A Condition for Sustainability, Growth and Funding

1 of the SME sector Why SMEs fail? Capacity and the SME Capacity Building Initiatives for Success Discussions .Table of Contents: 1.

The SME Sector: The SME sector in Nigeria accounts for close to 50% of GDP MSME Definition Proxy Loan Size at Origination <$10. million) (excluding land and buildings) Micro Small Medium Less than 10 10 .000 (N50-N500m) Source: New national policy on MSMEs .199 Less than 10 (<N5m) 10 .less than 100 (N5-N50.less than 1.7mN47.000 .35b Indicator Employees ASSETS (Naira.1m 3 million -15 million N47m-N2.m) 100 .49 50 .000 N0-15.< 3 million N15.000 <100.000 <1 million (*) Source: WBG Indicator Micro Small Medium Employees < 10 10-49 50-300 Total Assets or Annual Sales (US$) <100.7m 100.

Why Do Small Businesses Fail? 50% of SMEs die within their first year Only 20% survive beyond 5 years. .

…SMEs Fail Because… “..most SMEs are sophisticated in their aspirations.. but only a few of them rise above mediocrity in the administration of their businesses” .a bank Loan Officer .

Over-investment in fixed assets 6. Poor location 4. Competition 10. Unexpected growth 9. Personal use of business funds 8. Poor credit arrangements 7. Low sales . Lack of experience 2.WHY SMEs Fail… Leading Causes of SME Failure include: 1. Insufficient capital (money) 3. Poor inventory management 5.

10% of Nigerian SMEs applied for a loan or a line of credit .SME finance gap: formal SMEs .US$46 billion (informal MSMEs .US$12.7 billion).Only 5% of SMEs are able to get a loan .The Demand-Supply gap in Finance: .80% of SMEs seek access to a loan . .

Condition .Collateral .Capacity .Capital .Character .Being Ready For Finance… The 5 C’s of Credit: .

Asset reevaluations Other commitments Financial Structure Investment Strategy Cash Flow Analysis Condition Collateral Capacity .Key Considerations in Credit Appraisal… Element Character Definition Company and Management Integrity (IDD) Indicators History of repayment. Industry Analysis. Sector of activity Capital Other financial resources Access to other sources of financing. Strength and Size of competitors Hidden asset values. earnings reinvestment Sensitivity to external economic forces Underlying value of company and collateral provided Ability to meet obligations Business Strategy. Owners’ Contributions.

Building Capacity: Managerial Skills .

apps) to provide SMEs with high quality staff of SMEs. BE offers its clients management training solutions adapted and easily applicable to local business context that are delivered through a network of local franchised providers and certified trainers. mobile. interactive tools and training resources to grow their businesses. managers and www. BE covers 54 management courses SME Governance Corporate Governance training solutions .Some Capacity Building tools: IFC’s SME MANAGEMENT SOLUTIONS SME Toolkit http:nigeria.smetoolkit. Business Edge BE is an IFC owned training methodology specifically designed to strengthen the management skills of Overview IFC’s SME Toolkit is a one-stop-shop for SMEs and entrepreneurs looking for business management information. The program operates through a network of local partners and distributors and leverages the latest information and communication technologies (web.

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