For the past 30 years,the Federal Government’s policy interventions for the Small and Medium Enterprises (SMEs) sector of the economy have not produced the desired results as the sector currently contributes one per cent to the GDP, reports FRANKLIN ALLI.

According to International Finance Corporation (IFC), today, SMEs make an average of 50 per cent contribution to the GDP in both Europe and the USA and 40 percent in Asian countries.

In Nigeria, 96 per cent of firms in the manufacturing sector are SMEs. They account for 70 per cent of employment, yet, contributing a mere one per cent to the GDP.

Lack of access to finance, policy inconsistency, failing infrastructure, are the reasons for this low contribution of SMEs to the economic fortunes of the country.

To address these problems and make SMEs truly the “engine of growth” in Nigeria, government has over the years introduced a variety of financing schemes and programmes.

First were the institutional arrangements for direct financing intervention beginning with the establishment of Nigerian Industrial Development Bank (NIDB) in 1962 to the Rural Banking Initiative (RBI) in 1977 and the Agricultural Credit Guarantee Scheme Fund (ACGSF), Nigerian Agricultural Cooperative Bank (NACB) which focused specifically on increasing the flow of credit to agriculture and SMEs.

There was also the National Economic Reconstruction Fund (NERFUND) in the mid-1980s to assist SMEs adjust to the Structural Adjustment Programme.  The fund provided a long- term loan support of 5-10 years to SMEs at concessionary rates.

Total intervention to 214  SMEs was USD144.9 million between 1990 and 1998.  The ACGSF has between 1978 and the first quarter of 2011 supported 701,000 beneficiaries with a total loan of N43.12 billion.  Furthermore, government also secured a USD270 million World Bank- assisted SME 11 loan facility to further complement other SME-financing sources.

The loan was administered to SMEs through a credit line arrangement for eligible participating banks. In addition, the government established the community banking scheme in 1991 with the objective of rural development facilities for start-ups and smallholders.

There was also the People’s Bank and the Family Economic Advancement Programme (FEAP) in 2002.

On realisation of seeming duplication of SMEs support institutions, the government in 2002, merged the NERFUND and NIDB to form what is today known as the Bank of Industry (BOI) with an authourised capital base of N100 billion with the principal objective of  providing credit to the industrial sector including the SMEs at an interest rate of 10 per cent.

Apart from the foregoing, a number of SME-financing schemes have been developed and implemented by the Central Bank of Nigeria (CBN) in support of SMEs development in Nigeria. These schemes are as follows:  Refinancing and Rediscounting Facility (RF) at concessionary rate was introduced by the bank in 2002. The objective was to provide temporary relief to banks to provide long-term risks in the productive sector.

Another initiative was Small and Medium Industries Equity Investment Scheme (SMIEIS) that was set up in 2002 by the CBN and the Bankers’ Committee for Nigerian banks to set aside 10 per cent of their profit-before-tax annually in support of equity investment in SMEs.

The scheme as at the end of 2009 had attracted a total of N42.03 billion with N28.87 equity investment in 336 projects. The scheme has been scrapped.

The Microfinance Initiative (MFI) is yet another SME- financing scheme introduced in 2005.  The microfinance   policy sought to convert all the community banks in the country to microfinance banks with capital base of N2 million to N1.0 billion for unit and state banking outfits respectively.  As at date, there are a total of 866 microfinance banks operating in the country.

Finally, in 2010, the CBN established the following intervention funds to unlock credit to the SMEs sector:

*N200 billion refinancing and reconstruction fund:  This fund is to refinance and restructure the outstanding credit portfolio of manufacturing SMEs in the country.  As at June, 2011, the sum of N197 billion had been disbursed to 539 SME projects.

*N200 billion SME Credit Guarantee Fund: This scheme is a credit enhancement programme where the central bank provides 80 per cent guarantee to Deposit Money Banks (DMBs) to encourage lending to SMEs.  As at June last year, only N1.36 billion has so far been guaranteed.

*N300 billion off-grid power and airline fund in support of SME cluster: This fund is for as low as five mega watt power support to SME clusters or stand alone enterprises.