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Small and medium
enterprises in Nigeria are still finding it difficult to access funds
from commercial banks to kick start their businesses, despite attempts
to aid the sector.

These are
enterprises with a maximum asset base of N500 million (excluding land
and working capital), as classified by the Central Bank of Nigeria.
They argue that compared to their foreign counterparts, they don’t get
the required financial support from Nigerian banks.

“Most commercial banks do not want to give loans to start-ups,” said a banker at Intercontinental Bank.

“The proof for a
bank is to know that you are specialised and focused in your business,
and if they give you the money, you know what to use it for. You must
have run the business for a period of time; that is why some banks
would demand to see your cash flow statement, and your certified
audited accounts for two years.

“That is the stand
of commercial banks towards small and medium enterprises. An average
commercial bank will tell you that you are just starting the business.
As such, they are not sure about your business. If the Central Bank can
actually implement their plan to support small and medium enterprises
in terms of finance, then there may be a way out for them,” he added.

Friends and family to the rescue

But some operators of these enterprises are finding ways around the banks hurdles.

“Right now, I source for funds from my friends and family,” said Ade Olatunde, an oil and gas supplier.

“It is even worse
for oil and gas SME’s. Banks are not ready to fund such businesses,
especially downstream. What I’m doing is that I’m running my account
properly, so that my bank can monitor it, pending the time that I would
again request for a loan,” Mr. Olatunde said.

He added that there are so many people with great ideas, but they do not have funds to turn such into budding enterprises.

Kemi Abiodun, a
university graduate who wishes to establish a fashion designing centre,
says she was advised by bank staff to source for her capital from
friends and relations.

Saying she does not
feel bad about the bankers’ comments, “but I think if the government is
really serious about creating jobs, there should be an institute or
set-up that would guarantee the funds that the banks will give us and
monitor our businesses, to ensure that the money is spent as proposed.
I do not think the guranteed Central Bank’s fund covers start-ups, so
it will be difficult for these banks to lend us money. How much am I
looking for?”

Plans and more plans

Meanwhile, the
federal government, last Wednesday, announced the provision of
N75million to the Bank of Industry (BoI) to boost increased access by
small and medium-scale enterprises.

Olusegun Aganga,
the finance minister, disclosed at the launch of the initiative to
ensure the viability of small and medium enterprises in the country,
that the National Economic Management Team has identified the two
groups as the best institutions for job creation and economic growth in
most economies around the world.

The Central Bank
too has not left small and medium enterprises to their fate. It
facilitated the Small and Medium Enterprises Equity Investment, a
voluntary initiative of the Bankers’ Committee approved at its 246th
meeting of December 21, 1999.

The scheme required
all banks in Nigeria to set aside 10 percent of their profit after tax
for equity investment and promotion of small and medium enterprises.
The question is, where does all the money by these banks go, and what
projects do they fund?

The Intercontinental banker offers a clue

“Banks would rather
lend to people who have already made their money, who are already in
business, with the view that they are more credit worthy. Do you know
how many bankers from various banks are sitting at Dangote’s office, or
some other top shot with proposals of loan facilities that he can
acquire?

“We all know what
happened during the audit, how many so called ‘top shots’ owe the
banks. If, for instance, you give someone like Dangote N50 billion, do
you know how many small and medium enterprises that money would have
funded? That is what is happening,” he said.