Young Directors Forum 2024 conference addresses SME funding gap

By Esther Agbo

The Young Directors Forum (YDF), in collaboration with the Chartered Institute of Directors Nigeria, convened industry leaders and stakeholders at this year’s YDF Conference to tackle significant issues faced by Nigeria’s micro, small, and medium enterprises (MSMEs).

The conference, themed “Empowering SMEs: Addressing the Funding Deficit,” focused on the financing obstacles limiting the growth of SMEs, which employ over 80 percent of Nigeria’s workforce and contribute more than 50 per cent of the nation’s GDP.

In his opening address, the President/Chairman of the Governing Council, CIOD, Alh. Tijani Borodo, described SMEs as the “vital engines of economic growth, innovation and job creation” stressing their essential contribution to Nigeria’s economy. However, he noted the substantial financing deficit hindering their growth, “There’s a deficit of about 32.2 billion in financing accounts for this group of businesses.

“Survey reveals that 35 percent of businesses and owners identify inadequate access to finance as their primary concern. Our objective today is very clear,” he remarked, urging the need for accessible and affordable capital. He further emphasised that addressing this funding gap requires “We aim to address this broken funding deficit, not only through exploring new and innovative approaches to finance, but also by ensuring this segment of our economy is equipped to take full advantage of the available opportunities.”

Borodo urged all stakeholders to work collectively to create a supportive ecosystem where innovation thrives and entrepreneurs flourish.

Representing Dr. Olasupo Olusi, the CEO of Bank of Industry, keynote speaker Dr. Isa Omagu reinforced the significance of financial literacy and corporate governance in strengthening SMEs to secure necessary funding.

“While access to finance is undeniably crucial for SMEs, it is not the sole determinant of their profitability and sustainability. To thrive and expand, these businesses must contain a myriad of challenges, including unfavourable macroeconomic conditions, limited managerial expenses, inadequate infrastructure, and insufficient access to emerging and open access markets,” he explained, emphasising the need for robust business plans, positive reputation-building, and the integration of digital tools.

He noted that emerging fintech solutions could facilitate greater credit access for SMEs, saying, “The rise of fintech in regionalising SMEs access programs through the creation of suite innovation platforms like online lending, open banking, and bank payments. These innovations are fostering a more inclusive financial ecosystem by enhancing creditworthiness, accelerating loan processing, and alternating risks because of credit.” He urged SMEs to adopt these digital tools to streamline and make more efficient business processes, such as accounting and tax reporting.

Additionally, the chairman of the conference, GMD of Nestoil and founder of the Obi Jackson group, Dr. Azudialu-Obiejesi, emphasised collaboration as a fundamental component of SME growth. He quoted Henry Ford, stating, “Coming together is the beginning, keeping together is progress, working together is success.

“Just as collaboration strengthens us, our SMEs need to build support to thrive.” Reflecting on his entrepreneurial journey, he shared, “Research indicates that over 90% of business operations in Nigeria consist of SMEs. We provide employment and opportunity for campus Nigerians. However, a lack of accessible funding stifles their growth, hindering our companies’ full potential.”

Obiejesi called for targeted action, suggesting dedicated SME funds, mentorship programs, and simplified regulations. He underscored the importance of financial education for business owners, emphasising that understanding credit and managing finances empowers SMEs to make strategic choices in challenging economic environments.

Continuing the conference was a 2 panel discussion segment, the first was centred on the topic “Innovative Funding Approaches: X-Raying The Funding Landscape”, the first discussion examined challenges and solutions in financing small businesses.

Panellists from various financial sectors, including traditional banks, fintechs, and development financial institutions, discussed the difficulties SMEs face in accessing funds despite availability. Many SMEs struggle due to inadequate business structures and governance, which limits informed lending decisions by financial institutions.

The discussion addressed both supply and demand challenges in SME financing: financial institutions face a lack of credible businesses, while SMEs often lack preparation for securing capital. The panel highlighted the role of technology and data systems in enhancing transparency, assessing risk, and connecting lenders with creditworthy SMEs. They encouraged SMEs to improve operational standards and for financial institutions to leverage technology to bridge information gaps.

Innovation, technology adoption, and alternative funding sources, like fintech, non-interest banks, and grants, were noted as vital for SME growth, providing diverse financing options beyond traditional banks. The panel also highlighted the importance of financial literacy, proper record-keeping, and evolving asset and collateral types, urging financial institutions to adapt their risk models. Emphasis was placed on collaboration between banks, alternative finance providers, and SMEs to support sustainable growth.

The second panel discussion titled “Capital Readiness: The Role Of The Young Entrepreneur,” emphasised the critical importance of corporate governance for businesses, particularly startups. Mr. Titus highlighted that successful businesses must have the right structures in place, which requires intentionality and a clear corporate culture. He stressed that even small enterprises should formalise their processes to foster growth and attract investment.

Panellists however shared insights on how to implement effective governance practices, including maintaining proper financial records and establishing a trustworthy reputation with investors. They noted that building relationships with stakeholders, such as suppliers and customers, can provide valuable feedback and enhance credibility.

The conference ended with Dr. Nneka Okekearu from Pan-Atlantic University, leading the workshop segment by teaching attendees how to create a compelling business pitch that could persuade investors or partners, she emphasised the importance of effectively pitching a business or idea, using skills beyond just having a competitive or innovative concept.