The Small and Medium Enterprises, SMEs are seen as one of the most effective instrument for economic growth and development in developed and less developed countries because they account for more than half of a country’s output and employment.
The sector in Nigeria faces multiple challenges, like unskilled workforce, multiple taxation, and lack of access to finance.
However, Union bank has sufficiently presented big, strong and reliable intervention measures to boost access to finance for SME’s , writes Yemisi Izuora.
The Small and medium scale enterprises (SMEs) are generally regarded as the engine of economic growth and equitable development in developing economies.
They are labour intensive, capital saving and capable of helping create most of the one billion new jobs the world will need by the end of the century.
They are also perceived as the key to Nigeria’s economic growth, poverty alleviation and employment generation.
The SME sector is unarguably the backbone of major developed economies, as well as important contributors to employment, economic and export growth.
According to reports, in South Africa, SMEs account for 91 per cent of businesses, 60 per cent of employment and contribute 52 per cent of total Gross Domestic Product, GDP.
In Nigeria, SMEs contribute 48 per cent of national GDP, account for 96 per cent of businesses and 84 per cent of employment.
Despite the significant contribution of SMEs to the Nigerian economy, challenges still persist that hinder the growth and development of the sector.
According to the Nigeria Bureau of Statistics, NBS, small and medium scale enterprises (SMEs) in Nigeria have contributed about 48 per cent of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50 per cent of industrial jobs and nearly 90 per cent of the manufacturing sector, in terms of number of enterprises.
Though significant growth has been achieved in the MSME sector, there is still much to be done.
According to an article on “developing Africa through effective, socially responsible investing”, “there still exists a ‘missing middle’, which finds it hard to access funds due to the category of funding they belong to.” Other challenges encountered by the sector include lack of skilled manpower, multiplicity of taxes, high cost of doing business, among others
2019 Statistics by NBS, indicated that the number of micro, small and medium scale businesses in Nigeria grew by 12 per cent to 41.543 million in 2017 from 37.067 million in 2013.
The statistics was an outcome of the latest National Survey of Micro Small & Medium Enterprises (MSMEs) jointly conducted by NBS and Small and Medium Enterprises Development Agency of Nigeria SMEDAN.
According to the report: “The total number of MSMEs as at December 2017 stood at 41,543,028 – micro enterprises (MEs): 41, 469,947; small and medium enterprises (SMEs): 73,081. The sectors’ total employment contribution stood at 59,647,954 persons, including owners, as at December 2017, representing 86.3 per cent of national workforce, contributing 7.64 per cent of export receipts.”
Interestingly, as part of its developmental role and mandate of promoting a sound financial system, the Central Bank of Nigeria (CBN) on August 15, 2013, launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF).
This was in recognition of the significant contributions of the Micro, Small and Medium Enterprises (MSME) sub-sector to the economy as the sub-sector is characterized by huge financing gap which hinders the development of MSMEs.
The broad objective of the Fund is to channel low return funds to the MSME sub-sector of the Nigerian economy through Participating Financial Institutions (PFIs) enhance access by MSMEs to financial services; Increase productivity and output of microenterprises; Create jobs; and Engender inclusive growth.
Union Bank Intervention
Union Bank of Nigeria, one of the oldest financial institutions in the country that was established in 1917 is one of Nigeria’s long-standing and most respected financial institutions, offering a portfolio of banking services to individuals, SMEs, commercial and corporate clients.
With a robust geographical network comprising more than 284 service centres and over 934+ ATMs spread across Nigeria, the bank is committed to helping individuals, families and businesses grow for nearly a century.
He bank is committed to being widely recognised as Nigeria’s most reliable and trusted banking partner with the tall ambition that is hinged on successfully delivering against six strategic pillars including quality of our customer experience, client base, talent, banking platform, professional standards and earnings.
Aggressive execution of its strategy is underway, leveraging a robust transformation team largely focused on people, processes and technology.
Harnessing International Partnership
Early this year, specifically in February, the bank in partnership with the International Finance Corporation, IFC, a member of the World Bank Group, launched a $25 million local-currency investment in a risk-sharing facility to expand Union Bank’s lending to small and medium enterprises (SMEs) in Nigeria.
The facility, which will cover as much as 50 per cent of the risk of the bank’s loans to entrepreneurs, aims to help Nigerian businesses grow and create jobs.
With IFC’s support, Union Bank plans to offer more products and services to women-owned businesses, especially in Nigeria’s conflict-affected Northern and Delta regions, where entrepreneurs face particularly difficult challenges accessing finance, and more than half the population is excluded from the financial system.
With such partnership the bank will continue to develop sustainable products and services that promote enterprise and address poverty and financial inclusion.
This is in line with its commitment to support the communities within which it operate. To the bank the IFC facility is a welcome development which will further deepen its efforts to support Nigerian SMEs and women.”
The IFC’s risk-sharing facility will help Union Bank increase its focus on Nigeria’s underserved areas, positioning it as one of the leading banks that provides customized services to SMEs that are driving job creation and growth across the country.
Although small businesses provide over 80 per cent of Nigeria’s jobs, a recent World Bank survey found that only 15 per cent of SMEs in the country reported having a bank loan or line of credit. It also found that more than half of the women-managed firms surveyed named access to finance as a major obstacle to growth.
The new facility is part of IFC’s Small Loan Guarantee Program (SLGP), which is easing local-currency lending to SMEs in frontier markets.
The SLGP is backed by the International Development Association’s (IDA) Private Sector Window, which is providing a first-loss guarantee, allowing IFC to scale up its support to underserved and unbanked SMEs.
The IFC’s investment also includes support from the Women Entrepreneurs Finance Initiative, We-Fi in the form of performance-based incentives for increased lending to women-owned SMEs.
