Nigeria: SMEDAN, AZSA Partner on MSME Development

By Crusoe Osagie, This Day Live

The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the Azsa Microfinance Bank have signed a Memorandum of Understanding (MoU) to develop a seamless intervention between the provision/acquisition of entrepreneurial training and access to finance.

The move is doe to the duo’s commitment to further facilitate the access of micro, small and medium enterprises (MSMEs), to all resources required for their development in the country.

The Director-General of SMEDAN, Alhaji Muhammed Nadada Umar, said at the signing of the MoU in Abuja, that the whole idea of the Agency’s partnerships with their relevant bodies was to soften the environment for MSMEs to grow.

“The whole idea is to service MSMEs to help them surmount the challenges that confront them from embarking on, or pose as challenges during the course of their businesses,” he said.

He added that business was not just about money and expressed satisfaction that the Agency has been able to collaborate with some State Governors in the country which has been bearing fruitful results.

Chairman of Azsa Micro Finance Bank, Alhaji Garba Ibrahim, who was accompanied by the Managing Director of the bank, Dr. (Mrs.) Lizzy Okereke, expressed belief that the MoU would go a long way in enhancing the development of MSMEs as well as helping the impoverished people in Nigeria, especially Lagos where they exist in huge numbers.

In line with objective of the MoU, SMEDAN would provide entrepreneurial training and other Business Development Services (BDS) such as mentoring and counselling, link trained MSMEs to Azsa Micro Finance Bank for the provision of funding and advocate the issues and challenges of Micro Finance Banks (MFBs) on the National Micro Finance Policy Consultative Committee.

On its part, Azsa Micro Finance Bank would, according to the MoU, provide credit and/or debt and equity financing facilities to MSMEs trained by SMEDAN that satisfy the lending criteria of the MFB, maintain a register of MSMEs that have benefited from the MFB’s facilities and recommend some of its customers to SMEDAN for training and entrepreneurial skill enhancement programmes of the Agency.

Nigeria: Funding, bane of MSME development in Nigeria – DG SMEDAN

By Gbola Subair, Nigerian Tribune

THE Director- General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN),

Alhaji  Muhammad Nadada Umar, has stressed the need for dedicated banks to fund small and medium enterprises (SMEs) in Nigeria to ease their financial difficulties.

Alhaji Umar noted this while receiving a team from the Deutcshe Gesellschaft fur Internationale Zusammenarbeit (GIZ), a German organisation working on a new private-sector development programme aimed at improving the access of micro, small and medium enterprises (MSMEs) to financial services.

The development programme, named Sustainable Economic Development in Nigeria (SEDIN), also aims to foster employment within MSMEs through an improved business-enabling environment.

Alhaji Umar, who noted the similarities in the mandates of SMEDAN and SEDIN said that while funding posed the greatest challenge to the development of MSMEs in the country, SMEDAN remained committed to helping them surmount all challenges in the course of their growth and development through partnership with donor agencies, financial institutions and other government agencies that could make positive impact in the sustainability of the MSMEs.

Earlier at the interactive session of the two bodies which was held at the SMEDAN Headquarters in Abuja, the visiting Advisors from GIZ, Mr Alexander Speed and Mr Klaus Reiner, in company of the Local Economic Development Coordinator, Margaret Joshua, expressed excitement at the prospect of a possible collaboration with SMEDAN, adding that the objectives of the cooperation would have a huge impact on the nation’s economy with the support of the Federal Government.

Mr Alexander Speed said that the promotion of selected value chains from three selected states in Nigeria, including Niger State, would enable the programme to ascertain the effects of Nigeria ’s financial sector reforms in line with target group needs and conditions at federal, state and local government levels.

‘’Embedded in the Financial Sector Strategy 2020 (FSS 2020) and the strategic approaches for private-sector development under the general Vision 20:2020, our programme will adopt an integral capacity development approach at the interface of public, private and financial sectors’’.

Explaining further, Mr Reiner said that support would be given to reviewing the microfinance policy, the regulation and certification of microfinance banks and introduction of microinsurance.

“Of prime concern”, he added, “are reforms in land and company registration, planning and taxation systems just as we are also looking at providing support to Nigeria in regional convergence with ECOWAS which, we assure, would promote the implementation of ECOWAS protocols at national level”.

He noted that the programme would assist in raising awareness among decision-makers on issues of financial and private-sector development.

Nigeria: …Still on improving SMEs access to finance

By Siaka Momoh, Businessday Online

Facilitating adequate access to finance by small enterprises in Nigeria and other developing countries is an issue that will continue to attract discussion for a long time.

