Nigeria is not the only country where Small and Medium Enterprises (SMEs) experience difficulty accessing credit facility. According to the Acting Chief Executive Officer of CWG Plc, Adewale Adeyipo, small businesses in the United States experience the same struggle.
Adebayo said there is nowhere in the world where the Small and Medium Enterprise exists as a perfect entity. It was learnt that the challenges faced by the entrepreneurs in Nigeria confront owners of small businesses in the developed world as well.
For many SMEs in Nigeria, lack of financial support and tax incentives has been a barrier that is too high to overcome, and this has led to the demise of some small and medium businesses at their early stages, while for companies that were able to scale through, maintaining its deep-pocket investors is another struggle.
Although in recent years, SMEs have found comfort in private equity firms and venture capitalists, as banks are known to sideline small business owners from having access to credit for years. However, not every sector or market enjoys the privileges of private equity firms as most usually focus on tech-related businesses.
To withstand the pressures of the business environment in Nigeria, Adeyipo advised that small and medium enterprises should keep evolving as new challenges arise. He stated that the significance of the SMEs to the growth of the economy can’t be overquantified.
“The Small Business and Entrepreneurship Council (SBE Council) statistics revealed that 99.7% of U.S. (United States) businesses are SMEs. However, there are several barriers that the U.S. SME sector still faces, especially in commodities. The significant barriers to trading include insufficient access to finance, high transportation costs, tax laws, and rules, maintaining profitability, developing new products, language, and cultural differences.
“Gaps like these signify no SME ecosystem is perfect, and they are required to keep evolving with time as new challenges arise. Despite the challenges in the SMEs market in the US, the sectors still contribute 47% of total employment.
“While in developing economies like India, the contribution of the SME sector to manufacturing output, employment, and exports of the country is quite significant. It is noted that regarding the value, the SME sector of India accounts for 45% of the manufacturing output and 40% of the total exports. India’s SME sector employs around 42 million people in over 13 million units throughout the country.”[READ ALSO: DBN meets SMEs’ financial need with over N70 billion]
His statement regarding the essence of SMEs to a nation’s economy isn’t far from the truth, as SMEs in Nigeria contribute 48% of national GDP in the last five years, account for 96% of businesses and 84% of employment. With a total number of about 17.4 million, they account for about 50% of industrial jobs and nearly 90% of the manufacturing sector, in terms of the number of enterprises, this is according to a PWC report.
Speaking on the need to provide more than financial support for SMEs, Adeyipo said policymakers need to ensure a friendly business environment to support the growth of SMEs.
“Strategic implementation takes care of financial aspects, human resource, marketing, research and development, technology, and corporate governance in the SME sector.
“SMEs in developed nations are not only relying on credit availability but technological innovation and infrastructural policies. Hence, it is critical for policymakers to create an enabling and sustainable environment as a bedrock for SMEs to flourish.”