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Banks Must Expand their Loan Portfolio to include MSMEs – Ihejiahi

By on May 15, 2013

The Managing Director of Fidelity Bank Plc, Mr. Reginald Ihejiahi, has called on deposit money banks (DMBs) to put in place a process that will ensure that micro, small and medium enterprises (MSMEs) have speedy access to loans.

Ihejiahi who made this known in a chat with the Oxford Business Group (OBG), pointed out that the time is ripe for banks to expand their loan portfolio to include the “important” smaller-business segment.

According to him, “The electricity situation will improve with the on-going reforms of the power sector. Access and price of credit is falling somewhat. The macroeconomic environment is benign with favourable foreign exchange and interest rates. We are also seeing an increasing trend towards outsourcing among large corporations in Nigeria, which opens the door for many SME service providers.”

Ihejiahi believes banks could do even more to assist MSMEs, especially those in the agriculture sector, by helping them to develop sound business models.

“Dedicated teams should bring advisory services to SME customers at a given bank, engaging in rational discussions on business conduct, market dynamics, growth prospects and realistic capital requirements,” he said.

He added: “By boosting support services to small-scale clients while also providing access to low-costs loans, Nigeria’s banks will be able to expand their lending portfolios. However, they may, in turn, look for some measure of backing from the state, either in the form of guarantees for a cut-price lending scheme, or direct access to cheaper funds.”

Despite accounting for – by some estimates – around 50 per cent of GDP and providing employment for almost half the national workforce, Nigeria’s MSMEs continue to face an uphill struggle in accessing credit.

In a recent survey prepared by the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) and the German Agency for International Cooperation, more than 80per cent of entrepreneurs questioned cited poor access to finance as their greatest constraint and single largest obstacle to growth. The business owners surveyed, who numbered almost 10,000, listed collateral and documentation requirements set by lenders as the main hurdles to obtaining loans, followed by “cumbersome and time-consuming procedures”.

The Central Bank of Nigeria (CBN) Bankers Committee had on April 9 this year announced that it was looking at introducing low-cost loans specifically for MSMEs. The move, it stated, is aimed at making it easier for small-scale businesses to obtain credit by easing existing restrictions.

[Thisday]