Yemisi Izuora, writes that the Small and Medium Enterprises (SMEs) are critical to the development of any economy as they possess great potentials for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large-scale industries.
According to the Central Bank of Nigeria, CBN, Nigeria, has a long history of gross under performance of the SMEs sub-sector and this has undermined its contribution to economic growth and development.
The apex bank identifies key issues affecting the SMEs in the country to include unfriendly business environment, poor funding, low managerial skills and lack of access to modern technology.
Among these, CBN said that shortage of finance occupies a very central position. Globally, commercial banks which remain the biggest source of funds to SMEs have in most cases, ignore this responsibility because of the perceived risks and uncertainties.
In Nigeria, the fragile economic environment and absence of requsisite infrastructure has rendered SME practice costly and inefficient, thereby worsening their credit competitiveness.
Identifying these critical challenges as hinderance, the CBN, made a frantic move to improve access to finance by SMEs, by approving the investment of the sum of N500 billion debenture stock to be issued by the Bank of Industry (BOI) with effect from May, 2010.
Oriental News Nigeria, reports that in the first instance, the sum of N300 billion will be applied to power projects and N200 billion to the refinancing/restructuring of banks existing loan portfolios to Nigerian SME/manufacturing sector.
Guidelines for the N200 billion re-financing and restructuring of banks loans to the manufacturing sector has been issued by the bank.
The objectives of the ^200 billion re-financing and restructuring of banks loans to the manufacturing sector are to fast-track the development of the SMEs and manufacturing sector of the Nigerian economy.
It also seeks to improve the financial position of the deposit money banks.
Complimentary to the above, the bank has also established a N200 billion Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), for promoting access to credit by SMEs in Nigeria. The Scheme shall be wholly financed by the Central Bank of Nigeria (CBN) as stipulated in the existing guidelines.
The objectives of the SMECGS are meant to provide guarantee for credit from banks to SMEs and manufacturers, increase the access of promoters of SMEs and manufacturers to credit and then set the pace for industrialization of the Nigerian economy.
The overall goal of these two initiatives are to increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide inputs for the industrial sector on a sustainable basis.
As a key stakeholder in the real sector, the CBN continues to design policy measures that proactively address the insistent financing gaps in the real sector, particularly initiatives that would catalyze the flow of affordable and sustainable funds to the micro, small and medium enterprises (MSMEs), thereby driving the economic development and diversification agenda of the federal government.
To facilitate these policy intents of the CBN, a system of developmental policy packages were further introduced in 2018/2019, some interventions which among others include the Micro, Small and Medium Enterprises Development Fund (MSMEDF), launched on August 15, 2013, with seed Fund of N220 billion.
Under the initiative 90 per cent of the Fund, amounting to N198 billion, will be utilized for the provision of direct on-lending facilities to Participating Financial Institutions (PFIs).
Ecobank Playing Big In SME Funding
To say Ecobank is a big financier of SME’s in Nigeria is a euphemism because it plays that role in a large scale across Africa.
A critical example of this is a partnership of the African Union Development Agency (AUDA-NEPAD) and the Ecobank Group which began a commendable work to raise US$20 billion to support the recovery of small and medium-sized businesses in Africa after the Covid-19 pandemic.
Governments have committed to support MSMEs recovery, however access to existing commitments will likely be limited to registered medium enterprises due to criteria outlined by governments and the reducing appetite of commercial banks to loan to small scale enterprises.
The AU had observed that funds allocated for MSMEs are insufficient in most countries, leaving the biggest gaps in micro to small unregistered businesses.
Based on this estimated financing gap, only 6 out of 20 countries have made commitments that can cover the MSMEs labour costs, including South Africa, Egypt, Cote d’Ivoire, Gabon, Chad and Cape Verde, hence partnerships such as that being co-led by Ecobank Group and AUDA-NEPAD are considered very vital.
AUDA-NEPAD emphasized that success of this initiative will depend on the number of partners and of the quality of the partnerships.
According to Ecobank Group, the initiative is focused on empowering MSMEs and to ease restarting and growing Africa’s economies with the knowledge that a significant number of jobs will be lost and businesses incapacitated.
The workshop provided a platform for stakeholders from East, West, Central, North and Southern Africa to identify priority areas and strengthen collective approach to safeguarding this sector, especially the micro enterprises.