You will recall that last week, this issue was a subject of discussion by this writer, and it continues today with remarkable revelations.

The fact that has been established is that small businesses need funding, and that when they eventually get it, it’s always at high costs and at impossible rates. Financing windows other than the traditional commercial banks and microfinance banks have been suggested.

You will recall it was noted last week that the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the African Development Bank (ADB) held talks on providing access to working capital for micro, small and medium enterprises (MSMEs) in Nigeria.

The discussion, which took place in Abuja between the Agency and a delegation from the visiting continental development finance institution to Nigeria, centred on the creation of a special pool of fund in the African Development Bank, specifically for MSMEs funding and promotion.

Another financing window mentioned was the incentive-based Risk Sharing Framework for Motivating Agricultural Lending in Nigeria (NIRSAL). AGRA and McKinsey & Company/Philips Consulting Nigeria are working with the Central Bank of Nigeria (CBN) to support the design of proposed incentive-based NIRSAL. SMEDAN is also involved.

There was also the Nigerian MSME Project, a pilot initiative of the Federal Government and the World Bank in Abia, Kaduna and Lagos states, which the Nigerian Investment Promotion Corporation (NIPC) is driving. The Project aims to increase the performance and employment levels of MSMEs in selected non-oil industry sub-sectors, and in the three targeted states of the country listed above.

And there was the Nigerian Stock Exchange’s (NSE), Over The Counter (OTC) market designed for small enterprises – funding small enterprises through the capital market.

Jane Nelson, in a document ‘Building Linkages for Competitive and Responsible Entrepreneurship’ facilitated by UNIDO and Mossavar-Rahmani Centre for Business and Government, John F. Kennedy School of Government, Harvard University, puts up an argument that helped to take up the small enterprise funding discourse further.

His argument: Patricof and Sunderland argue, “Donors need to face the reality that young companies that can really move the needle on innovation, inspiration, and employment need high-risk, reasonably-sized equity investment to grow, not the limited doles of short-term, high interest debt currently provided.”

They observe that the type of long-term, permanent equity capital provided to young youth growth companies in developed countries by Angel investors and venture capitalist is almost impossible for similar companies to access in developed countries.

Citing challenges such as weak managerial capacity, business environment risks, limited exit opportunities, high transaction costs, limited deal flow, and currency risk, they argue that, “The combination of these factors make SME investing in growth-oriented companies in developing countries difficult, if not impossible, to justify in commercial terms. They are among a growing number of investment practitioners calling on donors, government and private sector financial institutions to explore new financing models that take into account the high risks, high transaction costs, low volume, and below market rates of return endemic to the sector.”

The UN commission concurs with the challenge, and like Patricof and Sunderland, it argues that a web of factors is at work, at just lack of capital. Related challenges cited by the commission include: weak property rights, lack of enforcement of contracts, lack of bankruptcy laws, further increasing the risk to investors, poor financial institutions with limited interest and lending skills for entering this market, lack of reliable credit information agencies and disclosure requirements; illiquid capital markets and lack of exit opportunities, and lack of skill, and will on the part of SME entrepreneurs themselves for receiving risk capital.

While these obstacles are not insurmountable, however, most of them require fundamentally new approaches and a fine balance between government- supported interventions, market-driven incentives, and ‘blended value’ – social/commercial investment approaches. Such approaches, which often rely on partnerships between different actors, are explored in more details in part V.

Access to skills and knowledge
The third essential pillar of entrepreneurship identified by the UN Commission is human capital: “A firm’s competitive advantage comes from its entrepreneurial capabilities; its management and technical know-how, including labour-management relations, information technology skills, basic finance, economics and project management; as well as the kills, education and adaptability of its employees.”

Important at all stages of enterprise development, such as human capital, is essential for small enterprises which aim to upgrade and integrate into regional and global value chains.

Some of the recommendations made by the UN commission to tackle skills and knowledge gaps include: public-private partnerships that combine on-the-job apprenticeships, with basic education; teach-the-teachers programmes to build local training capacity, entrepreneurial networks and associations for peer-to peer learning, mentoring and coaching relationships between local entrepreneurs and expatriate managers or the country’s own Diaspora; investment in local research on entrepreneurship and management courses, and efforts to stem the brain drain of professionals that occurs in many developing countries, and to encourage the Diaspora to return.

Upgrading, integrating small enterprises into value chains
Even when the fundamental pillars for entrepreneurship are being addressed, major obstacles persist in increasing the productivity and growth of small enterprises.
Research carried out by the German Development Institute on the role of small enterprises in productivity enhancement, points to the fact that small enterprises in developing countries tend to contribute less to productivity growth and national competitiveness, than their counterparts in industrialised countries.

