Acredit expert has said that most of the operators in the Small and Medium Enterprise lack basic requirement to access loans in both commercial and developmental banks.
Some of the requisite conditions are proper accounting records, financial statements, bankable business plans, lack of security and operating in disconnected value chains, which make it difficult for banks to finance their operations.
Head, Emerging Business, Diamond Bank, Mrs. Njideka Esomeju, explained that about half of the 37 million operators in the sector, which is popularly called ‘the engine room of the economy’, need to learn specialised skills and tools to convert their unstructured books to usable quasi-structured financial information for use in credit assessment.
“Though, trends show that quite a number of SMEs are becoming aware of these challenges and are positioning their businesses to be bankable but a large number of operators need to brace up and invest in capacity building initiatives, to align their businesses to be more appealing to banks and other investors,” she said.
On the reason financial institutions refuse to prioritise funding of SMEs, the banker explained that banks conduct due diligence on organisations before they are deemed qualified for loan and the SMEs will only become credit worthy when they are operated as organised units.
According to her, banking is business with profit expectation from shareholders, thus banks should finance business that will satisfy that objective. “If this objective is not met, banks will not lend. If they are forced to lend (say by law or the regulator), they will do so reluctantly.
“Therefore, more need to be done by all industry stakeholders (players and regulators) to eliminate or reduce this information gap,” she counselled.
