Financial inaccessibility hinders SMEs’ participation in global trade — ACCA

 

The Association of Chartered Certified Accountants (ACCA) said that the inability of Small and Medium Enterprises (SMEs) to access external funds to drive businesses is limiting their chances of participating in international trade.
ACCA said based on a recent research titled, ‘Growing globally’, which surveyed SMEs and accounting practices worldwide, if given the right opportunities and access to necessary finance, SMEs are very likely to participate in international trade.
Speaking on the development, Head SME Policy, ACCA, Ben Baruch, said that 31 percent of SMEs surveyed identified inability to access external finance as a limitation to grow globally.
He stated: “It’s encouraging that so many Nigerian businesses have the appetite to internationalize, but small businesses need to ensure they have access to the right professional advice and support to do so successfully. Almost a third (31 percent) of respondents identified a lack of access to external finance – such as export finance – as a barrier to successful internationalization.
“Internationalization can potentially bring a range of growth benefits for both small businesses and the broader economy, whilst also driving productivity.”
Barauch called on the federal government to equip business owners with financial literacy skills that would enhance their capacity and ability to access external finance and help them in running their businesses effectively.
“Financial literacy is essential for entrepreneurs to run their businesses effectively, efficiently and profitably. It also enables them to financially plan, manage their finance function and access external funding. More support needs to be provided by the Nigerian government to ensure business owners are equipped with key financial literacy skills. This, in turn, will improve Nigerian SMEs’ ability to obtain external finance and help them grow sustainable,” he added.

DBN expects surge in SME loans disbursement — Okpanachi

 

Development Bank of Nigeria (DBN) Plc, set up by the Federal Government to improve access to credit for small businesses, expects a boost in loans to small and medium enterprises (SMEs) after 15 more banks signed up to disburse the facilities this year.
                                         Tony Okpanachi,
Chief Executive Officer, DBN, Tony Okpanachi, who stated this in an interview with Bloomberg, noted that the 15 banks that were signed up by DBN were in addition to the seven that joined in 2017. He said that the bank is targeting loans disbursement of about N60 billion this year, adding that lending to SMEs is expected to reach “hundreds of billions of naira” in the coming years.
Okpanachi stated: “DBN has granted loans to about 10,000 small businesses this year, or half its target. We are going to see more up-tick from this July as the newly signed-up lenders bring their pipeline to us.”
Okpanachi who noted that less than 5 percent of the more than 37 million SMEs in the country have access to bank credit, said that providing credit guarantees may help curb the apathy that commercial banks have when it comes to lending to the sub-sector.
He asserted that with the current shareholders fund of $1.3 billion by the federal government, African Development Bank (AfDB), World Bank and other international development-finance institutions, DBN is unlikely to require new funding for at least another three years.
Established two years ago, DBN seeks to plug a gap left by banks that are investing in Nigerian Treasury bills that offer yields in excess of 14 percent and are considered less risky than providing credit to SMEs.

AfDB partners AFREXIMBANK to support African small, medium businesses

 

Akinwunmi Adesina

 

The African Development Bank (AfDB) is to provide a $500,000 grant under its African Private Sector Assistance (FAPA) programme to support emerging small, medium businesses in Africa.

During the recently concluded Annual General Meetings and 25th anniversary celebrations of the African Export-Import Bank (AFREXIMBANK) in Abuja, the bank signed an agreement to formalise the grant.

The Managing Director, Intra-African Trade, AFREXIMBANK, Kanayo Awani, signed the agreement on behalf of her bank, while Senior Director, Nigeria Country Office, Ebrima FAAL, signed for the AfDB.

The ceremony was witnessed by Chargé d’Affaires, Embassy of Austria in Nigeria, Elfriede Geisler, and Ambassador of Japan to Nigeria, Yutaka Kikuta, who represented the FAPA donor countries.

Mrs Awani said the agreement was aimed at upgrading the capacity and skill-sets of up to 20 emerging factoring firms in the continent.

Besides, the agreement would also help in providing advisory services to enhance the sustainability of established growth-orientated factoring firms, regulators, financial institutions and business and trade associations in Africa.

