‘How to boost employment opportunities through N25b Trust Fund in Lagos’
Stakeholders, who made this submission, explained that the state government’s N25billion Employment Trust Fund and the one per cent service charge policy are best steps ever made by any state government to actually support the course of Small and Medium Scale Enterprises (SMEs).
Enterprise Development Consultant, Muhammed Mustafa, at the Y2015 Africa Industrialisation Day commemoration in Lagos at the weekend, noted that the initiative was the first concrete effort and actual display of political will to support small businesses, eradicate unemployment and poverty.
Mustafa said that the State, which residents 65 per cent of country’s total industries, has indeed put her best foot forward in solidarity with the organised private sector.
According to him, “The Employment Trust Fund is quite commendable and should be emulated by other States. What particularly appeals to me is the one per cent service charge that they are going to ask for. Lagos is blazing the trail. It is a kind of synergy with the private sector, because Dangote Foundation has also established a fund where five per cent is charged. This is very good for Lagos,” he said.
It would be recalled that Governor Akinwunmi Ambode penultimate week sent a bill to the State House of Assembly seeking endorsement of the Employment Trust Fund Bill to boost employment creation in the State.
Mustafa, who is the President of Doublem Enterprise Development Centre, noted that the political will exhibited by the state government would ease the trauma of seeking loans from the Bank of Industry (BoI) and commercial banks.
He reckoned that the banks have not really served the interest of startup businesses in the country due to collateral and high interest currently in the neighborhood of 30 per cent. He said that while the BoI was set up with the best of intentions and meeting part of its’ objectives, “it is not really the best approach for small businesses.”
“The BoI is too big to handle small businesses. It is like killing a fly with a Mack truck. There must be other ways. The BoI is the best right now, but it can be improved upon to actually tackle the problem of loans and collateral, which are the most important issues with small businesses today,” Mustafa said.
The annual commemoration of the Africa Industrialisation Day was mandated by the UN General Assembly resolution 44/237 of 22 December 1989. The theme for this year is: “Developing SMEs for poverty eradication and job creation for women and youth.”
Speaking on the theme, Mustafa said further that if Nigeria must actually industrialise and diversify her economy, the government, among others, have a bigger role to play.
He observed that the Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) that had become the reference point for leapfrogged industrial development, were on account of sacrifices made by their governments.
In India for instance, the era of zero percent interest rate dated back to the 1970s, with service charge put at one per cent. Besides moratorium of five years, there are soft loan schemes for businesses to be competitive; exclusive reservation of certain items for SMEs alone to produce and even higher rates on government’s purchases just make the small manufacturers break even.
“These are the things that made the Asian Tigers. It is the government that drives them, because if it is right with the SMEs, it goes around. China allocates two per cent of its Gross Domestic Product to research. So, why are we surprise that almost everything in our houses have Made in China on them?
“It is not the business of the SMEs to create employment opportunities. But if they are doing fine, then employment generation becomes incidental. Our government can underwrite certain percentage, let’s say three out of nine per cent of interest rate to help the SMEs to get bank loans. It is a case of deferred benefit. If your business is doing well, then it benefits the government because you will pay more tax. That is why the move made by the Lagos State government is good and would benefit the state in the long run,” he said.
Mustafa added that the private sector could also initiate the establishment of small business banks, where the small businesses themselves are the shareholders. “The government can buy into it but the running and administration should be left to the private sector.”