96% of SMEs in Nigeria Are Not Duly Registered – Ayodele Olojede, Group Head, Emerging Businesses, Access Bank

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Group Head, Emerging Businesses, Access Bank, Ayo Olojede

 


A standard business plan should be able to show lenders what the risks are, how the company aims to mitigate it, show what the competition is if any and how much of the market share you own.


Group Head, Emerging Businesses, Access Bank, Ayodele Olojede has said that reason most small businesses don’t have access to business loans from commercial banks is due to their inability to properly register their business with the government.

According to Ayodele, 96% of SMEs in Nigeria are not duly registered with the government and by this status, it makes it impossible for commercial banks to identify such SMEs as legal entities and dealing with them with public finance for loans, saying banks only recognized registered businesses for commercial dealings.

Speaking at the PwC webinar tagged ‘Funding My SME’, Ayodele explained the reasons why SMEs are not getting access to loans to scale up their business as confirmed by the PwC report on SMEs in Nigeria.

She further stressed on poor accounting records, saying most small businesses fail to keep their stocks.

Small and Medium Enterprises (SMEs) play a major role in most economies, particularly in developing countries. SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. They represent about 90% of businesses and more than 50% of employment worldwide.

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Funding these enterprises has remained one of the challenges most SMEs owners face in setting up and expanding their businesses over time. Accessing business funding from commercial banks has been mind-numbing for SMEs.

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Also identifying poor business plans as part of causes that hindered SMEs from accessing loans, Ayodele noted that when business plans are presented in some cases, it often fails to clearly show how the business will generate the cash flow required to repay the loans.

Stating conditions attached for banks to grant loans to SMEs, she maintained that businesses should at least keep 3 years of audited financial statements that show balance sheets, profit and loss accounts as well as cash flow statements.

She added that a standard business plan should be able to show lenders what the risks are, how the company aims to mitigate it, show what the competition is if any and how much of the market share you own.

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Meanwhile the financial expert called on SMEs owners to ensure proper records keeping for their businesses and advised them against mixing business funds with personal expenses as it leads to poor corporate governance and risk of misappropriation of cash belonging to the business.

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