President of AFREXIMBANK, Benedict Oramah, said small and medium enterprises (SMEs) in Africa have long faced real difficulties accessing external finance for their business activities

This situation, he said, impeded their growth and prevented them from pursuing commercial opportunities.

“AFREXIMBANK sees factoring as a solution to bridge the funding gap facing SMEs, and the agreement will support our strategy to grow intra-African trade and facilitate greater SME contribution to regional and global supply chains,” Mr Oramah said

He said the bank was championing the development of factoring in Africa by focusing on the provision of credit lines to factors, capacity-building workshops, policy and regulatory inputs, advisory services and technical assistance to promote best practices.

The agreement with the AfDB, and the grant from FAPA, he noted, would reinforce and grow the availability of effective factoring across the continent and increase awareness of its availability.

Details of activities the grant would finance include: capacity building to address needs, including on-site training, provision of back-office support systems and customised manuals for marketing, credit and risk policy, finance and operations.

Besides, the grant would support advisory services to established factoring companies and serve as a platform to enable African factoring companies to network, exchange ideas and share best practices.

The other activities include development of a sustainable knowledge and learning platform, e-learning, workshops and the certificate of finance in International Trade, which provides four weeks’ formal training in factoring under a programme developed by the University of Malta.

Also, the grant would help the provision of project management coordination to ensure timely project implementation.

We’ll reduce lending rate for SME funding – Okpanachi

 

Image result wey dey for Pictures of Okpanachi

                                       Tony Okpanachi

 

In this interview with IFEANYI ONUBA, the Managing Director,  Development Bank of Nigeria, Mr Tony  Okpanachi, speaks on issues affecting the financing of Micro, Small and Medium Enterprises sector of the economy

Given that a lot of people may not be aware of your operations, why was the Development Bank set up?

The Development Bank of Nigeria was set up by the Federal Government to confront financing difficulties hindering private sector investment in the country.

The bank is to play an important and catalytic role in providing funding and risk sharing facilities to Micro, Small and Medium Enterprises.

The target of DBN is to overcome the funding gap in the Micro-, Small- and Medium-scale Enterprises space and help businesses unlock opportunities across Nigeria.

DBN’s ambition is strengthened by the financial and technical support of international partners, including the European Investment Bank and African Development Bank.

The new institution builds on international experience and uses a business model that has demonstrated proven success to enhance private-sector investment across Africa and around the world where other financing options are inadequate or absent.

How much Small and Medium Enterprises operators benefited from the bank?

One of the issues affecting the performance of MSMEs is the shortage of finance, particularly investment finance, which occupies a very central position.

The Development Bank of Nigeria is expected to contribute to mobilising significant long-term financing to this important yet under – served sector with high development potential.

We started our lending activities on 1st of November 2017 with three microfinance institutions. We have made available to them almost N5bn. This was supposed to be for several SMEs. Since we are a wholesale financial institution, we work through financial institutions. So when they come, we make a line available to them and as they come with their clients we draw on the line.

What is available now to the three micro finance institutions is N4.9bn. So as they are bringing their clients on board, we sign. Beyond that, we have started bringing on board some commercial banks which you can see on our website; we have also made lines available to them. So as they come, we draw down the line and that’s when we will begin to give actuals. But I am glad to tell you that what we have for disbursement for both commercial and microfinance banks is about N9bn.

What is the current ownership structure of DBN and what is the level of investment in the bank by international finance institutions?

We have equity shareholders coming in; that is African Development Bank and the European bank. They have invested $50m and $20m respectively. So effectively, they are shareholders of Development Bank of Nigeria. The announcement that was made recently was to the effect that they have committed that.  SEC has approved the basis of allotment and so as we speak, effectively they have funded the investment in the Development Bank of Nigeria. They are now shareholders in the Development Bank of Nigeria.

So the $50m from African Development Bank and $20m from European Bank are already in the system and as such, the bank is owned by the Federal Government, Nigeria Sovereign Investment Authority, African Development Bank and European Investment Bank.

