TMC shines light on credit awareness for SMEs

It is no longer news that one of the challenges confronting many founders and managers of small and medium-sized enterprises (SMEs) is lack of access to finance, which has stunted the growth of their businesses while some have shut down.

SMEs are widely seen as engines of economic growth as they help in creating jobs, delivering innovation and raising productivity, among others. It was in recognition of this vital role, which the Nigerian SME sector had yet to fully play, that a roundtable dialogue of stakeholders from different sectors of the economy was held recently in Lagos to proffer solutions that would enhance access to credit for SMEs.

The dialogue, with the theme ‘Credit Awareness for SMEs,’ focused on the roles of banks, credit bureaux (CBs), business membership organisations (BMOs) and public agencies in facilitating access to credit by SMEs. It was organised by Toki Mabogunje & Co, a business development services provider.

According to discussants on the role of banks in facilitating access to credit, high rate of loan diversions and defaults in repayments have depleted the pool of funds available and discouraged lending institutions.

A major challenge faced by SMEs is the inability to present acceptable collateral, they noted, therefore calling on banks to be innovative beyond collateral-based lending, which involves land and building to include movables. They also called on regulatory institutions to look at the terms on collateral policies.

On the role of credit bureaux in establishing the credit worthiness of SMEs, discussants pointed out the need for CBs to act as stakeholder lobby group to improve the overall functionality of the credit information system, adding that they should work with banks and BMOs in the development of capacity building strategies for SMEs and to support the need for the implementation of a policy on use of collateral registry.

Also, the absence of a national data bank on information on SMEs was identified as one of the problems facing BMOs in preparing SMEs to access credit.

Discussants stressed the need for BMOs to build capacity for adequate SME database by increasing their sensitisation to ensure that every SME in Nigeria was a member of a BMO.

“BMOs should work on a national database in collaboration with other government agencies. They should focus on the content of data base that can enhance credit worthiness such as information on assets, registration details, sectors and ownership,” they said, adding that BMOs should engage government to promote single digit interest regime to reduce loan burden on SMEs and to grant tax holidays to SMEs.

Discussants on the role of public agencies such as CBN, SMEDAN, Ministry of Trade and Investment, Bank of Industry, Bank of Agriculture, NEXIM, and Nigerian Development Bank, stated that government should help reduce the high cost of doing business in the country occasioned by poor infrastructure (power, roads, water, etc.), multiple taxation, high cost of legal documentation of credit facilities at both the states, land registries and corporate affairs commission.