The research suggests five essential and inter-related gaps in small enterprise performance comparing stylised enterprises in developing and industrialised economies. All five of these “gaps” needs to be addressed in order to improve prospects for high-impact small enterprise development in developing economies:

• Role of entrepreneurship. In many developing countries, “necessity entrepreneurship” prevails, versus greater levels of “opportunity entrepreneurship” in industrialised countries, which tend to be led by higher skilled and better-capitalised entrepreneurs.

•Firm growth and upgrading. In many developing countries, only a small proportion of micro and small firms grow beyond a certain threshold, due mainly to lack of specific management and/or marketing skills.

The lack of trust in society is another impediment, limiting many small firms to what their families and immediate communities can control or supervise. The result is a lack of more specialist and sophisticated medium-sized companies, often called the ‘missing middle.’

•Technological capabilities. Small enterprises in developing countries mostly focus on low-tech routine operations and use mature technologies as blue prints. On average, compared to their industrialised economy counterparts they are less capable of creating knowledge, applying new technologies and rarely performing R&D, often due to the lack of human capital, business competencies and skills.

•Export competitiveness. In developing countries, the export share of small enterprises tends to be much lower than in industrialised countries, with a few remarkable exceptions in Asia such as China, Taiwan and increasingly, Vietnam.

This situation reflects the technology gap, and in turn, results in small enterprises being excluded from international best practices and sources of knowledge.

Nigeria: Funding windows for small enterprises

By Siaka Momoh, Businessday Online

Generally, commercial banks won’t touch Small and Medium Enterprises (SMEs) or Micro Small and Medium Enterprises (MSMEs) otherwise known as small enterprises, because they consider them high risk. Owners of these enterprises disagree.

They believe MSMEs are being unjustly discriminated against, and seize every opportunity available to them to air their grievances. But they may be right after all.
What, with interested parties here and there taking up their case. Only recently, the Nigerian Stock Exchange (NSE) came up with the idea of Over The Counter Trading (OTC), a stock trading platform specially created for small enterprises.

Emmanuel Ikhazobor, renowned accountant and former interim administrator, Nigerian Stock Exchange (NSE), discussed the issue of small enterprises funding through the capital market, an alternative funding option, at BusinessDay’s organised Annual Capital Market Conference 2011.

He says this will be by Over the Counter Trading (OTC), and believes this funding approach will be very appropriate for SMEs who shun banks’ funds because of the high interest rates attached to them.

Additionally, according to him, this approach will allow for good governance which is currently absent in the sub-sector. But there have been problems.
According to experts, although this arrangement has the merit of allowing smaller companies to be listed on the exchange, in practice, the two-tier system has generally not been successful.

Many investors regard second tier companies with scepticism. For them, a Tier II label is like a badge of demerit – a Tier II listing connotes a public company that is not “good enough” to make it to the “big board.”

Hence, trading in Tier II stocks tend to be sparse, they argue. For them, this adversely affects both stock prices and liquidity (the two are linked); the potential of a Tier II listing is thus a mere inducement for small enterprises and potential investors.

Ikhazobor’s proposition is welcome but there is a caveat – Experts have argued that it would be wrong to suggest that the mere act of creating the mechanism for an OTC market was a panacea for SME liquidity problems.

For them, an OTC market requires brokerage firms willing to undertake the time and cost in its development, it requires a regulatory agency willing to adopt trading and disclosure rules, and it requires a sufficient number of companies on the OTC market to make the whole endeavour worthwhile.

They argue that one of this will happen overnight, that it will never happen without changes in statutes and other rules to allow small enterprises to more readily solicit capital from the public.

Another important argument that has been put forward is that if standards are put in place for an OTC market, such move will also facilitate trading of securities through the Internet, since the internet is becoming the trading vehicle of choice for many investors.

Only recently, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the African Development Bank (ADB) have begun fresh talks on provision of access to working capital for micro, small and medium enterprises (MSME) in Nigeria.

The discussion, which took place recently in Abuja between the Agency and a delegation from the continental development finance institution who were on a country visit to Nigeria, centred on the creation of a special pool of fund in the African Development Bank specifically for MSME funding and promotion.

Muhammad Damak, Credit Bureau manager, Africa, speaking while introducing his team from the ADB, disclosed that they were visiting selected Ministries, Department and Agencies (MDAs) of the Federal Government of Nigeria, adding that the purpose of coming to SMEDAN was to be abreast of activities of the SMEDAN and evaluate it towards promotion of MSMEs development, and also to ascertain the needs and challenges facing the MSMEs sector in general, and SMEDAN in particular.

