Improving access to finance for SMEs

Small and medium enterprises (SMEs) play a crucial role in the economic development of any country. However, in Nigeria, access to finance has remained a significant challenge for SMEs, hindering their full potential. Chisobat Ihime, the head of liabilities and emerging businesses at Diamond Bank, shed light on the current situation and discussed ways to improve access to finance for SMEs. In a recent interview with CNBC Africa, Ihime highlighted the obstacles faced by SMEs in securing the necessary funding to grow and expand their businesses. One of the primary challenges facing SMEs in Nigeria is the difficulty in accessing finance, exacerbated by the ongoing recession and economic downturn. Large corporations that previously offered extended credit terms have tightened their credit lines, making it harder for SMEs to obtain financing. Additionally, as an import-dependent nation, Nigeria relies heavily on foreign exchange to purchase goods, further limiting the availability of funds for SMEs. The reduced purchasing power of consumers has also contributed to the low demand for goods and services, creating a challenging environment for SMEs to operate in. Banks play a vital role in providing financial support to SMEs, but they often require stringent criteria to assess the creditworthiness of these businesses. Ihime explained that banks look for evidence of the SMEs' expertise in their field, as well as financial statements that demonstrate past performance. To address this issue, Diamond Bank has collaborated with Business Development Service Providers (BDSPs) to help SMEs develop comprehensive business plans that meet the banks' requirements. By supporting entrepreneurs in preparing strong business proposals, Diamond Bank aims to increase the likelihood of SMEs securing funding for their ventures. The upcoming launch of the Development Bank of Nigeria promises to be a game-changer for SMEs in the country. The development bank, an initiative of the federal government, aims to bridge the gap between commercial banks and SMEs by providing tailored financial solutions. It is expected to disburse over 200,000 loans in the next five years, leading to the creation of more than one million jobs. The anticipation surrounding the development bank's launch is high, as it is set to address the gaps and challenges faced by SMEs in accessing finance. Despite the efforts being made to improve access to finance for SMEs, there is a need for more coordinated policies and regulations to ensure that funding reaches the intended recipients. Many SMEs struggle to tap into the funds allocated by the government and financial institutions, leading to underutilization of resources. Ihime emphasized the importance of capacity building initiatives within banks to enhance their understanding of SMEs' operations and tailor financial products to meet their specific needs. In conclusion, enhancing access to finance for SMEs in Nigeria requires a multifaceted approach that combines regulatory reforms, capacity building within financial institutions, and strategic partnerships between banks and business support services. By addressing the challenges faced by SMEs in securing funding, Nigeria can unlock the full potential of its small and medium enterprises, driving economic growth and creating employment opportunities for its citizens.