ENTERPRISE DEVELOPMENT POLICIES ENTERPRISE DEVELOPMENT POLICIES AND CAPACITY BUILDING OF SMALL AND MEDIUM SCALE ENTERPRISES (SMEs)

IN AFRICA-CASE STUDY OF THE BANK OF INDUSTRY (BOI) LIMITED, NIGERIA PRESENTATIION BY MR AUSTIN JO-MADUGU GENERAL MANAGER(OPERATIONS) BANK OF INDUSTRY AT
THE JOINT AUC-UNIDO UNECA EXPERT GROUP MEETING ON THE IMPLEMENTATION STRATEGY OF THE PLAN OF ACTION FOR THE ACCELERATED INDUSTRIAL DEVELOPMENT OF AFRICA , OCTOBER 4-6, 2010 , ADDIS ABABA, ETHIOPIA

Introduction

I would like to begin this presentation by thanking the organizers of this conference for inviting the Bank of Industry Limited to deliver this paper on the theme: ENTERPRISE DEVLOPMENT POLICIES AND CAPACITY BUILDING OF SMEs IN AFRICA- CASE STUDY OF THE BANK OF INDUSTRY LIMITED OF NIGERIA .

Introduction

This presentation will focus on initiatives by and experiences of the Bank of Industry (BOI) relating to SMEs development and capacity building programmes within the Nigeria context.

Government and SMEs Development

The Federal Government initiated and actualized some policy measures for the development and growth of SMEs. These include: Realignment of some sector specific development finance institutions (DFIs).

-The merger of the Family Economic Advancement Programme (FEAP), People's Bank of Nigeria and the Nigerian Agricultural and Cooperative Bank (NACB) into Nigeria Agricultural, Co-operative and Rural Development Bank (NACRDB); -The merger of Nigeria Industrial Development Bank (NIDB), Nigeria Bank for Commerce and Industry (NBCI) and National Economic Reconstruction Fund (NERFUND) into Bank for Industry (BOI).
The establishment of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

Government and SMEs Development

Setting up of industrial estates in Lagos, Abuja, Kano, Enugu and Sango-ota to reduce overhead costs; Establishment of Export Free Zones in Calabar, Kano, Lagos, Port Harcourt and Abuja; The establishment of the Small Scale Industry Credit Scheme (SSICSs) to provide long-term credit; Creation of Nigeria Export Promotion Council (NEPC) and Nigeria Investment Promotion Council (NIPC)

Government and SMEs Development

Facilitating the establishment of the National Directorate of Employment (NDE), which also initiated the setting up of new SMEs; Strengthening the National Economic Reconstruction Fund (NERFUND) to provide medium to long-term local and foreign loans for small, and medium scale businesses, particularly those located in the rural areas; and Establishment of Industrial Development Centre (IDCs) and Technology Incubation Centres (TICs).

Private Sector Initiatives

The Nigerian private sector organizations and the Non-Governmental Organizations have equally played a significant role in the development of SMEs in Nigeria. Some of these are: FATE Foundation: engages in training and mentoring of entrepreneurs: has fostered the establishment of 1000 businesses by 2005 and 5,000 businesses by 2015- established by Fola Adeola, the pioneer Managing Director of GT Bank Plc ORGANIZATION FOR YOUTH EMPOWERMENT & SOCIETAL RESTORATION INTIATIVE: Involve in empowerment initiatives to individuals, communities and organizations to create employment opportunities. LEAP Africa: set-up to train, equip and empower a cadre of youths for leadership, effectiveness , accountability, etc.

Private Sector Initiatives

MOVEMENT FOR YOUTH ACTUALIZATION INTL: involved in programmes for youth liberalization and productivity; education and development to the less privileged
ALLIANCE FOR AFRICA DEVELOPMENT: An African led intl human rights, peace & sustainable development organization ASSOCATION FOR THE DISABLED WOMEN- creates awareness and support for disabled women entrepreneurs BUSINESS & PROFESSIONAL WOMEN NIGERIA- engaged in the provision of training education and opportunities to help women achieve economic independence AFRICAN PROJECT FOUNDATION- solicits for fund and support for entrepreneurial development

Private Sector Initiatives

CENTRE FOR DEVELOPMENT AFFAIRS- Helping people acquire knowledge and skills
ACTIONAID INTL NIGERIA- an advocate of reproductive sexual health and right; education; human security in conflct and emergencies and the integrated partnerships against poverty.

Overview of SMEs in Nigeria

SMEs are the engine room for the development of emerging economies.
They are a major source of economic growth, job creation, innovation, exports and other key development indicators.

SME's are popularly defined in Nigeria as enterprises with total cost (including working capital but excluding cost of land) above N31 million but not exceeding N150 million, with a labour size of between 11 and 100 employees.
In Nigeria, while SME's employ about 60 per cent of the labour force; they contribute only 35 per cent of industrial output and account for 10 per cent of industrial exports. In the USA, SMEs account for more about 50% of all the business transactions carried out every year.

