By Eric Elezuo Photos: Ken Ehimen
Small and Medium Enterprises (SMEs) have been identified as a viable means of growing the nation’s economy. In the country today, ADE ADEBAJO, stands tall as a champion in promoting SME growth using his company, UT Financial Services Limited. In this interview, the finance guru describes the SME industry in vivid detail, stressing the surmountable challenges, and opportunities that abound therein as well as how government, corporate organisations and individuals can turn it into a paradise for all.
Financial services essentially cover loans meaning that there is a connection between UT Financial Services and SMEs. What in your opinion are the challenges SMEs face in terms of accessing loans?
You see, the problem majority of SMEs have accessing loans is the interest rate. They are small businesses if you agree with me. They go to the bank and the banks are willing to give but at a very high interest rate, and this impacts greatly on the operators’ funds, and in most cases, the banks won’t give because most SME operators do not have collaterals or proper documentation. And the banks want everything on the table, and that’s where we come in – basically to bridge the gap – help. The banks will never help do documentation for anyone, so we are here to help. UT goes the extra mile to ensure operators surmount the challenge of rates because one thing that kills SMEs quicker than anything else is funding. They need funds to kick-start, and that’s where we pull our muscle. We help with the paperwork, help the business to stabilize and grow. In fact, at UT, we see everything from start to finish. Honestly, we reasonably bring down the rate. Mark my words, ‘reasonably’ because it must be within reason.
Still on the challenges, could you please itemize the remedies UT has outlined to put a smile on the SME operators’ face
At UT, we have done a lot. In fact, more than as I have elaborated above. In the first place, we take a cursory look at the business, and then we advise on documentation. Some SME owners come with faulty accounting procedures; either with no business plan or the business plan is not updated. So we advise, as a first step because no one should go into business blindly. The first thing we do is to second the operator to a member of the team that assists, who will become his consultant and give him direction at no cost. He assists them in looking through their business plans and proffers something durable and workable. Again, we look at the business holistically and decide the amount of money required. Then we do all within our powers to advance this fund at the lowest rate without forgetting our limitations because we have cost of fund to consider. Thereafter, we monitor the business ongoing, using our team whose primary assignment is to monitor businesses in motion. They visit the customer and their businesses, analyze their activities and give suggestions/advice at regular intervals on the way forward.You must understand that we have an obligation here; if the business moves forward, it is also to our advantage so as we are helping them to grow, we are also helping ourselves to grow. If they succeed, we get our money back, and if they fall, we don’t; and we want to get our money back. So we treat our customers’ business like it is our business. That explains the difference between us and the banks. The bank may give money, but they don’t bother about what happens between you and the money. At UT, we monitor things and follow it through.
Now on documentation, most small business owners are illiterate. They are made up of akara sellers, roadside hawkers and the rest. How do you factor them in this documentation thing and others?
Yes that’s true, and that’s the lower echelon of the SME business. We have that, and have made provisions for them. For instance, our branch at Trade Fair deals exclusively with these cadres of business people. But we also have the small manufacturing group; some people are making sachet and bottled water; another is starting a small furniture company; another is importing pencils and other goods abroad – all these are SMEs as well. For every category of SME, we have people in the market who will give them sound advice in the language they understand – be it Igbo, Yoruba, Hausa, Swahili, Tui, Ga, Ewe or whatever. There is always someone in UT who will attend to you satisfactorily. And that to us is the essence of being in business – customer satisfaction. In the same vein, for the bigger SMEs, we thoroughly cross check their feasibility studies because they belong to a different level. We engage them to ensure well documented plan, good feasibility studies, adequate comparisons made and profit margin ascertained – all on paper, before they launch out into the market place. That way everybody is taken care of irrespective of business status.
Now, how does importation of foreign made goods affect the growth of SMEs?
That is not just a big challenge, it is a big problem. You see when these goods come in from overseas, especially from places where their government has subsidized things and help get cheaper funds – talk about China, talk about Taiwan – their goods come cheaper and they hamper the growth of our own SMEs because the government of those places has helped them to produce goods at a cheaper rate, and sent it down, and the Nigerian populace as well prefers imported goods. There’s a perception that those are better though it is not always true, but the perception is there, and people go for it. This is really damaging the growth of our own SME industry. It has to stop.
How do you think it can be stopped?
The first step is a look at government policies, but in all honesty, the government is trying. For example, the government throughout last year tried banning the importation of some items because they are produced here in Nigeria. We need to begin to encourage our own. The problem is, even where they need to improve their own, they won’t, but if importation is banned, they will come together and commit improvement in the making of all products, and that is the way to go. Government is doing a bit. They have banned the importation of some goods, and those in that sector, especially in the agriculture sector are doing well because if you don’t bring the rice from Japan, furniture from Italy, and you want people to buy yours then you have to improve it. And I think it should be an ongoing thing. Government should look at more things they can ban so that we can produce it here.
