funding in form of loans and equity. We also do lending. In most cases, we do a combination of both. We have international investors – a number of international development institutions such as Shell, Triodos bank, ADB, IFC, Netherland Development Finance Company, SIFEM, Finnfund, Belgium Investment Company for Developing Countries, etc. As of now, we have committed capital to the tune of $320 million, part of which we are investing in Nigeria currently.
What are your regrets; after all, it cannot be all success stories
In Nigeria, we have invested in 44 companies to date. There are a few that have not done very well expectedly, because we are building a portfolio – a basket of investments. We ordinarily expect that a few might not do too well. There are those that will meet expected targets and there are those that will exceed expectations. At the end of the day, you balance your portfolio. That is exactly what you want to achieve as a fund manager. The adverse experiences that we have had, have had more to do with the time we needed to fully understand the investment terrain in Nigeria and how to work with Nigerian SMEs. We have gone through that learning curve and the indications now is that our performance trend should be going forward.