BOI Experience

The Bank of Industry : BOI was established in October, 2001 following the reconstruction of the Nigerian Industrial Development Bank (NIDB) by subsuming the mandates of NBCI and NERFUND (NERFUND has now been re-established ). NIDB had been in existence since 1964 as one of the oldest DFIs in Nigeria. BOI is largely a Government-owned DFI charged with the responsibility of promoting the emergence of a virile industrial sector. BOI was conceived to catalyze the transformation of the real sector. It finances largely acquisition of capital goods for large businesses, SMEs and lately micro-businesses.

BOI Experience
The strategic nature of the SMEs sector development in terms of industrial development attracted the interest of BOI in 2006 through a paradigm shift and motivated its increasing share in the Banks portfolio. At present, the Bank extends at least 85% of its loanable resources to the SMEs sub-sector of the manufacturing sector.

BOI Experience
The Banks lending policy will continue to be positively favorable towards SMEs in alignment with national and international policies and goals such as:.

- National Economic Empowerment and Development Strategy (NEEDS)

- Nigerias Vision 20:2020 - Millennium Development Goals

BOI Experience
Key Initiatives of the Paradigm Shift
A. FINANCIAL
1. Increased allocation of the Banks loanable funds would be devoted to SMEsLending to SMEs increased to 92% by December 2009 from 65% in 2005 482% increase in direct/indirect jobs expected to be generated by BOI assisted companies from 140,000 as at December 2005 to 815,000 as at December 2009. 2. Lending to enterprises that: - utilize local raw materials - have high employment - export generating capacities 3. Setting up a Gender Desk to specifically handle ventures promoted by women entrepreneurs.

BOI Experience
4. Encouraging the formation of Cooperative Groups to facilitate to them as individuals for acquisition of productive assets under a collective guarantee arrangement. At date, the Bank has approved over N1.360 billion under its Cooperative Financing window to more than 220 Associations involving about 25,000 employment opportunities. It entails the creation of new products/ businesses/ cum expansion of existing businesses, such that it constitutes at least 85% of the Banks portfolio. 5. A novel idea in project financing is the Counterpart Funding with State Governments. This programme ensures matching the funds provided by state governments for onward lending to projects from the partner-states. The Bank aims at doubling the amount of funds / states as well as the number of matched projects by the end of 2011.

BOI Experience

To-date, we have such arrangements with 13 State Governments with their contribution totaling about N10.0billion. The success of the programme has attracted the attention of some Local Governments and wealthy individuals who have indicated interest in such partnership with BOI. The Bank aims to double this amount/ States and interested individuals by the end of 2011. 6. Establishment of Micro Finance Bank. .

BOI Experience
B. CAPACITY BUILDING 1. Organizing Boot- Camp workshop primarily to expose local existing and potential entrepreneurs to financial and management skills, business opportunities and financing. 15,000 entrepreneurs in 275 cooperative societies so far trained. 2. Providing training for entrepreneurs under AGOA (African Growth Opportunities Act) for which it houses a Resource Center. About 400 SME Exporters have been trained . 3. Sponsoring SMEs to local and international investment fora and trade exhibitions 4.Collaboration with local and international development partners( such as SMEDAN, NEXIM, UN Group) in the training of entrepreneurs and staff. .

BOI Experience

BOI has working relationship with the following; - Development Bank of Japan Inc (DBJ), Japan Bank for International Cooperation (JBIC), Japan International Cooperation Agency (JICA), Japan Economic Research Institute Inc (JERI), Japan Finance Corporation for Small & Medium Enterprises (JASME) amongst others. The Bank also has MOUs/Working Relationships with the World Bank Group, African Development Bank Group, Islamic Development Bank (IDB), Industrial Development Corporation of South Africa Ltd (IDC), Tokyo International Conference on African Development (TICAD), SME Bank of Thailand, UNDP, UNIDO, etc.

BOI Experience
CHALLENGES OF FINANACING SMES IN NIGERIA 1. Poor credit culture/Integrity issues 2. Infrastructural inadequacies which militate against cost and operational efficiencies e.g power, transportation, ports etc. 3. Poor financial and technical knowledge/skills (proposals, financial statements, management of cash flows, etc.) 4. Monitoring issues dispersed, costly 5. High dependence on import for both capital goods and raw materials

BOI Experience

SOLUTIONS
1. 2. 3. 4. 5. Controlled disbursement Closer monitoring Training education & skills Mentoring and exposure to best practices Development of the petrochemical/gas sectors 6. Revamping of collapsed local steel and industrial good factories

Concluding Remarks

1. We, in the Bank of Industry, believe that SMEs are veritable vehicles of industrialization of any nation. In line with our mandate, we strongly believe in SMEs and we are committed to doing the needful to further their growth, development and sustenance. 2. We thank the organizers of this conference 3. It is our hope that the Governments of African countries and all stakeholders will henceforth begin to formulate/implement policies and programmes for the development of SMEs to facilitate industrialization of the African continent.

Thank you for your attention