Sekibo Advocates Protective Strategy for SMEs’ Devt

NEWS EXTRA

The Managing Director of Heritage Bank, Ifie Sekibo, has said that the establishment of a solid framework supported by clearly articulated government policy is the first step in creating an active Small and Medium-scale Enterprises (SME) sector that could spearhead the much needed industrial revolution required in Nigeria and in many African countries.
Sekibo made the submission while speaking at the 2nd US-Africa Trade & Investment Forum/Africa Investment & Development Awards, in New York, USA recently.
He spoke on “Small & Medium Enterprise Funding in Africa – a banker’s experience,” noting that in Sub-Saharan Africa, SMEs are more credit-constrained, which he said typically affects growth possibilities as significantly low number of startups who apply for financing actually succeed.
Studies, he noted, indicate that more than 70 per cent of the SMEs lack access to medium-longer-term finance, creating an SME funding gap of more than $140 billion in Africa alone.
“Using Nigeria as a case study, between 2003 and 2009, SME loans as a percentage of total credit, decreased from 7.45 per cent to 0.18 per cent. Yet by 2012, Nigeria had about 17.6 million Medium and Small and Medium-scale Enterprises (MSMEs) employing about 32.4 million people. Although it is generally accepted that SMEs enhance competition and entrepreneurship, and their development has a positive impact on innovation and productivity growth, policy and infrastructure factors to mitigate risk and costs that SME sector cannot internalise needs to be seriously worked upon by all relevant stakeholders,” he said.
He added that in Nigeria, most SMEs die within the first five years of existence while another smaller percentage goes into extinction between the sixth and tenth year, with only five to 10 per cent surviving, thriving and growing into established corporate status.
He listed the leading cause of such sub-optimal output to include: poor access to funds, weak institutional support, unstable macroeconomics, complicated and unstructured legal framework/regulation, inadequate business information, infrastructure & business environment and human capital factors.
Sekibo, however, lauded the recent response to financing SMEs in Africa by development finance institutions such as the African Development Bank (AfDB), Ecowas Bank for Investment and Development (EBID) and the relatively new African Guarantee Fund, which was officially launched in June 2012, that are engaging partnerships with commercial banks and other SME focused lenders to initiate advisory and innovation interventions to promote diverse SME funding windows.
He said these international finance institutions have a focused intervention fund to enhance international funding access to lending institutions with strategic and demonstrable focus on the SMEs.

“Five out of the top 10 fastest growing economies in the world are in Africa. The 39 fastest growing economies in 2013 have an average size of $78 billion. Growth in these countries is largely driven by Small Growing Businesses (SGBs) such as Agriculture, Solid Mineral, and Retail Distribution. Small is no longer risky, it is the way to building the Next Generation of African Corporates,” he said.