The bank shares the belief that a multilateral approach which includes organisations, private sectors and governments will be beneficial and imperative for a successful implementation of support for Africa’s MSMEs.
High level representatives from the African Union Commission, regional development banks, development financial institutions, international organisations and commercial banks from the continent came together to focus their efforts on supporting the MSMEs segment and protect the livelihoods of millions of Africans.
The MSMEs are critical to the African economy as they account for almost 85 per cent of all private sector employment.
Vulnerable jobs are in 5 sectors in Africa, including Trade, Agriculture, Manufacturing, Construction and Hospitality and about 25 to 160 million jobs in Africa are vulnerable due to the impact of COVID-19.
This presents an opportunity for such initiatives to increase capabilities available to MSMEs across the continent.
Consequently, leaders have acknowledged the need to continue ongoing efforts to support MSMEs while leveraging organizational capabilities for medium and long-term support.
The AUDA-NEPAD and Ecobank Group are determined to work with other African like minded institutions and businesses to utilize the platform for monitoring and benchmarking, thus allowing members and MSMEs to share their experiences, best practices, national policies, and challenges, and avail resources to support African businesses and economies to overcome the challenges posed by the pandemic.
This will help prioritise the Agency’s actions in the short, mid and long term towards the Member States and the partners, to mitigate COVID-19 economic impact, and leverage on lessons learned from the 100,000 SMEs project and other national, regional and continental initiatives to increase African economies’ level of resilience amid the pandemic.
The objectives of the initiative among others include, creating a one-stop platform which will address the issues, challenges and needs of MSMEs during and post COVID-19, and be an all-encompassing, flexible and comprehensive one-size-fits-all tool for MSMEs in the formal and informal sectors across the continent.
It will also identify opportunities and innovative ways to support and protect MSMEs and job opportunities, especially in food and agribusinesses, technology startups, health specialized entities and those operating along with supply chain operations, noting that MSMEs account for an estimated 90 per cent of businesses in most African economies.
The initiative will again coordinate and harmonize initiatives and ongoing efforts that support MSMEs to gain access to information, finance, and fiscal stimulus during the outbreak.
The platform also aims to ensure that MSMEs have continuous access to national, regional and continental markets while recommending to policymakers, solutions regarding domestic debts as they are projected to face challenges due to the economic difficulties that the Member States will face.
These were conceptualized with the anticipation that “the COVID-19 pandemic will affect global economies, have a devastating effect on African economies and businesses.
Thus the AUDA-NEPAD and Ecobank Group intend to jointly build a continental platform based on its initial ‘100,000 SMEs by 2020’ campaign which will provide an immediate response to the potential impact of COVID-19 on SMEs and job creation on the continent.
It will leverage on its existing instruments, networks, and programmes to gather stakeholders around a digital platform that showcases and monitors the progress made.
The Partners expresses the concern that the fragility of some of the African economies is more pronounced with the impact of COVID-19 and therefore continental coordination is essential to support national measures by governments to curb the spread of the virus on the continent.
This underscored that MSMEs which form a large part of individual economies in Africa have little or no absorption capacity to the effect of the pandemic.
As a longtime partner of AUDA-NEPAD, Ecobank is passionate about the measure and the opportunity to work with the Agency to co-lead this continental platform that will empower MSMEs with knowledge, resources, mentoring, technical expertise and financial support to ensure the sustainability of their businesses during and post COVID-19.
The objective of the continental platform is indeed aligned with the Ecobank vision of contributing to the economic and social development of Africa.
Expanding The Space With IFC Partnership
In 2015, the International Finance Corporation, IFC, a member of the World Bank Group, and Ecobank Transnational Incorporated, parent company of the Ecobank Group and leading pan-African full-service banking group, announced the launch of a $110 million risk-sharing facility that will increase access to finance for small and medium sized enterprises in fragile and conflict-affected states in West and Central Africa.
The target countries seemingly faces extreme and persistent poverty exceeding 50 per cent of their populations, coupled with severe socio-economic challenges, such as low employment, lack of infrastructure, and high insecurity that disrupts business activity and impedes access to finance.
These difficult environments have exacerbated the challenges faced by small and medium-sized enterprises (SMEs), which represent the backbone of the participating countries’ economies and provide the bulk of employment.