As a financial institution, do you conduct orientation campaigns to persuade manufacturers and final consumers to believe that what we produce can be better?
We do that within our means, but this is supposed to be the job of the government ministries, especially to engage people and let them know that the products we produce here are equally as good. In our own little way, we hold seminars, workshops and road shows, we let people know because we have a heart and passion for SMEs. And when you have a passion for SMEs, it means you have a passion for the growth of Nigeria because SMEs are one of the major contributors of any country’s economy. And like I said, when they grow, we grow. So we disseminate information to people as often as we can, and that’s why our people are trained so that when they go out, they preach the same gospel.
Most SME operators complain of major challenges like excessive taxes from government of all tiers, and these have sometimes brought their businesses down. What’s your take?
That is true no doubt, and can attest to the reason the price of some products are high. The levies and taxes from government are high, and VAT also. We want the government to step up their game a bit in the area of taxes. In UK and some other places, you don’t pay taxes or VAT at certain supermarkets and items; this really helps. The government should look closely at the SMEs, especially the start-ups; give them a break of one or two years so that they can grow. You may suffer it as a government, but you will enjoy it later. This is because when they grow, they will pay taxes. So SMEs deserve tax holidays. Like a new born, you make sacrifices for them; they need time to grow. All the tiers of government from the federal to the local governments must begin to review their tax policies, especially those of market places. Those are the ways foreign countries have been able to do it and bring in their goods cheaper. It would therefore be easy for us to produce goods here and sell in Britain and other places because the taxes are reduced, and so by doing foreign currencies will come in.
Sir, any possibility of SMEs becoming the mainstay of Nigerian economy?
Yes I see it. It is very possible if all hands be on deck. We are doing our part at UT, so let all the finance houses come together and do the same thing; let the banks help and it will become the mainstay of this country’s economy. It must interest you to know that SME is the mainstay of some countries’ economy. If there’s a lot of SMEs, there will be jobs of all sorts like drivers, delivery men and many more. And eventually, you will have them paying taxes to the benefit of the country.
Do operators of SMEs have a common forum which they use to lobby for welfare and better deals?
Yes they have common but forum in different chapters, so they need to come together a s national group not splinter groups so that the coercion will be strong to make representations to the National Assembly and get through to the Federal Government. They can therefore present cases like tax holidays for so and so number of years and follow it through as well as issues of mutual benefits. We need them to come together. It is just a matter of time, and the Finance Ministry, Chambers of Commerce and other bodies should encourage the motive.
To a would-be SME practitioner, what will you advise?
Plan very well from the start, do your feasibility studies no matter how small, and come to UT Financial Services for funding and advice. We will visit and follow your business through to make recommendations. We want you back as a customer, and that is why we make it our business to see you succeed.
What cushioning effects are available for the people when imported goods are banned in order not to make people lack?
If rice is going to be banned for example, the government must make sure that they encourage those producing it to produce much before the ban comes into effect. No government bans before producing the said product otherwise the country will starve. They must be given the right equipment on leases, and opportunity to pay for those equipment over a period of time so that they can produce in large quantities. Let the tax not be a burden to them so they can produce in large quantities. They must be encouraged through seminars, especially as regards the finishing because our products are good, but the finishing and packaging have remained a problem. Sometimes the rice that come in from China is not better than the one that come in from Jigawa, but finishing and packaging has remained an issue. When all these are in place then ban the goods and pump more money and energy into it. And before you know it, the country will be exporting to other countries.
What can actually distract a determined person from going into and continuing their SME operation?
Trying to start big; that’s beyond start-ups’ reach and capacity. Start small with a little loan from family members and friends, and gradually develop. Don’t burden yourself with too much loan, don’t over employ or go ahead and start buying cars. You will still get the bigger clients if you do it well because people appreciate quality. There is a tailor I know who started very small, but because he produces classic wears, the big clients came to him, and he is big now.
Are there some things private individuals and corporate bodies can do to support just as financial houses and government are doing?
Yes, in many ways. There can be seminars where they can disseminate information to all and sundry on the need to use made in Nigeria product and build the psyche of the people. They can also give grants and save the operator the hassles of sourcing loans. Just look at the impact the Tony Elumelu Foundation is making; how they are helping young people become bosses of their own. Yes, the private sector can come in, and there are lots to do. Private sector organisations and individuals need to come in and the impact will be greater. Those who Nigeria has been good to should see it as pay back. I am really proud of Tony Elumelu.
And to those going into SME, UT’s advice is tread carefully, reduce your cost and have a feasibility study of what you are doing. Go to where you will get sound financial advice and lowest interest rate; come to UT Financial Services Limited.