Revitalising small businesses – Thisday
The micro, small and medium enterprises fund is a good idea. But the challenges of cost, power and access to markets should be addressed The N220 billion Micro, Small and Medium Enterprises (MSME) Development Fund was recently launched by the Central Bank of Nigeria (CBN) to provide long-term affordable finance to the sub-sector. It is also expected to provide capacity building and cheap wholesale funds, deepen access to finance, improve the economic empowerment of women and grass-root development and promote job creation. To the extent that this fund is targeted at some of the most vulnerable constituencies of our society, it is an idea we wholeheartedly support and we urge the relevant authorities to make it work.
However, there are critical issues that would need to be addressed for the MSME fund to achieve its intended purpose otherwise it would end up as another byword for waste and corruption. Besides, while guidelines have been drawn up for accessing the fund and a council on MSME has been inaugurated to ensure that the sub-sector contributes to economic development, observers wonder whether these are enough to revitalise the MSME sub-sector or whether it is indeed the right way to go.
Guidelines for the MSME fund show that the fund will be administered at three per cent to on-lenders such as banks and finance companies that would then have the latitude to charge as high as nine per cent to MSMEs. The very idea that this fund should profit the banks more than it would the MSME sub-sector is cause enough for concerns and there are pertinent questions begging for answers: do banks really require a 200 per cent incentive to cater for the sector? Can the sector leverage loans at nine per cent to develop itself at the required pace? Will cheaper funding not translate to increased output and an overall improvement in development? Is this fund not going to profit the banks more than the promoters of these small and medium enterprises for which it was intended?
In addition to difficult funding, the MSME sub-sector experiences challenges of abysmal power supply, poor access to markets, high operating costs, dearth of expertise and poor quality among many other constraints. Millions of MSMEs registered in Nigeria today, operate as briefcase companies which do not sufficiently contribute to economic development. Many are unable to operate beyond the initial year of incorporation and the desired output from MSMEs do not appear to materialise. We therefore wonder how the council on MSME, which was recently inaugurated, will address many of these challenges or if at all it has the mandate to do so.
The council on MSME may have been inaugurated with good intention to build an economy that works. However, observers fear that like most committees and councils, this one could increase bureaucracy in resolving the challenges of the sector and consequently not achieve its stated objectives. There are various committees and councils in Nigeria today that are yet to deliver on their objective: so why create a council on MSME? To critical observers, the council is no more than another cost centre that will add little value while gulping considerable resources that could have been better utilised for the poor.
Notwithstanding some of the foregoing misgivings, the sub-sector is extremely important to the inclusive growth of our economy and we request that the government makes public the terms of reference for the committee in order for Nigerians to hold the members accountable. We talk a lot about revitalising the MSME sector and make subtle attempts to do so. However, what Nigerian MSMEs seek is positive action and clear direction for developing the sub-sector in order for it to provide products that will reduce our import dependency, output that can be exported to increase foreign exchange earnings and capacity that will provide employment to the millions of teeming youth that are unemployed or under-employed today.