The Minister for Trade and Investment, Olusegun Aganga, has called for new strategies to support the Small and Medium Entreprises (SME) sector as government looks to positively impact the entire economic value chain.
The minister made the call while receiving top executives of Diamond Bank Plc, a leading player in the Nigerian Retail Banking space, led by the Bank’s Group Managing Director/CEO, Dr. Alex Otti.
Speaking at the event, the minister said, “The SME sector in Nigeria currently employs about 25million people and accounts for about 40 per cent of the Gross Domestic Product. Despite recent growths in the economy, government realizes that economic growth that does not reach the SMEs cannot make any meaningful impact. Diamond Bank has played a pioneering and leading role in growing not only the banking sector but also the Nigerian economy through its activities with SMEs, and government is willing to partner such professionals with proven experience in the sector to develop the entire economic value chain.”
While presenting the bank’s blueprint on Improving Access to Finance to Micro, Small and Medium Enterprises (MSME), Otti recommended that a fund should be set up to take care of identified equity finance gaps. He also called for a risk-sharing guarantee to support the unsecured lending portfolio of banks that have established methodologies for assessing, disbursing, monitoring and collecting such loans.
According to him, “Over the past five years, Diamond Bank’s strategic focus on financing MSMEs had led to significant investments in structures and processes dedicated to this market. These include building a dedicated team of MSME experts, the development and acquisition of MSME lending methodology, sustainable provision of non-financial services to MSMEs such as access to market initiatives and promoting MSME focused CSR projects. Currently, Diamond Bank is the only bank that provides unsecured lending to MSMEs in Nigeria.
“Our commitment to the MSME sector has yielded the following results: disbursement of over N100 billion gross loans to over 60, 000 MSMEs since 2009, expertise in MSME lending that is scalable as we enter new markets, recognition as Nigeria’s MSME bank, a diversified loan portfolio and access to financial services by previously excluded MSMEs,” Otti added.
He explained that a major challenge in financing the sector is the absence of an independent rating system to aid loan assessment since most MSMEs do not have adequate financial records. However, from experience, the bank realizes that the risk factor is minimal as many MSMEs are honest businesses that are happy to repay loans if they have sustainable income. Close partnering with the businesses also gives the bank insights into crisis areas so they can be mitigated early.
Mr. Uzoma Dozie, the Executive Director, Retail Banking, Diamond Bank, called for a lessening of barriers to business financing in order to help MSMEs access long term working capital for capacity building projects such as staffing, training and procuring equipment. He said that Diamond is encouraging MSMEs to adopt electronic Banking processes in order to reduce the temptation to spend ready cash as well as to ensure that cash inflows and outflows are captured in the businesses account statement.
As part of its “Building Entrepreneurs Today” CSR initiative, every year, Diamond Bank trains 50 small business owners in entrepreneurship at the Enterprise Development Centre of the Pan Atlantic University. At the completion of the programme, the bank supports the best five students in setting up their own businesses with grants of 5 million naira, while the other beneficiaries acquire skills to help them manage successful businesses.
Diamond Bank is also the only bank currently offering collateral-free lending of up to 50 per cent to MSMEs in Nigeria.
