FirstBank: Positioning SMEs for Inclusive Growth

SMALL and Medium scale Enterprises (SMEs) play a major role in most economies, particularly in developing countries. SMEs account for the majority of businesses worldwide and are important contributor to job creation and global economic development.

SME development has been considered a high priority for many governments around the world, and has been tipped to be the major source of the estimated 600 million jobs needed by 2030 to absorb the growing global workforce. In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs.

In Nigeria, where the rate of population growth is higher than the Gross Domestic Product (GDP) growth rate, there is also a growing need for job creation in order to absorb the ever increasing youth unemployment. For instance the country’s youth unemployment rate, according to the National Bureau of Statistics (NBS), is 29.7 per cent. It also put women unemployment rate at 26.6 per cent.

In fact, the growing workforce in Nigeria has attained global recognition as the World Population Review estimates that Nigeria’s population is expected to double – from about 200 million today to 401.3 million people by 2050. This will make Nigeria the third most populous country in the world after China and India, overtaking the United States. This population growth rate by far, dwarfs every job creation efforts by both federal and state governments in Nigeria.

According to the National Bureau of Statistics, Nigeria has some of the highest unemployment and underemployment rates in Africa, put respectively at 23.1 per cent and 20.1 per cent.

At the regional presentation of a report entitled, ‘Creating decent jobs: Strategies, policies and instruments’, held in Abuja, Senior Director, Nigeria Country Department, African Development Bank (AfDB), Mr Ebrima Faal said, “The situation for Nigeria is much more frightening and could become catastrophic if decent jobs were not created for the country’s youth population.”

For growth to be inclusive, more jobs have to be created to spur economic prosperity. Economists are unanimous of the opinion that inclusive growth is growth that benefits everyone.

Head of Tax and Corporate Advisory Services at PwC Nigeria, Mr. Taiwo Oyedele, said the combination of unemployment and underemployment figures is in the region of about 40 percent and that until the government begins to take practical steps to grow the Micro Small Medium Enterprises (MSMEs), the over 40 million unemployed youth figures will continue to balloon.

He said there are over 30 million MSMEs in Nigeria lacking the right monetary policies to access finance and vocational training which may enable them to expand and employ the over 30 million job seekers in the category.

It is in the light of this that various economic agents especially the financial institutions are developing innovative products that not only prepares ground for more SMEs to spring up but also helps in nurturing them for expansion.

One of such financial institutions is First Bank Nigeria Limited. The lender has identified with the SMEs as the engine of job creation and growth in the economy, whilst promoting its contribution to the National development. Having found out that access to finance is a key constraint to SME growth, and the second most cited obstacle facing SMEs to grow their businesses in emerging markets and developing countries, First Bank has between 2017 to date, given N170.3billion financial support to the SMEs, in form of  loans irrespective of product type. Available records also indicate that the  Bank in the last 3 to 7 years, has supported over 70,703 SMEs.

The International Finance Corporation (IFC) also underscores access to finance as a major constraint to SMEs growth. It estimates that 65 million firms, or 40per cent of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending. It noted that about half of formal SMEs don’t have access to formal credit. The financing gap is even larger when micro and informal enterprises are taken into account.

But, according to  Gbenga Shobo, Deputy Managing Director, First Bank of Nigeria Limited, “FirstBank has over the years, been at the forefront of supporting Businesses, especially the SMEs as we recognise that the SMEs are the engine of the economy. We are committed to ensuring that we leave no stone unturned as we connect with them in their continued contribution to national development in terms of the employment opportunities they create as well as their contribution to the nation’s GDP amongst many economic values.”

“The FirstBank SME Week is driven to promote the Bank’s SME proposition, thereby having SMEs across the country optimally enlightened on how to plug in. We believe this will help SMEs bolster their contribution to the growth and development of the economy” he concluded.

Additionally, following extensive research by the Bank over the years, it identified these seven (7) strategic pillars to be essential for the sustainability and growth of the SMEs. These include – access to infrastructure, access to talent, capacity building, policy and regulation, access to resources, access to market as well as access to finance. This has duly informed First Bank’s strategy and propositions for the sector going forward.

The lender in describing one of its products named, ‘FirstBank SME Connect,’ captured its activities in the following words:

“We are passionate about helping your business grow on all fronts. Beyond financial support, we offer you strategic advisory services, business seminars periodic updates as well as information that will guide you in growing your business.”

It went further to say, “Our scope of SME services cover small/medium scale manufacturing firms, merchants (suppliers, distributors etc), professional firms(law, consulting, audit etc), agricultural, Churches, Mosques and NGOs whose annual debit turnover is between N5million and N500million.”

Small and Medium Sized Enterprises (SMEs) as defined by the Central Bank of Nigeria (CBN) are economically independent companies with about 11 to 300 employees and an annual debit turnover of between N5million to N500 million.

Some essential products

No matter the business type, the lender said it can provide the working capital requirements of the business with this facility up to the maximum amount of N20 million. It has 12 months tenor and legal Mortgage over property in FirstBank acceptable Locations or Treasury Bills/Fixed Term Deposit as collateral. First Bank’s Secured Overdrafts are designed with financing options for all  other needs including : medical Bills, Local Purchase Orders School fees ampng others.

The secured overdraft is a loan type designed to finance small to medium scale retail businesses with an annual turnover of N3billion and below.

Also, the bank’s Contract Finance is designed to help borrowers fund bigger contracts from FirstBank-approved list of companies; for easy execution without challenges.

According to the bank, facilities above N50million will require an additional FirstBank acceptable security.

Secured Term Loans are designed for  businesses with annual turnover of N500 million and below. The bank said it  designed this loan facility to provide retail organisations with finance to execute capital projects  like acquiring new technology, asset replacement among others to the tune of N40 million and maximum tenor of 36 months.

As part of the launch of its specialized SME propositions First Bank of Nigeria Limited, convened  its SME Week between 5 – 9 August 2019. Customers and non-customers of the lender participated in a wide range of events and activities designed with the SME in mind. The activities ranged from the SME Masterclass themed “Designing and Implementing a Growth Strategy for your Business” to specialized one on one sessions with renowned business coaches and the launch of seven (7) unique pillars which make up  SME propositions available via SMEConnect – The FirstBank SME portal

The highlight of the week is the launch of the SME portal, a platform through which SMEs  accessed  unique propositions that have been designed to equip them with the essential tools needed for the growth of their business.

The SME portal is also designed to help them identify various gaps that hinder their business growth leveraging the lender’s innovative Business Diagnostics Tool, with a view to proffering tailored solutions and creating opportunities for business improvement, profitability and sustainability.

There was also; one on one coaching advisory sessions,  simultaneously held across 6 locations in Lagos, Abuja, Rivers, Oyo, Kano and Owerri. The weeklong event rounded off with a live webinar on 9 August 2019, facilitated by Gbenga Shobo, the Bank’s Deputy Managing Director. The idea behind SMEConnect is in line with IFC’s submission that introducing innovation in SME finance such as e-lending platforms, use of alternative data for credit decisioning, e-invoicing, e-factoring and supply chain financing will help in nuturing them.

It further observed that Policy work, analytical work, and other Advisory Services can also be provided in support of SME finance activities.

Culled from Tribune