Damak said that they had met with the Central bank of Nigeria and some commercial banks in the country on the prospects of giving loans to small scale business operators.

Welcoming the delegation to his office, the director-general of SMEDAN, Muhammad Nadada Umar, commended them for the visit, and listed among others, the challenges the Agency was facing in the discharge of its mandate, especially in the area of facilitation of access to business finance for MSMEs.

Some of these challenges include high interest rates and hidden charges, as well as demand for collateral securities by commercial banks.

Umar informed the ADB team that the Agency, however, had recorded some level of success with its collaboration with the national Economic Reconstruction Fund (NERFUND) and the Bank of Industry (BoI).

He also noted that the Agency was working in liaison with NASENI to link entrepreneurs with the research and development (R&D) results to harness them for productive uses.

Another financing window is one which is to come up from the relationship between SMEDAN and Alliance for Green Revolution in Africa (AGRA).

The two have begun partnership talks to fashion ways of unlocking the various potentials derivable from financing the agro-based enterprises. This partnership talks began during a courtesy call by AGRA to the office of the director-general of SMEDAN.

Tayo Badru, leader of the visiting team and senior consultant with Phillips Consulting Nigeria, who was accompanied by Nathan Gonzalez of McKinsey & Company, stated that the purpose of coming to SMEDAN was to share key aspects of the funding solution design, and get their perspective on the Agency right, and to better understand SMEDAN’s mandate, and explore possible areas of partnership/collaboration with the proposed incentive–based Risk Sharing Framework for Motivating Agricultural Lending in Nigeria (NIRSAL).

AGRA and McKinsey & company/Philips Consulting Nigeria are working with the CBN to support the design of proposed incentive-based NIRSAL. The overall goal of NIRSAL is to develop a new innovative mechanism for helping to unlock commercial bank financing to serve the needs of different categories of farmers, especially small-holder farmers, agro-processors, agri-businesses and input suppliers in the agricultural value chain.

Badru equally says NIRSAL is clustered into five core components, namely: risk sharing facility, insurance components, technical assistance facility, bank incentive mechanism, holistic bank rating system.

In the course of the project, the team has been involved in engaging with various NIRSAL stakeholders and potential partners in both the public and private sectors, including CEO of banks and insurance outfits, large scale farmers, and a host of others.

One other financing window of sort that small enterprises can now leverage on is the Nigeria MSME Project, a pilot initiative of the Federal Government and the World Bank in Abia, Kaduna and Lagos states, which the Nigerian Investment Promotion Corporation is driving.

The Project aims to increase the performance and employment levels of MSMEs in selected non-oil industry sub-sectors and in the three targeted states of the country listed above.

The project will develop and strengthen the capacity of local intermediaries to deliver financial and non-financial services to Micro, Small and Medium Enterprises (MSMEs), reduce selected investment climate barriers that constrain MSME performance, mobilise via (i) and (ii) above, increased private investments in MSMEs and intermediaries.

It has the following five components:
· It will seek to deepen and broaden the financial services available to MSMEs.
· It will seek to develop the market for business development services (BDS) by supporting intermediaries to respond to unmet MSME demand for BDS, focusing on the three target states.
· Technical and capacity building support will be provided through the International Development Agency (IDA) credit to assist in the following initiatives of the government of Nigeria: (a) registration reform, (b) commercial dispute resolution, (c) leasing services, (d) credit bureau, and (e) secure transaction system.
· IDA resources will be allocated to provide selected federal and target state government agencies, with MSME development responsibilities the opportunity to access global best practices.
· IDA funds will be allocated to finance the execution, reporting, review (semi-annual and mid-term) and monitoring of project components and independent evaluations of selected issues, particularly through case studies.

Micro entrepreneurs seek action on youth unemployment

By Daniel Essiet, The Nation

The Association of Micro Entrepreneurs of Nigeria (AMEN) said it is ready to work with the government to develop business opportunities to help tackle youths unemployment.

Its President,Prince Saviour Iche, said the nation cannot afford to lose another generation of young people to unemployment and under achievement.

Addressing the annual business meeting of the association in Lagos,Iche said the association is ready to mobilise young Nigerians,including those serving in the National Youth Service Corps(NYSC) to take on small business ventures.

He said the association encourages and supports the development and success of new small and medium sized business firms, through collaboration and by providing productive contacts among operators.

