Banks and the SMEs

For an economy that is gradually shifting from public sector dominance to a private sector-driven one, the encouragement and sustenance of the private sector should be considered key. And what is the private sector without the Small and Medium Scale Enterprises?
That the Small and Medium Scale Enterprises are experiencing a squeeze is public knowledge. The Director General of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Mrs Modupe Adelaja cried out recently when she accused the banks of not doing enough to support the implementation of the Small and Medium Enterprises Equity Investment Scheme (SMEEIS) which was set up seven years ago to jump-start the growth of the real sector. But seven years after, the scheme is still floundering. Mrs. Adelaja has blamed this on the unwillingness of the banks to assist the operators of the scheme.
One of the strong reasons canvassed by the CBN authorities in ordering a recapitalization of the nation’s banks over two years ago, is that with the consolidation, banks will have the financial muscle to assist the private sector to grow. Two years after the exercise, the banks have neither been able to finance the small and medium scale enterprises nor mega projects. Yet the same banks declare huge profits year-in, year-out.
What this failure translates to is economic stagnation. If the public sector is seemingly scaling down its activities and the private sector is not empowered to intervene, the result will be a shrinking economy. With the failure of the SMEEIS, the unemployment index will only be on a daily increase, with the attendant consequences of crime and insecurity, a malaise which will in turn hunt the banks themselves.
But the irony is that the failure of the banks to assist is not so much as a result of the unavailability of the funds to support the scheme, as it is the inability of the SMEEIS operators to meet the “stringent conditions” set by the banks before such facilities can be accessed.
While we agree that banks must exercise caution in the deployment of depositors’ funds, we also believe that excessive caution that complicates access to needed funds by the private sector is neither helpful in the long run, nor of real benefit to the banks themselves.
We believe the various state governments could be made to sign Irrevocable Standing Payment Orders (ISPOs) on behalf of the entrepreneurs in their various states, so the banks can really release the funds to the SMEEIS through the state governments, as a way of reflating the economy.
Indeed, for a government desirous of tackling poverty and unemployment - the twin malaise of our society- deliberate efforts must be made to bridge the gap between the haves and the have-nots, even if it means relaxing some policies. The SMEEIS scheme is one veritable means of achieving this.
We also believe that the near moribund National Directorate of Employment (NDE) can be re-awakened by making it an integral part of this scheme, what with the structure it should have had in place over the years. The NDE, by its nature should be able to provide a good guide to the SMEs on how to not only generate employment opportunities, but also regenerate the Nigerian economy altogether.