A shot in the arm
• But the N220b MSME fund initiative ‘ll succeed only if past pitfalls are avoided
IN an economy where venture capital is perennially in short supply, and when available, is never really accessible to a sector regarded as critical in the nation’s growth matrix, the N220 billion Micro, Small and Medium Enterprises (MSME) Development Fund, an initiative of the Central Bank of Nigeria (CBN), could not have come at a better time. Launched by President Goodluck Jonathan in Abuja last week, the fund seeks primarily to boost funding to this critical sector.
Under the guidelines of the fund, each state of the federation will be able to access N2 billion, to be administered to beneficiaries at an interest rate of nine per cent. Sixty per cent of the fund is said to be earmarked for women in order to address their peculiar financial exclusion circumstances; another two per cent is reserved for economically active physically challenged entrepreneurs.
In all, 50 per cent, according to CBN Governor Godwin Emefiele, will go to Small and Medium Enterprises, while 9.75 per cent will be used for capacity building for prospective entrepreneurs.
Ten states have reportedly signed Memoranda of Understanding with the CBN to access the fund. These are Delta, Akwa Ibom, Osun, Oyo, Bayelsa, Gombe, Zamfara, Enugu, Ondo and Benue.
It must be said that the beauty of the latest initiative isn’t necessarily because it is anything new, but in the possibility that it will profit from similar initiatives in the past which failed. After all, we have had, before now, all manner of micro-credit schemes ostensibly designed to give succour to the informal sector. The challenge is to understand why previous well-meaning efforts failed.
A lot has been said of how some beneficiaries in the past treated such funds as freebies –their proverbial share of the national cake – with no obligation to repay. Capacity issues which reflect not only in the poor understanding of the environment for doing business, but in the businesses’ failures to undertake the elementary tsask of book-keeping, have equally been highlighted – aside the twin issues of non-responsive bureaucracy and corruption.
The bigger part of the story however, must be seen in the hostile, if not impossible economic terrain in which small and medium scale businesses have only a fleeting chance of survival. Clearly, nothing has changed in any significant sense, at least as far as the environment for doing business is concerned. Not only has the challenge of infrastructure endured, there has been little progress in terms of getting SMEs adopt best practices so vital to accessing credit. There is also the issue of inadequate skills pool from which the prospective entrepreneurs can hope to draw upon.
These challenges, though not insurmountable, remain impregnable. The latest initiative will do well to have these challenges at the background.
Having said that, the N220 billion can make a lot of difference, in direct terms and also by way of multipliers to the economy. We cannot agree more with the perspective of the trade and investment minister, Olusegun Aganga, when he noted that only eight percent of Micro, Small and Medium Enterprises in the country have access to financing despite accounting for about half of Nigeria’s Gross Domestic Product (GDP). No doubt, the sector deserves more than a shot in the arm.
As for the proposal to set 9.75 per cent of the funds aside for capacity building for prospective entrepreneurs, we see it as an important step forward. We can only add that the Federal Government complement this by fast-tracking the pace of development of critical infrastructure without which the businesses stand no chance of being competitive. Shorn of the typical tardiness and graft as we have seen of other initiatives, this one might just make a difference.
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