The facility was specifically designed to overcome the challenges of lending to these smaller businesses, which have a higher risk profile, in what are some of the world’s poorest countries.
With the IFC and Ecobank sharing risk equally in the $110 million facility, SMEs in Burundi, Chad, Côte d’Ivoire, Democratic Republic of the Congo, Republic of Congo, Guinea, Mali and Togo will gain increased access to loans through Ecobank affiliates.
The IFC places a strategic priority on promoting a sustainable architecture to improve access to finance and spur job creation in fragile- and conflict-affected states.
The partnership Oriental News Nigeria, understand will enable Ecobank to better support small and medium enterprises which face difficulty accessing much-needed credit in these economies.
Ecobank, has historically been committed to supporting small and medium-sized enterprises, and this facility will go a long way to giving SMEs in fragile states or those emerging from conflict the kind of access to finance that they need.
The bank is exited for being a founding member of the Global SME Finance Forum and to be able to play a part in the launching of SME Club campaigns in many African countries. This includes participating countries for this project.
The IFC and Ecobank enjoy a long-standing collaboration dating back to 1993, through which they have delivered innovative and customized initiatives to underserved markets across sub-Saharan Africa.
With ETI’s unrivaled reach in SSA, IFC has been able to extend financial access in difficult environments at a scale that few other IFC-partner financial institutions can match.
Most recently, IFC extended an emergency liquidity facility in response to the Ebola crisis through Ecobank’s affiliates in Guinea, Sierra Leone and Liberia, the most impacted countries and ETI continues to be a key partner of IFC in the markets where it operates.
Recognition For Excellence
Good work and sustainability initiatives comes with recognition.
So this year the Global Finance named Ecobank as the most innovative bank in Africa.
The announcement was made at the eighth Global Finance annual awards, the Innovators 2020, honoring entities that regularly identify new paths and design new tools in finance.
Categories in the award include Top Innovations in Corporate Finance, Payments, Trade Finance, Cash Management, Islamic Finance, with Winners selected from different regions of the world.
The classes of award comprised Most Innovative Banks in Africa, Asia-Pacific, Central & Eastern Europe, Latin America, Middle East, North America and Western Europe; The Most Innovative Fintech Companies in Asia-Pacific, Central & Eastern Europe, North America, and Western Europe; and The Best Financial Innovation Labs
At the virtual awards announcement, Anita Hawser, European Editor at Global Finance and Lead, Global Finance Awards evaluation team, noted that companies recognized at the Innovators 2020 significantly stood apart.
She said the review panel looked at innovation in the context of product or process innovation, as they were ultimately more concerned with the impact of innovation in terms of creating value for customers or addressing a specific need, like speeding up lending or credit review process for small businesses; enabling companies to deposit cheques remotely and not having to visit the branches.
According to her, these are innovations that significantly reduce the time or cost of companies to perform financial tasks and really transform customers’ business lives helping them operate more effectively in a significantly challenging business and economic environment.
In his remark, Ade Ayeyemi, Ecobank Group CEO said: “We are pleased to be recognised as the “Most Innovative Bank in Africa” by Global Finance. This attests to the strength of our brand in multiple countries across Africa, our unique pan-African platform, and our innovative banking products and solutions made possible by the success of our digital transformation journey.
With a larger African footprint than any other bank operating in West, Central, East, and Southern Africa, Ecobank is the only bank that has banking operations that spans 33 African countries, operating a truly integrated African network.
That is One unified integrated Ecobank Mobile Banking App, that works seamlessly across all 33 operating countries in Africa; One Ecobank Omni and Omni Lite serving Multinationals and SMEs in Africa; One Rapidtransfer app that breaks down country borders and allows the diaspora community sends money directly to their loved ones, instantly and affordably across Africa; One Ecobank Online Banking platform that can be easily accessed across 33 African countries.
The Ecobank Group’s unique and largest pan-African platform is designed to help unlock the opportunities of the continent, for the benefit of the continent, through standardization, thereby enabling regional integration, and trade and investment across borders.
With the Group’s sterling performance, it has been severally recognized as ‘Best Retail Bank in Africa 2019’ at African Banker Awards; Most Admired Financial Services Brand in Africa 2019 by Brand Africa 100; Best Digital Bank in Africa – 2017 by Euromoney Awards; Best Retail Bank and Innovation in Banking both in 2018 by the African Banker Awards amongst others.