The Managing Director and Chief Executive Officer of the Development Bank of Nigeria (DBN), Tony Okpanachi, has revealed why Nigeria’s Micro, Small, and Medium Enterprises (MSMEs) sector is experiencing lack of funding despite the growing number of lenders in the country.
According to Okpanachi, the financing need of the MSMEs segment is quite huge. Specifically, it runs into trillions of naira, he said.
The DBN boss also claimed that the risk profile of MSMEs influences the lack of funding challenging the sector.
He added that the bankability of businesses in the MSMEs sector is another reason why funds are not accessible for operators.
“So I think that the market is quite huge in terms of the requirement for finance but there has to be a concerted effort to be able to meet that need. That is in terms of quantum and availability. The second part, which I talked about, is in terms of risk profile. Historically, most MSMEs are usually where most banks seem to have the number of non-performing loans. Because, historically, a lot of MSMEs start with their finance, and they fail.”
Adequate funding for MSMEs is sacrosanct: The role of SMEs in enhancing economic growth and development has, over time, been widely acknowledged globally. Economic wealth all over the world is created through enterprises and the expansion of their output.
SMEs contribute to the economy by creating value through the production of goods and services, thus enhancing the gross domestic product. They also generate employment by creating much-needed jobs in the economy, as well as expanding the export sector largely through linkages with large firms that produce for the foreign sector.
Lack of adequate funding has been one of the major challenges facing Nigerian SMEs. For a long time, entrepreneurs have lamented the lack of adequate provision of credit facilities. It is, therefore, a good thing that something is finally being done about the situation.