The Role of Development Finance Institutions (DFIs) in Promoting Small and Medium Enterprises’ (SMEs) Development in Nigeria
Adeyemi, A. Adekunle
Dept of Accounting, Banking and Finance, Olabisi Onabanjo University, Ago-Iwoye, Nigeria.
The significance of the Small and Medium Enterprises (SMEs) in the economic growth of many countries cannot be overemphasized. There is consensus of opinion that though the sector consists of individually small businesses, their total contributions to industrial development and national output is very significant (Roslida, 2011; Ogunsiji & Ladanu, 2010, Surienty, Hong, & Hung, 2010; Hong & Hung, 2010; OECD, 2004; NIPC, 2004). Researchers also support that SMEs help in the achievement of improvement in rural infrastructure, improved living standard of the rural dwellers, creation of employment and utilization of indigenous technology, production of intermediate technology and increase in revenue base of individuals and governments. (Wahab and Ijaya, 2006; Odubanjo, 2000; Nnanna, 2001, Onwumere, 2000). The developed nations understand the importance of this sector and are harnessing the potentials for their growth. In China, SMEs with fewer than 300 employees accounts for 99.5% of the factories in Tokyo and employs 74% of the workforce there. Korea and Taiwan are prospering as both countries manufacture and export with the aid of well established SMEs. The German SMEs employ 73% of the labour force. Some other comparative analysis of SMEs contribution is as in the table below:
Comparative Analysis of SMEs Contributions in Selected Countries Countries
| Employment (% of Total)
| Export Earnings(% of Total)
| Contribution to GDP (% of Total)
| United Kingdom
Source: CBN SMEs Surveys (2005) and Vision 20:2020
By 2020 Nigeria intends to be one of the 20 largest economies in the world, able to consolidate its leadership role in Africa and establish itself as a significant player in the global economy. The SMEs sector has been identified as one of the critical elements to achieving the Nigerian vision 20:2020. The SME sector constitutes 99% of the total business enterprises in Nigeria, employs 75% of the nation’s industrial labour force but only accounts for 10% to 15% of the total industrial output while utilizing only about 30% of its installed capacity. Significant as the SME contribution to employment figure is, there is still a serious unemployment crisis in the country today. In the recent past people without basic education accounted for over 76% of the unemployed in Nigeria. The situation today has been compounded by the regularly increasing number of unemployed graduates. According to the National Bureau of Statistics, (NBS) the total number of unemployed Nigerians rose from more than 12 million in 2010 to over 14 million in 2011, with the figure increasing by 1.8 million between December 2010 and June 2011. The Bureau added that unemployment was highest among people aged between 15 and 24, and 25 and 44 years. The NBS data also shows that over 22million of the active population are either unwilling or unable to work or are working for less than 40 hours per week on the average. The incidence of poverty is dangerously hovering over a large proportion (70%) of the population living below the poverty line of US$1.00 (NGN150) per day. The Vision 20:2020 document notes that as at 2006, the SMEs contributed only 2 per cent of export earnings and 10 per cent to GDP. The low contribution to export earnings has been attributed to lack of skills, management capacity, poor product quality, low production capacity, poor access to international markets and lack of working capital that have made the sector to be uncompetitive....
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