Despite multiple funds made available by the Federal Government to fund Micro, Small and Medium scale Enterprises (MSMEs), experts in the financial sector and industrialists are worried about the challenges of accessing the funds by entrepreneurs.
The Federal Government had in the past set up several intervention funds warehoused in the Central Bank of Nigeria (CBN) and other Development Finance Institutions (DFI) to provide startup capital and business development funds for entrepreneurs.
Some of these funds are being managed and disbursed by the Bank of Industry (BOI), Development Bank of Nigeria (DBN), Bank of Agriculture (BOA) and commercial banks.
However, experts at a recent roundtable organised by the Abuja Chamber of Commerce and Industry (ACCI) have raised concerns over high interest rates and collaterals demanded by banks and DFIs before disbursing the intervention funds.
The experts brainstormed at the roundtable in Abuja on “Remodelling SMEs Financing: Options and Solutions.”
The Director General of ACCI, Mrs. Tonia Shoyele, said remodelling financing strategy for intervention funds had become imperative considering the many obstacles businesses must scale before accessing many intervention funds set aside by both the Federal Government and sub-national governments to help businesses thrive. Mrs. Shoyele said the experts would seek alternatives to funding enterprises aside from the current use of DFIs and commercial banks.
The Vice President of ACCI (Media and Strategy), Jude Igwe, said commercial banks were more interested in getting intervention funds out of the CBN without genuine intention of disbursing the funds to the businesses that needed them.
Igwe said some of the banks used the money to buy treasury bills from the Federal Government to make profit while making it difficult for the target prospective beneficiaries to access the funds knowing that the CBN would not charge interest on the funds.
The Director General of the Budget Office, Ben Akubueze, represented by his Technical Adviser, Prof. Olumide Steven Ayodele, said enterprises needed to be organised to be able to access intervention funds.
Akubueze, therefore, called on the organised private sector to initiate a comprehensive study to determine the main obstacles to accessing intervention funds.
The Managing Director/CEO of PenQuin Development Concepts Limited, Antonia Ifeanyi Ahiedu, said sometimes politicians were dragged into the disbursement of intervention funds.
Ahiedu said there was lack of coordination for the several intervention funds, and therefore there was need for all the funds to be managed and disbursed from one special vehicle; preferably driven by the organised private sector.
She called on ACCI to incorporate a special vehicle to function as a finance institution to access intervention funds and disburse to members.
The Deputy Director, Enterprise Development and Promotion, Small and Medium Enterprises Development Agency (SMEDAN), Ibrahim Abdulmalik, said the clamour for a more simplified approach to disbursement of intervention funds led to the establishment of the DBN.
He, however, said there was little or no difference in the approach of the BOI and DBN in terms of difficulty in accessing funds by SMEs. An estate developer, Ben Ojo, said it was easier to access loans in the 1990s than today considering the many obstacles set by banks.
Ojo said the guidelines were complex and difficult to meet, even as he called on DFIs and banks to simplify the guidelines.
Recently, the President of ACCI, Prince Adetokunbo Kayode, advised the Federal Government to replace direct cash intervention funding for small businesses with Finance Leasing to de-risk the loans by 80 per cent.
Speaking at the official opening ceremony of the 2019 Abuja International Trade Fair (AITF) in Abuja, the ACCI boss said Finance Leasing, which provides for direct procurement of Capital Expenditure (CAPEX) by funding the agency to the SME and the provision of only Operational Expenses (OPEX) as against the prevailing direct cash, would prevent diversion into several other concerns.
Prince Kayode said, “Since CAPEX is usually about 80 per cent of total capital requirement, this leads to a de-risking of the facility up to about 80 per cent, especially with the covering of cost for delivery, installation, maintenance and insurance.”
He said the current system of funding mechanism for SMEs was defective and that the defect must be resolved expeditiously.
He added that, “At the last count, government has about 21 intervention funds with billions of naira committed, but very minimum impact either in terms of quantum or quality.”
He, therefore, urged government to consider and agree to a special funding vehicle for SMEs through the Organised Private Sector (OPS).
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