21 June 2014

Nigeria: SMEs Need Quick, Properly Priced Funding to Catalyse Growth - Oyebode

Mr. Akintunde Oyebode is the head of Small and Medium scale Enterprises, SMEs, Stanbic IBTC Bank. In this interview with Saturday Vanguard Business he highlights some of the challenges stiifling SMEs growth in Nigeria and also proffered the way forward.

He insists that funding SMEs through the use of intervention funds and guarantee schemes are temporary measures that cannot yield long term result. He said Stanbic IBTC Bank was ready to use its global partnerships to boost the access of Nigerian businesses to the global trade network.

SMEs grow at almost twice the rate of GDP in most markets across Asia, Africa, and Middle East, but not in Nigeria. What are the major issues stifling the growth of this important sector of Nigeria's economy?

The main driver of the growth of SMEs in Asia and the Middle East is the level of access to finance enjoyed by SMEs in those regions. The emergence of micro-lenders like the popular Grameen Bank has helped bridge the financing gap in Asia, thereby stimulating SME growth. In sub-Saharan Africa, the funding gap within the SME segment is estimated at something between $100 billion and $200 billion, depending on who you're listening to. This implies a need to increase the current flow of finance at least four times from current levels of $25 billion.

In addition to this, the lack of capacity and challenges with infrastructure impede SMEs in Nigeria. Training and advisory are two areas Nigerian SMEs are particularly disadvantaged, while high cost of doing business also takes its toll on Nigerian businesses.

Given the aforementioned challenges, what role can lenders play to improve SMEs' access to finance?

The challenge to lenders is simple: Provide quick and properly priced funding to the SME market. Due to the nature of the segment, SMEs are usually poorly capitalised with little or no assets. Therefore, a big barrier to funding is usually the lack of tangible collateral. Another big challenge is the absence of accurate and verifiable financial statement, with which formal lenders evaluate the credit worthiness of the borrowers.

To solve this, lenders need to develop non-traditional methods to evaluate borrowers in this segment, and leverage on available clusters like cooperatives and market associations to provide comfort to the lenders. Lenders must also identify that finance must be supported with the right level of technical assistance. The most successful lending models are usually those backed by the right level of technical assistance to ensure that borrowers maximise the funding provided.

Organisation like SMEDAN has constantly called on banks to assist SMEs through trainings that will improve business methods. What are the efforts being made by Stanbic IBTC in this regard?

We are very interested in capacity development and training. As you correctly mentioned, one of our priorities is the provision of technical assistance to SMEs across Africa, and Nigeria is not different.

We are corporate members of SMEDAN and we are currently in talks with the leading indigenous and international SME Development Associations to commence sustainable training initiatives for SMEs. We expect that this and our innovative product suite will support the growth of the segment in the medium to long term.

What other strategic partnerships is Stanbic IBTC Bank involved in to encourage uptake of financing and business advisory by SMEs?

We have identified selected indigenous and international partners to help develop the SME segment. Some of these include a regional partnership with the Pan-African Business Coalition to offer health and business training to micro and small businesses. We are also in partnerships with leading business schools to constantly produce SME based research and provide various training modules that meet the needs of businesses in various life stages.

Apart from these organisations, we also work closely with market and trade associations, agricultural cooperatives and other clusters of SMEs to continuously understand the needs of these businesses.

Does Stanbic IBTC Bank see opportunities in the country's SME sector given the noticeable disappearance of international boundaries and barriers to trade ushering in an era of global competitiveness?

The SME sector is an area of significant importance to Stanbic IBTC Bank in Nigeria and Standard Bank as a group. The Standard Bank group is always seeking ways to connect businesses within Africa, and also to the major trading partners outside Africa. Nigeria's balance of trade position clearly suggests we are a major player in international trade, with the gradual disappearance of barriers to trade. We are uniquely positioned to use our extensive regional network to connect Nigerian businesses to trade partners around Africa and also use our global partnerships to boost the access of Nigerian businesses to the global trade network.

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