ACCI Seeks Alternative Mechanism for Funding SMEs

James Emejo

The President, Abuja Chamber of Commerce and Industry (ACCI), Prince Adetokunbo Kayode, has called for an alternative mechanism for funding the Small and Medium Enterprises (SMEs) in the country, describing existing measures as defective.

Speaking at the opening of the 2019 Abuja International Trade Fair (#2019AITF), themed: “Remodelling SMEs Financing: Options and Solutions”, he added that the defect in funding support needed to be urgently resolved in either to enable small businesses deliver on their roles as a catalyst to economic growth.

Specifically, he said the funding strategy through the commercial banks had proven to be largely unproductive while issues of multiple taxation constitute a snag to the growth of SMEs.

Noting that SMEs constitute the main building blocks for critical development of any economy, he said the chamber remained resolute that government has a duty to provide a clear and distinct policy for the growth and development of small businesses in the country.

According to him, SMEs have continued to suffer untold hardships, lack of support and complicated and complex but hardly effective intervention funding mechanisms in recent times.

Kayode said: “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. Over the years, the federal government especially through the CBN have made very substantial funds available for SMEs.

“But the issues associated with the disbursement in terms of collateral, interest rates and short term nature have contributed forces to dwindle the marginal efforts to fund SMEs. Funding through the commercial banks has proved unproductive.

“The commercial banks are not programmed or structured to do long term funding or capital investment. They are into short term, quick return deals. So why do we continue to pass development funds through commercial banks, where experience has taught us that the essence and the aim of government is frustrated and or thwarted.” As a result of the concerns highlighted, the ACCI president urge government to consider and agree to a special funding vehicle for SMEs through the Organised Private Sector (OPS).

He said: “We prefer that government embark on finance leasing, which provides for direct procurement of Capital Equipment (CAPEX) by funding agency to the SME and the provision of only Operational Expenses (OPEX) as against the prevailing instance where direct cash, where given become exposed to diversion into several other concerns.”

According to him: “Since CAPEX is usually about 80 per cent of total capital requirements, 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 an OPS driven SME funding Development Finance Institution (DFI) will soon be proposed to the CBN governor, adding that “It will be great if the CBN will give serious consideration to this. At least let us try to do SME funding another way”.

The ACCI president, further identified the problem of multiple taxation and grey taxation procedures as major limitation towards the development of the SMEs sector. He said: “Manifestation of multiple taxation is in many forms: corporate tax, stamp duties, property tax, tenement rate, infrastructure charges, environmental charges, water rates, to mention a few.

“We hold the firm view that businesses pay appropriate taxes and municipal charges. But multiple taxation kills SMEs. So also unearned and destructive charges on loans to SMEs like stamp duties, registration fees, consent fees, CAC fees and so on.

“To say the least, shocking and worrisome that governments, at every level, continue to take up to 10 per cent -15 per cent of part of loans granted to SMEs in the name of consent fees, stamp duties, title registration fees, filing fees at the CAC, and so on. “While the banks also collect another 10 per cent or more through administrative charges and documentation costs. All these have to stop in the interest of the economic development of this country.”