Micro, Small and Medium Enterprises (MSMEs) are a significant part of every economy; according to the World Bank, they represent over 95 percent of registered firms globally, account for more than 50 percent of jobs, and contribute over 35 percent of GDP in many emerging markets.
In Nigeria, about 37 million MSMEs make up 90 percent of firms in the non-oil sector and contributes over 50 percent of the country’s GDP, yet these MSMEs are often credit constrained. Access to finance remains a critical hindrance to their growth as they are significantly underserved by financial institutions.
This has led to a widening finance gap that must be closed to create opportunities for MSMEs, advance economic development and reduce poverty. This is the exact mission Access Bank Plc has embarked on with its launch of an innovative loan portfolio; one that is easy to access, affordable with flexible interest rates and collateral-free.
In a media chat at the Access Bank Tower on Friday, July 26, 2019, Ayodele Olojede, Head, Emerging Businesses, Access Bank Plc explained what the new portfolio entails, how it can be accessed and how Access Bank Plc is helping MSMEs in the education, health and tech sector, access these loans. Particularly MSMEs owned by women.
According to Olojede, Access Bank Plc remains committed to its support for MSMEs through loans, as always. “We have sufficiently invested significant weight in our understanding of the variables and risk factors in this sub-sector so much that in the last three years we have incrementally supported them,” she said.
Last year, Access Bank Plc granted about N37 billion in new loans to 11,000 MSME customers, a feat it was able to achieve because of its innovative approach to lending. 30 percent of these loans were granted to women through Access Bank’s W-Power initiative. In 2017, 8000 MSMEs received N22 billion in new loans.
This year, the target is to engage 30,000 MSME customers to help them improve their business practices and consequently, profits while providing them with loans. In this light, Access Bank Plc is granting MSMEs collateral-free loans for working capital purposes and the procurement of equipment in the education, health and tech sectors.
For example, these loans will cover the purchase of buses, books, and laptops for schools; drugs, beds, and other medical equipment for hospitals. Same typical equipment requirement in the tech sector as well. These loans, with a capital of up to four million in the health sector and 10 million in education, are often tailored to fit whatever the business requires.
With Access Bank’s new approach to lending, all a business needs to access a loan is to show its credit and sales record. One of the reasons for high loan decline to MSMEs is because most of them fail to demonstrate the managerial competence required to sustainably run their businesses.
“There are funds available for businesses, even those with a concessionary rate as low as nine or 15 percent for women, but customers still can’t access these funds due to poor bookkeeping,” Olojede explained. “The bank needs to see your financial records to be able to give you loans.”
Through its W-Power initiative, Access Bank Plc grants a 15 percent loan concession per annum to women who own 50 percent of their businesses. Those who own between 40 and 49 percent get a two basis point concession from the bank’s regular interest rate. Women with 30 to 39 percent shareholding get one basis point concession. And those with a shareholding below 30 percent gets charged at the bank’s regular interest rate.
Interestingly, these grants are open and accessible to customers of other banks as long as they meet the criteria of having a business record and can provide a bank statement. “We can give you a loan even when you are not our customer. What we require is that you keep the money in a bank as we are trying to ensure your participation in the formalised sector,” Olojede said.
Furthermore, these loans are also accessible to unregistered MSMEs; Access Bank partners with its lawyers to help get businesses registered to enable them access loans.
Having established its willingness and ability to lend to the MSME sub-sector, Access Bank Plc ensures the profitability and sustainability of its new loan portfolio by organizing business workshops and leveraging infrastructures like the National Collateral Registry.
The bank’s She Means Business workshop, in partnership with Facebook, teaches business owners how to leverage social media to improve business and increase earnings, thereby giving them a greater chance at accessing and repaying loans. MSME clinics are also organized to provide business owners with one on one engagements with professional business consultants. So far, 12,000 MSMEs have been engaged this year.