Union Bank has continued to support SME and empower women-led businesses through tailored products and services. The Bank recently unveiled Alpher (α), a dynamic proposition aimed at uplifting Nigerian women through customised financial services, capacity building opportunities and competitive interest rates on loans.
In 2017, the Bank also introduced an innovative business acceleration programme, ‘Start up Connect’ which enables Nigerian businesses creating technology-based solutions to be more competitive in the rapidly expanding African technology market.
The partnership with Union Bank underscores IFC’s growing commitment to Nigeria. IFC has invested in several projects in heavy manufacturing, technology and financial services amongst other key sectors in the country. Nigeria has been one of IFC’s fastest growing country portfolios, making it one of the organization’s top ten country exposures.
Union Bank Plc in continuation of its intervention measures also received f $200 million credit facility to support SMEs and women-led firms in the country.
The fund was secured from Atlas Mara Limited in agreement with Overseas Private Investment Corporation (OPIC), the US led government’s development finance institution.
Under the terms of the agreement, Union Bank will receive a ten-year credit facility of up to $200 million from OPIC for investments in digitization, on lending to small and medium enterprises, and funding to women-led businesses, as part of OPIC 2X Women’s initiative which aims to catalyse $1 billion for investment in women across developing nations.
According to the latest SME report by the NBS, 22 per cent of MSMEs in the country are owned by women, in a country where the population of women is about 45 per cent of the total inhabitants in the country.
In 2014, the International Finance Corporation (IFC) found out that 9.34 million women owned SMEs in over 140 countries, representing a third of all formal SMEs. Also, based on the findings of First for Women, 78 per cent of women-owned businesses are profitable, ahead of 70 per cent for men. The compelling statistics on the viability of women-owned businesses is encouraging most financial institutions to give significant supports to women led businesses in Africa.
The OPIC deal will further cement its position as an SME-friendly bank in the country. Union Bank attributed the success of the deal to the bank’s desire to make impact across sectors in Nigeria.
The partnership with OPIC is expected to strongly advance the bank’s lending to key segments of the population, especially the SMEs.
The 10-year tenor of the OPIC facility provides flexibility to maximize impact across key sectors of the Nigerian economy as the bank will continue to advance proven initiatives including those focused on women’s banking and financial inclusion.
Riding On Its Unique Products
Union bank in stamping authority in the SME space has developed products and applications that will enhance access of finance to small businesses.
With Union360 business operators can conveniently make single or bulk transfers to beneficiaries in any bank. Payments such as staff salaries, vendor/supplier fees and third-party payments can be made without visiting a branch.
Union360 can be accessed via mobile phones, tablets, PCs or other web-enabled devices.The payment process on Union360 is seamless and can be completed in 4 easy steps;
Online Payment Gateway Service
With this customers can make payments through websites and social media platforms using debit/credit cards – Verve card, Mastercard & Visa card, as well as bank account numbers.
This simple and secure solution offers customised collection services.
This has numerous benefits like, Seamless integration to corporate’s ERP! Online real-time reporting tool for corporates, Customisable report view and account narration and Online real-time transaction update on corporate’s ERP
The multi- bank collections platform enables merchants, businesses, and organisations receive payments into their Union Bank account from any bank in Nigeria. The solution is a simple resource that will enable you to achieve a seamless cash inventory electronically.
Small Business Banking
Union bank has made it simple that operators Of business business can benefit from its personalised Business Banking solutions. The solutions are flexible and offer convenient services with attractive features.
With this the bank help operators you grow their business by providing competitive and innovative products and services that are specially tailored for them.
Access to Credit Facilities
Union bank’s loan solutions can help grow businesses in a sustainable manner with the provision of working capital to assist businesses increase their yield.
Current account with up to 75 per cent discount on account maintenance fee or zero account maintainace charged.
Operators can enjoy huge discounts off their account maintenance fee on their current account while still earn interest on the account.
Access to foreign exchange for small scale importation
The bank offers access to funds for small scale importation to its SME customers. This fund can be used to import goods that are eligible for import by CBN.
Dedicated Relationship Manager
In addition to its 24-hour contact center that readily attends to all customer needs, the bank also assigns a dedicated Relationship Manager to assist operators in managing their business.
The SBA Initiative
Union Bank is a Preferred Small Business Administration, SBA lender, offering specialized guidance through the application process and expedited closing for eligible loans.
Small Business Administration (SBA) loan programs can assist businesses with a variety of financing needs and with more flexibility than traditional loans.
ThenSBA programs are designed to help conserve capital and enhance business’s cash flow. As an SBA preferred lender, Union Bank can help determine if an SBA loan is right for your needs.
SBA 504 loan program
The SBA 504 is specifically designed for those in the market for real estate and equipment.
Eligibility is for those with an existing for-profit business, a tangible net worth of less than $15 million, net profit after taxes of $5 million or less and occupy at least 51 per cent of existing facility being purchased or at least 60 per cent of new facility being constructed
With an SBA 504 loan, one can acquire or refinance owner-occupied commercial real estate or major long-term equipment and invest in project sizes up to $20 million.
The SBA 7
The SBA7 program offers loans from $250K to $5 million or $5.5 million for manufacturers.
With this loan, existing for-profit business must show a tangible net worth of less than $15 million and a net profit after taxes of $5 million or less. Also the operator must occupy at least 51 per cent of space in existing facility being purchased or at least 60 per cent of space in new facility being constructed.
If approved, you can use the capital for: Tenant improvements, Equipment or machinery purchases, Owner-occupied commercial real estate purchases, Franchise purchases, Business expansion and acquisition, Long-term working capital needs and Debt refinancing.