CAPITAL AND FINANCIAL INCLUSION CHALLENGES FACED BY SMEs IN NIGERIA: AN OVERVIEW.

Capital and Financial Inclusion
Capital is a significant development need in many countries. Financial inclusion in Nigeria and other parts of Africa has had relatively slow progress, primarily due to the hostile embrace of new digital technology. One notable mention is the recent ban by the Central Bank of Nigeria (CBN) on the use of cryptocurrency [1] . While capital challenges remain, previous financial inclusions in developed countries provide valuable lessons for policymakers and financial institutions [2] . Financial inclusion is the availability of opportunities to access a range of financial services like savings, credit, payment, and risk management products by individuals and enterprises (especially low-income earners and Small and Medium Enterprises, SMEs) [2] . A 2019 report by PWC shows that one of the missing middles in SME development in Nigeria is accessing funds due to the category of funding they belong to [3] . It is no news that there has been recent financial exclusion affecting the different proportions of the country's population. Suppose the Government is to meet its sustainable development goals (SDGs), including enhancing individuals' well-being, reducing poverty and promoting economic growth. In that case, it must then be financially inclusive. For the second-largest economy globally, China, development has been experienced due to its inclusive financial system [2] . More financial services are now provided for individuals and enterprises in China, especially for SMEs and low-income groups, accounting for 24% of total loans by their financial institutions. Unfortunately, this is not the same for Nigeria, with the commercial banks' preference for big corporations, thereby side-lining the SMEs. Also, the requirements to obtain these loans by SMEs most times can be overwhelming [4]

The Issues with Assessing Fund
As earlier illustrated, due to the category SMEs belong to, they find it hard to access funds. They belong to people that require between $50,000 and $2,000,000. They cannot go to microfinance banks and big commercial banks because what they need is either too big or too small [5] . Microfinance banks developed in the 1990s focuses on financial inclusions. But serve a particular segment of the excluded market with targeted products (mainly small-scale products) [2]. SMEs make up more than 80% of the companies in the developed world and hire around 80% of the workforce. For example, in South Africa, SME's makeup 91% of the business, 60% of employment, and make 52% contribution to the total GDP [3]. Unfortunately, in West Africa, they employ only 30% of the workforce [5]. In Nigeria, SMEs contribute 48% to National GDP and account for 50% of industrial jobs at the start of the business [3]. Due to poor policies and sustainability issues, by estimation, more than 50% of the new start-ups close business within five years, as reported by the World Bank [6]. One of the proposed solutions to the failure of SMEs is the introduction of Venture Philanthropy. To address the problem of loss capital in the early stages, foundations and investors should implement the concept of "Venture Philanthropy". Venture philanthropy is the investment process of supporting start-ups and early stages companies with a good business model but do not generate revenue yet [5]. But the big question is, is it enough? What do we have to do more? Should the policies introduced by developed nations be implemented? One of the recognized solutions is Financial inclusion.

How PELSE CONSULTING Helps

In recognition of SMEs' need for financial inclusion and venture philanthropist, Pelse has devised a model that creates the platform by which SMEs can access funds. The goal is to ensure that the SMEs are well catered for and encouraged to grow their businesses. Our management consulting firm is wholly focused on the growth and sustainability of SMEs to aid their expansion desires. We help SMEs develop structures that make them credit-worthy and improve the capacity of their team for improved business outcomes.

Why accessing Capital Is Important for SMEs.

For a developing economy, the issues of funds must be made easy for SMEs. Some of the importance of funding to SMEs are:

  • It provides an opportunity to unlock growth and investment.
  • It mitigates risks.
  • Improve export earnings.
  • Enhance capacity utilization in critical industries.
  • Increase value addition to raw materials supply.
  • Absorb up to 8% of jobs.
  • Improve per capita income.

A solution: Building Capital and Financial Inclusion Development

In recognition of building a sustainable development path for SMEs, Pelse consulting believes practices enumerated below must be executed, such as:

  • Policies and regulations – There must be an outline plan for improving the availability, satisfaction, and quality of financial services and products, emphasizing the needs of SMEs. Under the program, Government needs to take a range of policy measures; to reduce businesses' operation and communication costs. It should include monetary policies, tax policies, and supervision policies.
  • Fiscal and tax policies – both central and local governments' support should stimulate the development of capital and financial inclusion, such as government-owned financing guarantee funds, tax reduction, and earmarked funds should be incorporated. This policy has led to the growth of SMEs in countries like South Africa and China [1][2] .
  • Development of digital financial inclusion – with the integration of digital technology and financial services, both traditional financial institutions and emerging internet financial service providers will expand their ability to tap into the neglected economic demand of customers such as SMEs. The development of digital finance lowers the threshold of financial services ad promotes operational efficiency with new models, delivery channels, and products [7] .
  • Development of Internet Microfinance – Since SMEs' demands are always in high frequency, low amount and urgent need, Internet and technology facilitate efficient services for SMEs. Providers should launch more appropriate products for SMEs. The internet microfinance like that exhibited by china should be bank-based, e-commerce based, and supply-chained-based. Commercial banks should launch relevant online lending services with instant credit approval, no guarantee, and collateral, ad a low amount limit [2][7] .
In conclusion, this article provides a perspective of government and financial institution's support system in helping SMEs grow. However, further research is required to assess the present level of support currently received. There are some key takeaways. The Government has not implemented the fiscal policy that plays a vital role in developing financial inclusion. The commercial banks lending services to SMEs need to improve. The concepts of Venture Philanthropy should be introduced to help the sector. Finally, compared to other economies globally, financial inclusion in Nigeria is low, especially in digital financial inclusion for SMEs.

References
  1. Guardian News. 2021. https://guardian.ng/features/revisiting-cbn-ban-on-cryptocurrency- transactions/ [Accessed 20 th April 2021].
  2. Chen W., and Yuan X. 2021. Financial Inclusion in China. Frontiers of Business Research
  3. WC report. 2019. https://www.pwc.com/ng/en/events/nigeria-sme-survey.html. [Accessed 15 th April 2021].
  4. Nairametrics. 2017. https://nairametrics.com/2017/06/25/why-small-businesses-in-nigeria-dont-get- loans/ [Accessed 19 th April 2021].
  5. Venture Africa. 2018. Developing Africa through effective, socially responsible investing. https://venturesafrica.com/developing-africa-through-effective-socially-responsible-investing/. [Accessed 15 th April 2021].
  6. World Bank report. 2019. https://punchng.com/322-nigerian-firms-shut-down-in-five-years-wbank/ [Accessed 18 th April 2021].
  7. Lai, J. T., Yan, I. K. M., Yi, X., & Zhang, H. (2020). Digital financial inclusion and consumption smoothing in China. China & World Economy, 28(1), 64–93.