Stakeholders see SMEs unleashing potential as FG readies development bank
Stakeholders in the small and medium scale enterprises (SMEs) sector believe the Federal Government’s move to establish the Development Bank of Nigeria will enable small businesses unleash their potential.
Kemi Adeosun, minister of finance, recently announced that the country had entered into an agreement with the World Bank Group and other development partners to release about $1.3 billion for the funding of SMEs through the planned take-off of Development Bank of Nigeria (DBN).
“It is a good development and we are very happy about it. We have been canvassing for a long time that the Bank of Industry (BOI) cannot do it alone,” said Femi Egbesola, national president, Association of Small Business Owners (ASBON).
“We heard that the interest rate on the loans would be three percent for SMEs, which is very good and cannot be obtained anywhere. We are hoping that the conditions for accessing it would not be too stringent,” Egbesola added.
Entrepreneurs and small business owners cannot easily access finance to expand their businesses. They are usually confronted with problems of collaterals, high interest rates, extra bank charges, inability to evaluate financial proposals and limited financial knowledge, among others.
Banks often charge between 15 and 30 percent interest on loans, making it difficult for small business owners to access funds for expansion.
All these have remained major impediments to growth for SMEs operators in Nigeria, since most cannot access external finance due to their sizes.
Friday Opara, director, strategic partnership, Small and Medium Enterprises Development of Nigeria (SMEDAN), said: “It is long overdue for SMEs to have a bank that would be focused on their funding. Bank of Industry (BOI) is only focused on giving loans to established businesses.”
Opara stated that the DBN will go a long way in helping SMEs to be well-structured and prepare them to become competitive.
He urged the Federal Government to ensure that the requirements for the funds are not too stringent so that more businesses, especially start-ups, can access the loans.
Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), told Real Sector Watch recently that manufacturers need to access loans at five percent.
He said the BoI needs to be recapitalised to enable it meet larger obligations.
Some of the operators have a different opinion on the proposed establishment of the DBN, calling on the government to re-structure the already financial institutions that are mandated to address the issue of loans in the country.
“Why creating another establishment when we have BoI and Bank of Agriculture (BoA). We just need to recapitalise BoI and BoA and give them the needed support,” said Degun Agboade, president, Nigerian Association of Small and Medium Enterprises, in a telephone interview with BusinessDay.
“If you look at what BoI has done in the last two years, it is more than what they have done in 10 years. All we need to do is work on areas the existing establishments have failed and intensify their operations,” Agboade said.
Josephine Okojie