You said some banks have signed onto the bank’s loan disbursement arrangement; what are these banks?

For the commercial banks, we have Wema Bank Plc, Eco Bank, Sterling Bank, Diamond Bank, and Fidelity Bank.

For the micro finance bank we have Micro Credit, Infinity, and Bosack.

There was an issue with Fortis. I understand they had issues with accessing the fund. We have not disbursed to them yet. I know they are working towards meeting the conditions that will make them able to access the funds. We have not disbursed to them yet.

What are the mechanisms put in place to ensure that the proposals of banks for funding meet DBN’s criteria and that the funds are not diverted?

For us, we receive the exact request; check the tenure and the terms of condition offered before we disburse.

So we disburse for on-lending not for the banks to hold on to the funds. We have a mechanism within our system that ensures that the funds hit the account of the end borrowers within 72 hours. Beyond that, we follow up on them to see the impact made by the borrowing.

For example, we check if it had created more employment; has it increased turnover? Has the loan increased revenue to enable them pay more taxes to government when necessary? So we look out for all of these; we don’t just create the lines for the banks alone.

The issue of interest rate is one of the major factors that make borrowing very challenging; does DBN have uniform interest rates for borrowers?

No, it depends on the risk profile of the institution. It is not flat for everybody as some based on assessment may be more risky. Knowing that we take the risk of the financial institutions, we assess them and rate them; so that brings about the risk premium for each.

Do you have an upper limit for the loans you give out to these financial institutions?

The upper limit is tied to the weight we attach to the risk of the rating. There is a minimum criterion you must reach for you to come on the DBN rating depending on the institution risk profile.

For our rating we have a model which is a bit complicated due to the many factors in our rating. The difference from our rating may not be more than 100-200 basis points depending on the risk profile. The upper limit is a function of the risk premium.

One of the models upon which DBN is based is risk-sharing; have you started that?

We have not started that though we have got the regulatory approval to set it up. It’s going to be a subsidiary of the Development Bank of Nigeria and we have started working with World Bank to get the consultant to put the structure in place.

It is our projection that towards the end of the year or early next year the credit guaranty should come on board.

The issue of risk is very vital when giving out loans; to what extent have you gone with de-risking the industry and providing capacity to financial institutions?

That is also on-going. If you recall, we have a unit with the ministry of finance called the project implementation unit. The idea is to have different unit handling the capacity building issues so that we are not distracted from the core mandate of lending and they have sent out expression of interest for consultants to come in and the process is on-going.

Then, the next stage is to ensure that the consultants are short listed and we identify which Primary Financial Institutions that need this capacity building and allocate consultants to them.

In the process of appraising the PFIs, some of them that do not meet our criteria, we identify ways we can help them. That’s where the technical assistant comes in. For example; if it is lack of a strong SME desk that is the problem, we give assistance.

The idea is that even if a firm does not qualify today, we work with them to make them qualify. The overall objective is to create more access for the SMEs.

Funding is a major issue when it comes to development financial institutions. So far, has there been any need for you to go to the market to raise more funds?

No; from the funding we have now we can still move for the next two years before we can consider going to the market depending on the market situation

Specifically, how much is available to the DBN now to finance SMEs?

There are some information that we cannot put out there. In terms of the amount, I can assure you that we have enough funding now.

What plan does the bank have to help young graduates who may want to start up a business, knowing that they may not be able to meet up with the bank’s criteria?

Part of what we are doing differently is capacity building where we tell the financial institution that once a project comes to them and they assess it, we are ready to take up the risk with them to give funding for start-up.

Subsequently, we are going to come up with products that we are going to sell through these financial institutions. For now, we want the buy-in of these financial institutions themselves so that we tell them the fund is available for them and we are willing to fund start-ups.

We build that confidence in them and subsequently we go out with our products directly to say help us sell these products to these people but that will be in phases. But we are very much available for start-ups. We will also share risk with them. The overall objective is to make funding easy to them.

During the commencement of the bank’s operation last year, the bank promised to finance 20,000 SMEs within its first year of operation. To what extent have you been able to meet this target?

