Finance Houses operating in the country have said their limited source of income has affected their intervention in small businesses in the country.

Speaking at a CEO Business Meeting and Luncheon held in Lagos, Yemisi Tayo-Aboaba, an official of Finance Houses Association of Nigeria (FHAN) and former Managing Director, First Funds Limited, said small and medium scale enterprises remain a natural focus for finance houses.

Stating that finance companies exist to bridge the gap between the big commercial banks and microfinance banks, she said there was need to concentrate on undeserved segments such as SMEs for finance houses to be relevant.

She explained that Finance Companies as a group may be able to collaborate with government in providing funding and capacity building that is critical for growing the Small Scale Medium Enterprises (SMEs) segment.

For her, adequately funded finance companies will contribute to the growth and development of the economy especially by funding SMEs. She however noted that securing long-term and cost-effective financing remains a big challenge for finance houses in the country.

She explained that equity, private individuals, institutional investors, debt and/or equity from Developmental Finance Institutions, borrowings from individuals as well as institutions and funding from government were key sources of funding for the sector.

Tayo-Aboaba however said that unlike banks, Finance companies are not allowed to accept deposits. This limitation means finance companies can only source funds from shareholders, Private Equity Companies, Development Finance Institutions and other Institutional Investors.

According to her, most operators are sourcing for short -term funds to finance longer term assets thereby creating significant asset-liability mismatch. Such actions, she said also open the business to reinvestment risks. Tayo-Aboaba said that high cost of funds leads to riskier investments and makes finance companies less attractive to other institutional financiers. According to her, the subs-sector offers a variety of services including; funds management, equipment leasing, project financing, Local Purchase Order (LPO) financing, debts factoring, financial consultancy among others. She said that Finance companies provide financial services for consumers' industrial, commercial, or agricultural enterprises.