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LSETF Access To Finance Initiative And The Role Of Non-Financial Services

by on January 27, 2017
 

Access to finance has remained a consistent challenge for Micro, Small and Medium Enterprises not only in Nigeria but across several developing economies, however, it is also true that the absence of structured non-financial services such as business development, market share penetration and retention strategies, profit management and business best practices know how have also combined to wipe off the hundreds of millions several Youth Enterprise with Innovation in Nigeria (YOUWIN) award winners got between 2012 and 2015, this also applies to several other MSMEs that have had to close shop just within five (5) years of starting up.

The Lagos State Employment Trust Fund recently disbursed close to One Billion Naira to Seven Hundred and Fifty (750) qualifying MSMEs in the state in what I understand are loans to invest in their enterprises, a laudable initiative seeing that the State is among the few that did not benefit from the Central Bank of Nigeria 220bn MSME development fund (this is released by the CBN in August 2015), these disbursements would be with a view to driving entrepreneurship development in the state and job creation but for this to genuinely happen, a couple of other measures needs to be put in place, measures that will help to guarantee success for the beneficiaries.

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Business failures are often associated with enterprises who either were not well schooled in the business management best practices as regards the business enterprises they setting up or had several external factors collude to gradually erode their bottom line to the point where sustainability becomes an uphill task, to avoid both scenarios, developed economies pay greater attention to the provision of non-financial services that are designed to help entrepreneurs understand the intricacies of starting up, sustaining and scaling up business enterprises. These non- financial services are often more valuable to MSMEs than just dolling out cash to them and from my experience on the YOUWIN project, the absence of these essential set of non-financial services robbed many award winners of the millions they got from the YOUWIN project.

Non-financial services are desperately needed by the Seven Hundred and Fifty beneficiaries of the LSETF and other MSMEs in Nigeria to enable them spend minimal funds in getting access to business development, strategic planning, market penetration and retention strategies, profit management planning, enterprise scaling strategies and also to be able to understand the demands of managing for success, their business enterprises.

The Lagos State government should also establish a platform for mentoring and open communications with the beneficiaries of this fund, mentoring would help to pair the beneficiaries with  individuals who can help them sustain and scale up their enterprises while an open communication platform would help them reach out to the managers of the fund when crisis inevitably comes calling ( a good example would be when multiple tax collectors invades their enterprises), in the absence of both, the chances of these funds making great impact for both the beneficiaries business enterprises and the state at large would be minimal.

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Lagos State government should also work to address the several challenges MSMEs in the state are already grappling with, challenges such as but not limited to multiple taxation, non-classification of MSMEs with a view to determining how to relate with each classification in terms of revenue payment and licensing processing, absence of  a help desk to enable MSMEs involved in production based activities to learn better production techniques and ease the stress and cost of obtaining certifications from both NAFDAC and SON and more importantly, establishing a network of support structures saddled with the responsibility of mapping the MSME landscape in the state and determining the best way to support each sector/classification and designing a development plan for MSME growth beyond general commerce in the state.

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It is our belief at MSME-ASI that the state government has taken a bold step in supporting MSMEs, we are also convinced that the fund’s managers are determined to succeed with the project and urge both the state government and the fund’s managers to go the extra mile in ensuring this happens as there is a common saying in MSME circles that “a well-managed business enterprises funded with ten thousand naira can grow into hundreds of thousands within a year while a poorly funded enterprises funded with one million naira can quickly decline to ten thousand naira in a couple of years”.

We commend the state government and management of LSETF on this giant stride and also urge them to take a second look as to why YOUWIN despite gulping several billions made little or no impact, this will no doubt help keep LSETF management and staffs on their toes.

 

Celestine Okeke

Lead Partner: Micro, Small and Medium Enterprises Advocacy and Support Initiaitve

@okekecc Celestine@msme-asi.org

DISCLAIMER; Opinions of the writer are sole his and do not reflect the opinion of Breaking Times.

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