We are working towards meeting the target. As I said earlier, we are in our first year of operation. Now DBN is a start-up; there is a process of start-ups. I said first year of full operation and so you are going to start the follow up this year because we now have full operation in place.

We were licensed on 29th of March 2017. We took process of setting up structures that took some time and because we are a wholesale financial institution, we are going to partner with some financial institutions to bring them on board before we can now begin to lend to them. I can assure you that we are on course.

How many SMEs has the bank funded so far?

So far, the requests from the PFIs for MSMEs are beyond 5,000. But like I told you, as they make requests and meet the conditions, we fund them.

What is the level of collaboration between DBN, SMEDAN and others in reaching out to MSMEs?

We are currently working with SMEDAN. We have technical committees from their end and our end. They have clusters around the geopolitical zones. We want to key into those clusters to help build capacity for the MSMEs. We notice the MSMEs lack certain capacities so we want to start teaching the MSMEs on a case by case basis.

My hope is that everyone who is interested in expanding their businesses should learn the basics of doing so. They were here a couple of weeks ago and we have been talking.

Beyond SMEDAN, we also know we need to collaborate with a lot of institutions – the National Association of Small and Medium Enterprises for instance; we need to engage them. There are so many partnerships we are going into.  We have to work in collaboration.

Other DFIs have been working in silos but that hasn’t worked well. So we are coming up with a collaborative approach to ensure that all the institutions playing key roles work together. The idea is to take leadership to ensure that MSMEs have easy access to funds.

Going forward, what are some of the areas of focus for the bank to boost the activities of MSMEs?

We want to have sustainable financing so that in the long run, the institution will still be operational and be able to provide funds on a sustainable basis. A lot of factors are expected to come in here.

The second is awareness of the fact that the funds are available and we want to begin to get the MSMEs to pressure their banks to sign on with DBN so that many MSMEs can begin to have access to these funds.

Thirdly, the ultimate objective is to see the developmental impacts of our intervention fund like in the area of job creation. Lending empowers more people and ensures financial inclusion which is why we are taking time to put in place sustainable structures as it’s done elsewhere.

We also need to make it work. This is the first time all these development partners will be coming together to provide this funding. That means they believe in it and if they do, then why don’t we take advantage of it?

 

AfDB gives African Guarantee Fund $10M to underpin SMEs

 

 

(Ecofin Agency) – The African Development Bank (AfDB) approved July 11 an additional $10 million in financing to the African Guarantee Fund (AGF) for small and medium-sized enterprises (SMEs) across Africa.

This support will enable the Fund to continue guaranteeing loans, especially to SMES active in renewable energy, housing, health, education, finance, trade and agriculture.

To date, more than 8,600 SMEs across Africa have already benefited from AGF loans. However, there is still room for improvement. According to AGF, financing gap for African SMEs remains high, standing at $155 million, currently.

We’re addressing MSMEs’ financing nightmare – Okpanachi, Development Bank of Nigeria MD/CEO

When Mr. Tony Okpanachi was appointed the Managing Director/Chief Executive Officer of Development Bank of Nigeria (DBN) in 2017, his mission was to alleviate the financing constraints faced by Micro, Small and Medium Enterprises (MSMEs) and small corporates in Nigeria.

                                   Mr. Tony Okpanachi 

  

His job remains to provide financing, partial credit guarantees and technical assistance to eligible financial intermediaries on a market-conforming and fully financially sustainable basis. One year down the line, he has forged on quite steadily.

In this interview with journalists, he speaks more about his job and DBN.

Operations so far

You will recall that on November 1, 2017, we started our lending activities with three microfinance institutions. We have made available to them almost N5 billion and this was supposed to be for several Small and Medium Enterprises (SMEs). Since we are a wholesale institution, we work through financial institutions. So when they come with their clients, we make a line available to them and we draw on the line.

