The requirements needed to fund a small scale business during a recession of the economy

1. Financing SMEs for
Industrialization in a
Recession

2. MSMEs Defined
Enterprise Category Number of
Total
(N’Million
Annual Turnover
(N’Million)
Loan Amounts
(N’Million)
Micro ≤ 10 ≤ 5 ≤ 20 ≤ 10
Small >11 ≤ 50 > 5 ≤ 100 ≤ 100 >10 ≤ 100
Medium > 51 ≤ 200 > 100 ≤
500
≤ 500 >100 ≤ 500
Source: BOI

3. Key SME Indices
 Businesses with turnover of between N100 and N500 million per annum and/or less than 200 employees
 Turnover of M5m - N500million
 96% of Nigerian businesses are SMEs compared to 53% in the US and 65% in Europe
 90% of the manufacturing/ industrial sector in terms of number of enterprises
 About 17 million SMEs in Nigeria
 Employ 25% of total labour force, i.e 32.41million persons
 48% contribution to GDP
(2012 Enterprise Baseline Survey)

4. Why do SMEs Fail?
 Only 20% of SMEs survive in Nigeria.
 Empirical evidence showed that finance contribute only 25% of the success of SMEs.
 Other factors are:
 lack of succession plan
 Inability of the operators to distinguish between profit and revenue
 Unfavorable fiscal policies, multiple taxes, levies and rates, and so on.
 Lack of infrastructure
 Political risk - policies

5. Difficulties in Lending to SMEs
 Credit bureaus
 Collateral Registries
 Customer identification (ID)
 Taxation laws – multiple federal and tax laws
 Structural deficiencies of SMEs

6. Generic Funding Options
 Personal, friends, family, Peer-to-Peer (Prosper, Lending Club)
 Micro-Finance Options (Accion, Opportunity Fund, Grameen Foundation)
 Equity Funding
 Finance Companies
 Banks
 Venture capital

7. SME Targeted Funds - NGOs
o Tony Elumelu Fund($100M) : agriculture, fashion and design, light manufacturing, ICT, and solid minerals
o GroFin Fund($500m): to micro, small and medium business (MSMEs) across Nigeria
o Lagos State Employment Trust Fund: up to 5 million for a tenor of three years
o FG Social Intervention Fund(N6 billion): Artisans & business owners can access a maximum of N100, 000
at 3%p.a
o Oxfam: recently disbursed €100 million to high-impact SMEs in Nigeria through Nextzon

8. SME Targeted Funds - BOI
o Graduate Entrepreneurship Fund (GEF):Select NYSC members with accepted business ideas, trained for
4 weeks, N500,000 - N2 million.
o Cottage Agro Processing (CAP) Fund: for small and medium agro processors
o Nolly Fund for players in the Nollywood industry
o Fashion Fund for designers and other players in the value chain
o N5billion Aliko Dangote Funds: Single Digit loans for SMEs

9. SME Targeted Funds - CBN
o CBN to allow movable assets as collateral for SMEs
o N200 billion SME Restructuring and Refinancing Facility (RRF): To re-finance and restructure banks’
existing loan portfolios to manufacturers at 7%p.a
o N200 billion SMEs Credit Guarantee Scheme (SMECGS): To encourage banks to lend to productive
sectors of the economy, by providing 80% guarantee on loans granted by banks to SMEs
o N220 billion Micro, Small, and Medium Enterprises Development Fund (MSMEDF):
 to provide wholesale facilities, refinancing and guarantee to MSMEs
 provide liquidity support to microfinance banks/microfinance institutions for on-lending to MSMEs
 Sixty per cent of the Fund will be devoted to women entrepreneurs.

10. SME Targeted Funds - CBN
o N200 billion Commercial Agriculture Credit Scheme (CACS): To finance large ticket projects along the
agricultural value chain 9% for 7 years
o Agricultural Credit Guarantee Scheme Fund (ACGSF): To encourage lending to the agricultural sector by
providing guarantee to banks.
 Interest Drawback Programme (IDP): Payment of interest rebate of 40.0 per cent to farmers that make timely repayment.
o Agricultural Credit Support Scheme (ACSS): 14% p.a loans to SMEs. Refund of 6% to beneficiaries with
timely repayment.

11. SME Targeted Funds - CBN
o Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL):
 risk sharing, technical assistance, bank incentive mechanism, bank rating system, and insurance facility for the
agricultural value chain.
o Agricultural Small/Medium Enterprises Equity Investment Scheme: Bankers Committee to pool a % of
banks’ profit SMEs in the Agricultural sector.
 N300 billion Power and Airlines Intervention Fund (PAIF)

12. Documentation
 Business financial statements
 Business tax returns
 Business plan with budget or projection
 Personal financial statements
 Personal tax returns