As a result of the important role of Small and Medium Enterprises (SMEs) in economic development, financial institutions have been urged to de-risk SMEs to enable them drive the desired growth.
According to Peter Bamkole, the Director of Enterprise Development Centre, Pan Atlantic University, Lagos, who made this call during the Fidelity Bank Annual SME Conference in Lagos yesterday, most banks don’t like giving fund to small business owners especially when the businesses are still developing because of fear of collapse but are willing to lend to people who have collaterals.
This, he said, is very challenging to small business owners and hampers the growth needed in the sector.
His words: “Most banks are willing to lend to people who have collaterals, but for the small businesses, which will one day, if well developed, become one of the big ones, they don’t like to fund them, they want already made and this is a big challenge to SME sector.”
He stated that banks must be willing to fund small businesses especially at the early stage to de-risk them, noting that one of the ways to do that is to build capacity of the business owners to make them understand all about the business.
However, on the part of the business owners, he said they should make themselves look good to be able to attract banks to provide fund to them.
He explained: “Most small businesses don’t look good; they don’t look good because the person that wants to fund you don’t know how they operate. Don’t forget the money the banks want to give you is not their money; it is the money they have collected from shareholders and depositors. The banks owe the shareholders and depositors. So, they also need to be careful to ensure that whatever money they give out, they will also get it back and also with interest.”
He explained that the only way small businesses can make themselves look good is by keeping good records and help people who are not part of the business understand how the business can make money.
Continuing, he emphasised that trust, integrity and creditability are essential in business.
“If you have credibility and trust without collateral, you will make it. A lot of people I know have told me that without trust, it would have been impossible for them to grow to the level they are today”, he said.
Earlier, the Managing Director of Fidelity Bank, Mr. Nnamdi Okonkwo, explained that the conference was planned to provide insightful access to range of key factors affecting the development of SMEs in Nigeria from a wide array of SME development stakeholders; deeper understanding of Fidelity’s innovative range of SME-tailored products and services; access to robust advisory/ networking platform that could open new doors and opportunities and a platform for celebrating the contributions of past guests that have appeared on the Fidelity SME Forum radio programme.
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