What is available now to the three microfinance institutions is about N9 billion. So, as they are bringing their clients on board, we sign them on. Beyond that, we have started bringing on board some commercial banks, which you can see on our website. We have also made lines available to them, so as they come, we draw down the line and that’s when we will begin to give actuals. But I’m glad to tell you that we have almost nine currently on our list both of commercial and microfinance banks and between now and the end of June, we expect more commercial banks. So, as the commercial banks come up, knowing they have more of the volumes, we will hear more from them.

European Bank and ISD investments

We have equity shareholders coming in, that is African Development Bank (ADB) and the European Bank. They have invested $50 million and $20 million respectively. So effectively, they are shareholders of DBN. So, the announcement that was made was to effect that they have committed and that they are going into it and looking at the publication from our issuing house, DLM, (Securities and Exchange Commission (SEC) has approved the basis of allotment.

So, as we speak effectively, they have funded the investment in DBN. So, they are now shareholders in DBN.

The $50 million from ADB and European Bank are already in the system; so now, the bank is owned by the Federal Government, NSIA (National Sovereign Investment Authority), ADB and European Investment Bank (EIB).

PFIs that have signed so far

Wema Bank, Ecobank, Sterling Bank, Diamond Bank, Fidelity Bank, They are among the Primary Finance Institutions (PFIs) or commercial banks we have signed on to work. For the microfinance banks, we have microcredit, infinity, busack. There was an issue with Fortis; I understand they had issues with accessing the fund. We have not disbursed to them yet, I know they are working towards meeting the conditions that will enable them to access the funds. We have not disbursed to them yet.

Meeting set criteria

For us, we receive the exact request, check the tenure and the terms of condition offered before we disburse. So, we disburse for on-lending not for life for them to hold on to. We have
a mechanism within our system that ensures that the funds hit the account of the end borrowers within 72 hours. Beyond that, we follow up on them to see the impact made by the borrowing. For example, we check if it had created more employment, has it increased turnover? Has it increased revenue to enable them pay more taxes when necessary? So, we look out for all of these. We don’t just create the lines for the banks alone. Like I said, we made available N5 million so we draw down as they bring the clients. So, it is not just giving the money to the bank alone, we go further than that. We do things differently. We ensure that having made the money available, the banks bring clients.

Uniform interest

We do not have uniform interest. No. It actually depends on the risk profile of the institution. It is not flat rate for everybody, as some, based on assessment, may be more risky. Knowing that we take the risk of the financial institutions, we assess them and rate them. So, that brings about the risk premium for each.

Upper limit

The upper limit is tied to the weight we attach to the risk of the rating. There is a minimum criteria you must reach for you come on the DBN rating depending on the institution’s risk profile. For our rating, we have a model which is a bit complicated due to the many factors in our rating. The difference from our rating may not be more than 100-200 basis point depending on the risk profile.

The upper limit is a function of the risk premium. For PFIs who are below investment grade, it is 1.5 with reference to the market rate.

Risk sharing

We have not started risk sharing, though we have got the regulatory approval to set it up. It is going to be a subsidiary of DBN and we have started working with the World Bank to get the consultant to put the structure in place. It is our projection that towards the end of the year or early next year, the credit guaranty should come on board.

De-risking the industry

That is also ongoing. If you recall, we have a unit with the Ministry called the Project Implementation Unit. The idea is to have different units handling the capacity building issues so that we are not distracted from the core mandate of lending and they have sent out RFPs expression of interest for consultants to come in and the process is ongoing. Then the next stage is to ensure that the consultants are short-listed and we identify which PFIs need this capacity building and allocate consultants to them.

In the process of appraising the PFIs, we identify ways we can help some of them that do not meet our criteria. That’s where the technical assistant comes
in. For example, if it is lack of a strong SME desk that the problem is, we give assistance. The idea is that even if a firm does not qualify today, we work with them to make them qualify in the near future. The overall objective is to create more access for SMEs.

Raising more funds

We don’t have any reasons for now to go to the market to raise more funds. No. From the funding we have now, we can still move for the next two years. It is in two years’ time we can consider going to the market depending on the market situation. But where we are now and with the unburdening of the PFIs, we are not going to see uptake of the loans. So, it is at that point that we will seek more funds. But I think we have a funding that will take us for one to two years.

