‘SMEs face hurdles accessing BOI loans’
Chris John Mamuda is a business development expert and the Senior Special Technical Adviser to the Nigerian Association of Small and Medium Enterprises (NASME). In this interview with he explains what discourages SMEs from accessing loans from the Bank of Industry (BOI) and also their contribution to the Gross Domestic Product (GDP).
What will you has been the contribution of Nigerian SMEs to the GDP and economic growth in general?
Nigeria’s SMEs over the years have had huge potentials and contributed to The GDP and economic growth of the country, increased and enhanced the productivity of the economy, added value to existing products, saved the country, generated employment and also facilitated further diversification of the economy.
However, all these do not come with challenges, and these challenges are some of the things that are still making enterprises lacking the full capacity to contribute meaningfully and their impact to be felt by Nigerians. say
What are the challenges hindering SMEs from optimal performance?
They are many, but I categorise them into two; internal and external challenges. The internal challenges range from poor organisational skills, inadequate record keeping and data to know new business trends and how to catch up with international standards, and also poor development and product packaging skills. We all know very well you can’t grow a business when you’re not abreast with global trends and also when you don’t have adequate data to know what is in demand.
For the external challenge, this is where regulation, multiple taxation, absence of business advisory support and access to loans come to play. Taxes being charged on SMEs are not encouraging, and also advisory support from the agencies are not available. Also, access to start-up loans is a huge challenge as there is lack of understanding of the procedures of securing such loans by the SMEs. are the of securing that business do not
What procedures BOI loans operators understand?
Most of SMES do not understand how it works; everybody just believes because government says there is money for loan, you just go and collect without any proper documentation and planning. For instance, if BOI wants to give loans, there are certain processes involved, ranging from the purpose of the loan and the collateral involved to other demands which you must meet. However, most enterprises don’t want to go through this process; that is the lack of understanding.
Also, BOI interest rate is at nine per cent while commercial banks are at 22 per cent, and with commitment fee from BOI, it may be 10 per cent. However, with moratorium from them, they can say you have six months grace before you start repaying, but the problem is most of these business operators still do not understand and that is why we have huge unpaid loans even from BOI and sometimes these loans they offer favour foreign SMEs more than the local ones.
Why did you say funding does not support local SMEs?
When look at
you Nigeria, most of the SMEs are micro SMEs, and when you look at the national policy on enterprises, it says you must have an asset, staff and a registered company, and most of these small enterprises do not have it, and the foreign SMEs have assets, staff and standard offices; that is why we say the policies favour them more. Most of the SMEs in Nigeria are just micro enterprises and not SMEs because going by international definition of what SMEs are, they are not qualified.
Has government been able to address the challenges so far?
Government has been able to address some of these challenges, but our concern is that they should further reduce the tax and levies for MSMEs in Nigeria in collaboration with state governments.
Also, the Small and Medium Enterprises Development Agency (SMEDAN) should be strengthened to provide business mentoring and support services on regulatory compliance, financial literacy and business development skills.
Finally, and most importantly, encourage citizens in the patronage of made in Nigeria goods and services; it will go a long way in boosting the morale of small enterprises in Nigeria.