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Promoting Access to Credit for Micro, Small & Medium Enterprises (MSMEs) through Effective Government Initiatives

March 23, 2012

EFInA hosted its third breakfast series in Abuja, to discuss and evaluate the key findings of its study titled “Promoting Access to Credit for MSMEs through Effective Government Initiatives”

The development of a robust MSME sector is a viable means to create jobs and reduce poverty in Nigeria. Currently, the Nigerian MSME sector is fragile, operating in a business environment that presents considerable challenges. The Nigerian government has launched a number of interventions to promote support access to credit for the MSME sector.

EFInA commissioned Genesis Analytics to undertake a study to identify the challenges that financial institutions (especially deposit money banks) face in providing finance to MSMEs; review government policies aimed at increasing access to finance for MSMEs; and make recommendations as to which policies are best suited to effectively promote access to finance for the MSME sector.

EFInA’s Access to Financial Services In Nigeria 2010 survey revealed that 38.1 million adults are self employed, of which 19.6 million adults (51.1% of those that are self employed) are the main income earners in their household. In addition, only 8.6 million self employed adults (22.6% of those that are self employed) has a bank account.

Ms. Modupe Ladipo, Chief Executive Officer of EFInA, stated that the potential for promoting financial inclusion through MSMEs is significant, given that as at 2010, 29.5 million self employed adults (77.4% of those that are self employed) were unbanked. Ms. Ladipo emphasized that the Nigerian government needs to adequately monitor and evaluate the impact of their interventions aimed at increasing financial access for MSMEs, in order to determine their effectiveness.

The keynote speaker was Mr. Richard Ketley, Partner, Genesis Analytics, South Africa. Mr. Ketley spoke on the financing gap in the MSME market in Nigeria and that potential interventions must have clearly defined elements that mitigate the risk of providing credit to MSMEs; increase revenue for the banks; and reduce the cost of providing loans. He stated that successful interventions are simple, scalable, sustainable and affordable; and that different interventions are appropriate for the different segments of the MSME sector (i.e., micro, small and medium). Mr. Ketley recommended that government interventions should be targeted at micro-enterprises, as they make up 98% of the MSME sector. He also encouraged the use of Innovation Funds to provide novel solutions to bridging the financing gap in the MSME sector.

The breakfast meeting was attended by regulators, development finance institutions, and deposit money banks. The participants debated on the most effective methods of designing government interventions for the MSME sector; examined the definitional issues around the different segments of the MSME sector; and identified which government interventions were most likely to successfully promote private sector lending to MSMEs.


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