What is available to you now?

There are some information that we cannot put out there. But so far, all the development partners we have, have taken first or second tranche of drawdown and we have been able to meet up. In terms of the amount, I can assure you that we have enough funding now to disburse to customers.

Helping young graduate start-ups

Part of what we are doing differently is that we are ready to fund start-ups. For instance, in capacity building, we are telling financial institutions that once the projects come and they assess them, we are ready to take up the risk with them to give funding for start-ups.

Subsequently, we are going to come up with products that we are going to sell through these financial institutions. For such institutions, again, that is down the line. For now, we want the buy-in of the financial institutions themselves. So, we tell them the fund is available for them and we are willing to fund start-ups. We build that confidence in them and subsequently we go out with our products directly to say help us sell these products to these people but that will be in phases. But we are very much available for start-ups. We will also share risk with them and the overall objective is to make funds easier for them to access.

20,000 SMEs target

We are working towards meeting the target. As I said earlier, we are in our first year of operation. Now DBM is a start-up, there is a process of start-up. In the first year, we have done full operations. So, you are going to start the follow up this year; we have full operations in place as well. We were licensed on March 29 last year; we took process of setting up structures that took some time and because we are a wholesale institution, we are going to partner with some financial institutions to bring them onboard before we can now begin to lend to them. I can assure you that we are on course.

Beneficiary MSMEs

So far, the request from PFIs for Micro Small and Medium Enterprises (MSMEs) is beyond 500. But like I told you, as they make requests and meet the conditions, we fund them.

PFIs selling at higher interest rates

Every Development Finance Institution (DFI) is more like a catalyst. You cannot meet all the demands. A typical business outfit comes to a bank; it needs working capital, for instance, which is mostly short tenored like 90 days, six months, etc, and most banks are willing to take those businesses

SMEs Urged to Embrace Digital Transformation

Dell EMC, a global technology solution provider has advised chief executive officers (CEOs) of large enterprise companies as well as small and medium enterprises (SMEs) to align their operational processes with digital transformation, while ensuring that technology drives their entire business activities.

Country Manager, Dell EMC Nigeria, Mr. Travers Nicholas, who gave the advice during an interview with THISDAY in Lagos, warned that unless organisations align their businesses with current digital transformation, they would find it extremely difficult to remain in business in today’s digital era where competition drives businesses.

“My candid advice to all CEOs, business owners, small or large, is that digital transformation is the next frontier. Technology is no longer focused only on Information Technology (IT) department as cost centre, because technology itself is now the cost centre and data is no longer something that organisations need to worry about because data is the new currency.

“Today, technology is driving businesses to new heights to open up new channels and can engage people in diverse ways, and that is why technology is the new business. Organisations that have embraced digital transformation, have used technology to transform their businesses and they are using technology solutions to deliver products to people’s home, thus changing the business modules of old,” Nicholas said.

He added: “So, with basic technology solutions, organisations are able to provide basic services that the customer needs.

“Uber for example, has used basic technology apps to transform the transport business, and this is the type of digital transformation that Dell Technology is driving among large enterprise and SME businesses to enhance competition, business growth and profitability,” Nicholas added.

Therefore, he urged CEOs to understand that technology is now the business model, saying they need to look into their own business pattern to see how they can use technology to cause positive disruption.

“CEOs need to disrupt themselves. Every company needs to disrupt itself with technology before they are disrupted by others and Dell has a long history of disrupting self in many years,” he further said.

Speaking on the roles of Financial Technology (FinTech) players in the entire digital transformation process, Nicholas said: “FinTech players are key to digital transformation, because they develop solutions that drive automation processes that speed up business activities.

“FinTech has done a lot in the financial industry and they have caused a lot of distortions in that sector. Today we talk of successful online transactions because the FinTechs were able to develop solutions that drive it.
“Today many banks have become online banks and we operate mobile banking using the mobile phones.

“So, the evolution of banking has been ongoing and the FinTechs are instrumental to the evolution that has revolutionised the baking sector, he further stressed.