The Bank of Industry, BOI has said though the Small and Medium Enterprises, SMEs are backbone to development of many nations funding has remained a challenge to that sub-sector.
The BOI noted that poor business plans have continued to make banks reluctant to give credit SMEs.
The banks managing director, Rasheed Olaoluwa who spoke at the conference of Finance Correspondents of Nigeria, FICAN in Lagos at the weekend also noted that absence of bankable Business Plans and lack of clear Business Models are major challenges hindering credits to SMEs.
Olaoluwa further said that information asymmetry arising from SMEs’ lack of accounting records makes it difficult for creditors and investors to assess the creditworthiness of potential SME proposals.
He observed that finance has been identified in many business surveys as a critical factor for the survival and growth of SMEs in both developing and developed countries.
“Access to finance allows SMEs to undertake productive investments to expand their businesses and to acquire the latest technologies, thus ensuring their competitiveness and that of the nation as a whole.
Poorly functioning financial systems can seriously undermine the macroeconomic fundamentals of a country, resulting in lower growth in income and employment” he added.
The MD noted that despite their dominant numbers and importance in job creation, SMEs traditionally have faced difficulty in obtaining formal credit or equity.
He said “For example, maturities of commercial bank loans extended to SMEs are often limited to a period far too short to pay off any sizeable investment.
This is due to the short term nature of their funds, with the attendant mismatch if granted as long-term facilities to SMEs.
Meanwhile, the tendency is for access to competitive interest rates to be reserved only for prime customers, while loan interest rates offered to SMEs remain high”.