16 April 2018

Nigeria: Thumbs Up - Lifeline for MSMEs

Micro, small and medium scale enterprises (MSMEs) play a major role in most economies, particularly in developing countries.

In fact, MSMEs are recognised globally as the nucleus of sustainable growth, job creation and poverty reduction. They contribute up to 45 per cent of total employment and up to 33 per cent of national income (GDP) in emerging economies, according to a report by the World Bank.

According to estimates, 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and sub-Saharan Africa.

In emerging markets, most formal jobs are with MSMEs, which also create four out of five new positions. However, access to finance is a key constraint to MSME growth, as without it, many SMEs languish and stagnate.

MSMEs account for a significant share of employment and GrossDomestic Product around the world, but, when they have limited access to finance, the economy suffers a series of negative consequences: Economic and social opportunities are restricted, enterprise creation and growth are restrained, households and enterprises are more vulnerable to threats, and payments are costlier and less safe, according to the World Bank.

In Nigeria, the greatest challenge of the 17.3 million MSMEs in operation is the poor access to affordable financing, leading to an estimated financing gap of about N9.6 trillion. And since the drop in crude oil revenue, policy makers in Nigeria have continued to fashion out strategies to support operators in the non-oil sector, with increased focus on MSMEs and the agriculture sector

This was why last week's decision by the Bankers' Committee to commence the disbursement of the Agribusiness Small and Medium Enterprises Investment Scheme (AGSMEIS), an initiative designed to improve access to affordable financing for MSMEs, particularly those operating in the informal sector of the economy, has been commended.

The AGSMEIS fund, which was derived from an initiative by the banks to set aside five per cent of their profit after tax in a year, from its current value of N26 billion, is expected to hit N60 billion by the middle of the year.

All the deposit money banks, voluntarily agreed to set aside and contribute five per cent of their profit after tax (PAT) annually to finance eligible projects under the Scheme.

The Central Bank Governor, Mr. Godwin Emefiele, disclosed that most of the beneficiaries of the funds are youths who had been been trained on various entrepreneurship, vocational and management skills across the country by Entrepreneurship Development Institutions and Centres, such as Fate Foundation, Lagos Business School, House of Tara and Thrive Agric.

Upon the completion of their vocational training, the specific implements needed to practice their vocations would be procured under the scheme.

"The beneficiaries' details including their Biometric Verification Numbers (BVN) are forwarded to the deposit money banks to confirm that they are their customers before accessing the fund.

"It is indeed an auspicious occasion as the outcome of today's engagement is expected, in no half measures, to significantly, reduce youth unemployment and restiveness, increase social cohesion and drive inclusive economic growth," Emefiele explained.

Clearly, this initiative if pursued genuinely and made transparent, would go a long way in supporting the federal government's quest to diversify the economy.

Indeed, access to finance can boost job creation, raise income, reduce vulnerability, increase investments in human capital as well as engender inclusive growth.

That is why this initiative by the Bankers' Committee deserves thumbs up.

Nigeria

Army Launches 'Operation Last Hold' to Crush Remnants of Boko Haram

The Nigerian Army is set to launch a new exercise tagged 'Operation Last Hold' aimed at crushing the remnants Boko Haram… Read more »

Copyright © 2018 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.