According to him, poverty will never be overcome unless small and medium enterprises flourish.

To this end,he said his association is mobilising every family in Nigeria to own a business.

He said the association wants to stimulate initiatives, innovation, entrepreneurship, rapid technology transfer, and adaptability to the economy.

He said the association wants to pursue programmes which foster enabling environment favourable to small business to carry out their activities.

The Centre Manager,Matori Business Support Centre,Small and Medium Enterprises Development Agency of Nigeria(SMEDAN),Mr Yinka Fisher, said his agency is ready to support the establishment of successful entrepreneurial enterprises.

He said creating high potential entrepreneurs that can generate economic growth and development on a much larger scale requires delivery of regular training to invigorate entrepreneurship and innovations capable of solving business management problems.

Fisher said one of the most effective ways of building sustainable small businesses is bycreating a linkage between them and commercially viable Microfinance Institutions (MFIs).

For this reason,he said SMEDAN is working with the Central Bank of Nigeria(CBN) to provide small entrepreneurs access to essential financial services to help them grow.

Micro finance institutions, he noted, will be able to finance creditworthy low-income entrepreneurs,who otherwise would have no access to mainstream banks.

He said SMEDAN is ready to provide technical assistance to help the CBN launch sound MFIs with capacities to assess entrepreneurs skills.

Through its support for application and linkages among entrepreneurs,Fisher said SMEDAN is committed to facilitating economic development, and the agency aims to further expand the effects of entrepreneurship on GDP growth and jobcreation.

Speaking during the meeting, the General Secretary,Mr Frederick Okeleme,said it is focused on building on the achievements and broadening the scope of activities.

He said the goal of the association is the creation of a large, diverse community of local entrepreneurs capable of promoting sustainable development.

Okeleme said the association is working with every relevant agency to address challenges that 1are hindering small scale operators growing into strong and profitable enterprises.

Microfinance operators charged on relevant products

From Nigerian Tribune

The Director-General of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Muhammad Nadada Umar, has advised operators of microfinance banks in the country to study their business environment and take into cognisance the culture of the people and try to blend it with the various products they are giving out. Speaking at the opening of the second round of microfinance banks certification programme, organised by SMEDAN in collaboration with the Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN), Muhammad Umar told the participants that the essence of the training was to polish the MFBs towards efficiency and effectiveness.

According to him, though the environment is tough and challenging, the MFBs should carter for small business operators and see their assignment as a national one and not for their family wellbeing only.

Umar, who was represented at the occasion by the Director of Enterprise Development and Promotion, Mrs. Justina David, disclosed that the essence of the partnership with CBN, NDIC and the MFBs was to reach out to the rural people where the various small business operators were domiciled.

He added that SMEDAN, as an Agency that promotes good environment for the operation of the small businesses, would always want the presence of MFBs to be felt at the localities where the micro and small enterprises operate.

The Director-General re-stated that the MFBs must condescend to the level of the small business owners by getting to know them, know the environment and how to help out, reduce the interest rate to one digit rate, remove collateral hiccups and, above all, allow complete access to funds by these entrepreneurs.

A total of 46 MFBs participated in the training.

Niger State, Nigeria, To Increase Microfinance Banks, Create Employment

by Amina Alhassan Ahman, Leadership Nigeria –

In line with the government’s determined efforts to empower the teeming youth and women in the state, Niger State will facilitate the establishment of 18 microfinance banks across local government areas of the state.

This was made known by the Director-.General, Niger State SME’s and Microfinance Agency (NSSMA), Alhaji Mohammed Aliyu.

Aliyu disclosed that the 18 local governments have expended over N260 million in building or renovating befitting banking offices.

”This will increase the number of MFBs from 11 to 31 by the middle of the year, thereby creating employment for 300-500 graduates and other school leavers in the state,” he said.

He revealed that over N1.5 billion has been disbursed , just as a N30 million interest- free facility was granted to 18 microcredit cooperatives and interested promoters in the 18 local government councils as seed capital, payment for consultancy services for the incorporation and payment for banking licences fees, as well as intensive advocacy and sensitisation of the citizenry across the state.

He also said that since its inception by the Chief Servant of Niger State, Dr. Babangida Aliyu, NSSMA, in collaboration with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Abuja, has undertaken the training of 450 entrepreneurs in various areas of vocational skills.

“We are presently training another batch of about 1500 youths in different areas under the auspices of the newly established Ministry of Youth Affairs and Strategy. Beneficiaries will also be linked with microfinance banks for sustainability, while the state government would facilitate access to required seed capital,” he said