25th October, 2010
All over the world, small and medium entreprises are the bedrock of the economy. It seems the same does not apply to Nigeria. Nobody seems to look the way of SMEs which are crucial to the Nigerian economy.
China, which today has become the bride of every country, started her journey by developing and encouraging small business and it has paid off. India, Brazil, Malaysia, Thailand and several others keep formulating policies that encourage people to go into this sub-sector of the economy.
The axe wielded recently by the Central Bank of Nigeria, CBN, on Micro-Finance Banks, MFBs, should be tempered by a little bit of mercy. Three weeks ago, the CNB revoked the operating licences of 224 MFBs for non-performance and being technically insolvent. However, we have been informed that the apex bank may have secretly reversed the revocation of operating licences of 33 of the 224 MFBs.
Criticisms have trailed the action of the CBN and while we do not roundly criticise the action of the CBN, we believe the action could harm the growth of SMEs, many of which are being financed by the MFBs. Not unexpectedly, one of the critics of CBN’s action is the President, Abuja Chamber of Commerce and Industry, who believes that CBN’s action portends danger for small and medium scale enterprises which could be forced to close shop due to blockade of access to capital which many of them have been enjoying from the MFBs.
ABUCCIMA President, Mr. Dele Oye, urged the Federal Government to focus on providing an enabling environment for private investment to thrive in order to promote foreign direct investment rather than scuttle the growth of small businesses. According to the CBN, a total of N18.2 billion depositors’ funds, a loan portfolio of N19.6 billion and N6.16 billion shareholders’ funds are reportedly trapped.
The apex bank had explained that its action was a product of the examination carried out on the banks following complaints and petitions that most of the MFBs were not meeting their obligations to customers. Good move, but we must remember not to throw away the baby with the bath water. We need to separate the chaff from the wheat and sort things out the property way.
In China last year, the China’s State Council, the Cabinet, issued a document to strengthen support for the development of that country’s small and medium enterprises. The Chinese government deepened reforms in the country’s monopoly industries, lowered the market access threshold for the SMEs and created a more open and fair competitive environment. The Chinese government also granted a one-year reprieve on social security fund to the SMEs in operational difficulty amid the global financial crisis in a bid to reduce financial burdens and protect the interest of the SMEs.
In India, SMEs are now exposed to greater opportunities for expansion and diversification across the sectors. The Indian market is growing rapidly and Indian enterprises are making remarkable progress in various industries. Nigeria cannot afford to be the odd one out. We must find ways to strengthen SMEs if our Vision 20-20 is to become a reality.
We know the banking and financial sectors are full of crooks but must we allow honest businessmen suffer for the sins of a few who bend the rules? We believe the CBN can do more in the area of monitoring the financial sector especially when it concerns SME financing and the small business is the soul of the economy.
Ask any SME operator in Nigeria what the biggest problem is and he will tell you: finance. How then do we organise these SMEs to ensure that they have access to finance to enable them grow? What comes readily to mind are small and medium-sized banks, which we can interpret to mean MFBs in Nigeria. We know that without  monitoring them closely, there is a tendency for some of them to overstep their bounds or even forget the reason for which they were allowed to operate.
The National Association of Small Scale Industrialists, (NASSI), the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Micro-Finance Banks, MFBs, the Central Bank of Nigeria, CBN, and all other stakeholders must get together and brainstorm on the way forward for small businesses. Too many Nigerians are jobless and the complaint is that of lack of finance to start up a small business. Let’s face reality: Nobody is going to do it for us. We must help ourselves grow.
