Much
has been said and written about the challenges of small businesses in Nigeria,
a country struggling to cope with high unemployment and low productivity,
amidst high population.
Poverty
is rampant and all these conditions combine to make creating a conducive
enabling environment for entrepreneurship at the lower level, a national
imperative. 
However,
the efforts towards making small businesses to thrive would need to pay
attention to funding gaps which appears to be intractable so far.
Small
and Medium Enterprises (SMEs) sector supports the Nigerian economy. SMEs
constitute the major part of enterprises in the private sector and provide
employment opportunity to most of the citizens.
Regrettably,
in Nigeria, they have not performed very well. They have contributed just a
small percentage to the Gross Domestic Product, unlike their peers in other
emerging economies.
Of
course, the challenges faced by these small businesses are not only numerous,
but also not getting the right attention at the right time and manner. These
challenges have been responsible for their slow growth.
Despite
its importance, most small businesses fail within the first five years,
notwithstanding the presence of agencies established by the government to
support the sector.
Most
of the failures are due to the lingering challenges facing the sector, which
are also key and success factors of small businesses elsewhere.
For
instance, funding is a major problem with SMEs in Nigeria. However, the problem
is not so much about the sources of the funds, but the accessibility. Most of
these enterprises are unable to access both short-term and long-term loans.
Some
of the factors limiting funds accessibility by the SMEs include the lack of
adequate collaterals and credit information, stringent conditions set by
financial institutions, and the cost of accessing funds.
Most
Nigerian banks do not support start-ups and even existing businesses don’t have
the required collateral.
For
SME operators that go through non-conventional banks, the high interest rate is
always a burden and eventually, leading to their mortality. As a result of
this, most SMEs in Nigeria cannot compete with items or products from other
countries, especially China and other Asian major economies.
The
narrative, granted, is gradually changing. Nigerian banks are responding to the
needs, but more is needed. For Sterling Bank Plc, there is earmarked N50
billion to meet the urgent needs of existing and potential customers in the
SMEs space before the end of the year. It is part of efforts to ensure that
SMEs and entrepreneurs contribute meaningfully to the nation’s economic growth.
The
Group Head, Retail Assets and Liability of the bank, Mrs. Benedicta Sadoh,
explained that the bank has developed a scheme known as the Business Support
Facility where operators of small businesses can access funds to grow their
businesses in a sustainable manner.
According
to her, the scheme is targeted at businesses that generate cashflow daily, like
most SMEs, and the rental is monthly.
She
noted that the scheme does not have a fixed interest rate because it is based
on a digital score card, which is a scoring process where information about the
prospective customer is used to determine the applicable interest based on his
financial worth.
“The
scheme that is targeted at entrepreneurs, where you can access loans to meet
your urgent business needs and it is payable over an extended period of 24
months. So, you have to pay conveniently over a dedicated period of time with
processing time of 48 hours and minimal documentation period.
“The
difference between sterling and other banks in terms of this offer is that most
banks do a 12 months offer for entrepreneurs because of the volatility of their
business but we have extended our repayment tenure from the standard of 12
months, which other banks do to 24 months,” she said.
The
Unit Head, SME Sales, Fatai Jelili, said the bank plans to work in partnership
with some insurance companies to provide covers for defaulting customers In a
bid to mitigate against business uncertainty.
“There
is a secondary mitigants, the good practice in business is that you will put in
place measures to counter unforeseen circumstances; in that case, we have some
insurance partners that we are working with to ensure that we have some
collaboration that will up businesses during the period of downturn.
“To
ensure we provide some cover for their businesses. We are working with some of
our insurance partners to provide this cover for the businesses. This is one of
the several offerings that we have to support SMEs.”
