Unlocking Funding Opportunities for SMEs through Grant

PERSONAL FINANCE

Omolabake Fasogbon

Dspite its importance, finance remains a significant hurdle for small and medium-scale enterprises (SMEs) in the country, posing a major challenge to their growth and success.

Aside from its need for business take-off, it will support SME players to drive business expansion on all sides, reduce unemployment crisis and stimulate economic growth.

As part of bridging the finance gap, economies of the world have been adopting several measures, including grants to sustain the sector. Nigeria is no exception. 

Globally, grants are considered effective tools to fund a business and especially for SMEs to stay competitive and perform better either as a startup or for business expansion purposes.

Nigeria has likewise benefited from various targeted grants for SMEs, courtesy of foundations, corporate organisations, foreign entities like the World Bank, as well as federal and state government initiatives, among others.

In a recent update, the federal government announced that it disbursed N27.2 billion in grants to nano businesses between April and June 2024, as part of its Trade Grant Initiative, which has a total allocation of N50 billion.

Similarly, the World Bank in a recent report revealed that a sum of $1.4 billion has been disbursed as grants to Nigerian SMEs in six years. 

However, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, argued that the effectiveness of grant support for SMEs depends on various factors in the business environment, which is fraught with challenges that can undermine its objectives.

Yusuf, feared that many of the about one percent of SMES that can access grants are still struggling to navigate, given the tough economic climate. 

In light of this, he advised grantees to take extra caution and be innovative while drawing up a business plan being funded by a grant.

He said, “First of all, that the percentage of SMEs accessing this support is minute compared to the over 41 million players in the sector makes the impact of this effort insignificant to the economy. This is in addition to the uncertainty around grant recipients. Are they getting the right persons? 

“Notwithstanding, it is important that the few ones accessing the grants justify the effort and make them serve the purpose for which they are intended.”

To lock in grant gains, Yusuf reiterated business skills and entrepreneurship spirit. 

He said, “Not all SMEs are good entrepreneur, a major reason why 80 percent of businesses die in their first five years and not just because of finance. Some people have the money but they cannot manage a business.  Businesses must be structured for survival while making room for all lapses in the operating environment.”

He reiterated that grant beneficiaries must factor in elements such as macroeconomics, structural, and management, to leverage finance support not just for survival, but strategic growth. 

He advised that being creative and minimising risk factors to navigate issues around product competitiveness, environment, infrastructure, and power and consumers’ purchasing power. 

“This is why you must be creative and try as much as possible to minimise risk as an entrepreneur. 

“Why not go for a business that consumes less energy or embrace alternative energy like CNG, gas, or solar? Besides, you may decide to expend grant on a virtual business instead of getting an office space.

“After all, the likes of Opay, Money Point, and Palm Pay, amongst others operate profitably without walls, thus saving overhead costs. Opt for products that are on popular demand. You may also scale back packaging quality as well as produce smaller and more affordable content or quantity to appeal to diverse income levels. These are strategies to surmount tough climate,” he advised. 

For established businesses, he encouraged using grants to diversify portfolios,  thus spreading risks and ensuring steady demands across multiple revenue streams.

To the Chairman Odu’a Investment Company Limited, Bimbo Ashiru, discipline on the part of the grantee is key. He noted that donors can enforce discipline by checking back and monitoring progress of beneficiaries. 

He added, “It will be highly impactful if donors take it upon themselves to educate recipients on grant management”. 

The Chief Executive Officer of Leotetra Healthcare Ltd, Ade’ Adeoba Jnr, believed that the grant is just the ‘beginning,’ adding that the key to long-term success is contingent on its utilisation. 

Adeoba who is a donor through his established Ade Adeoba Foundation expects that grant holders first have a thorough understanding of support, upon which he then develops a cost-efficient implementation plan. 

He added, “By focusing on high-impact activities, maintaining detailed and transparent records of expenditure, reducing costs without compromising your profit and quality as well as inculcating sound financial management practices will propel grants to generate substantial and sustainable outcomes,” he enlightened. 

Finally, from Adeoba, he inspired successful grantees to share their expertise and lessons with others to help them grow. 

“This will enable creating case studies or success stories to showcase grant impact of,” he stated.

To the   Chief Executive Officer of Emerging Africa Group, Toyin Sanni, grants are a veritable lifeline for SMEs, hence being deployed prudently. 

“They should be utilised for stipulated purposes. Where none is stipulated, they can be used to acquire key equipment, technical capacity or human capital. Their utilisation should in all cases be well accounted for as that will inspire confidence in future financiers,” she said.