In recent years, the amount of loans committed to Micro, Small and Medium Enterprises (MSMEs) has not only been low, but the news is also that it is actually getting lesser by the years. A National Bureau of Statistics (NBS) data revealed that, between the year 2015 and 2017, the number of borrowers that gained access to loans within the various categories of MSMEs declined consistently and considerably (see chart below).
For instance, the total number of borrowers in the upper group of microbusiness reduced constantly from 127,994 in 2015 to 110,092 in 2016, and lower still to 87,485 in 2017, leading to a 32% drop in the number of businesses with access to credit finance in this business group (see chart below).
Likewise, the borrowers who could be categorised as Small and Medium enterprises who accessed loans within the period also reduced by 27% and 18% respectively. The only exception to this pattern is the Non-MSMEs (see chart above).
Borrowers of funds above 1 billion Naira, being the highest class among all the business groups, however, defied the general trend by having ever increased access to credit finance in that period. As their numbers nearly doubled, with 90% increase (see chart above), so did the total amount they received as loans increase by 29% at the expense of others (see chart below). However, all other groups suffered a serious slash in the amount of money they could access to finance their businesses.
For instance, the number of loanable funds for borrowers within the lower group of Microenterprises was slashed by over half within the three years, from N252 billion in 2015 to N227 billion in 2016, and then a free fall to N122 billion, a decrease of 106% by the year 2017. This means, for these micro-businesses, about one-quarter (23%) of the number of customers in 2015 no longer have access to loans in 2017, and not just that, they can altogether only access half of what their counterparts borrowed back in 2015.
On the other hand, for the big borrowers, about a double of customers in 2015 now have access in 2017 to an increased amount of loans to keep their businesses succeeding.
The import of all these, first, is that Micro Enterprises are totally underserved with credit finance from Commercial Banks. As the chart above shows, the blue credit money line is below their brown population numbers. And the access gap, which is negative here, is far wider for the ‘Up to N1 million’ loan category than the ‘above N1 million to N10 million’ loan category of the micro-enterprises.
Secondly, from the Small and Medium Enterprises upwards, the blue credit money line rises above their brown population numbers, which shows their varying levels of access to credit finance from Commercial Banks as at the year 2017. The level of access of the two sections of Small businesses to credit finance is at 1.6 units and 1.3 units respectively, and the Medium industries enjoy a better level of credit finance at 5.8 units.
As expected, for the Big businesses, the level of access to loans compared with their population numbers is highest, depicted by the gap between the blue line and the red line in the chart above (see table below for the varying levels of access).
One of the five key execution priorities cited in Nigeria’s Economic Recovery and Growth Plan 2017-2020 (ERGP) is “Driving industrialization, focusing on Small and Medium Scale Enterprises”. But, hitherto, the federal government’s focus on financing MSMEs, under the Small and Medium Enterprises Scheme (SMEIS) only “requires all banks in Nigeria to set aside ten (10) percent of their Profit After Tax (PAT) for equity investment and promotion of small and medium enterprises.”
While other Federal government financing initiatives for MSMEs which are run through microfinance banks, Bank of Industry, agriculture credit scheme, Youth entrepreneurship development programme, etc. are laudable, all these do not compare still with the huge money-creating potential that commercial Banks hold, which they would rather devote to credit financing of governments and big companies, perhaps, to earn higher and easier returns, to the detriment of Nigeria’s MSMEs, and indeed, Nigeria’s industrial growth and full employment.