News Column

Access Bank Assures SMEs of Increased Support

June 8, 2014

Obinna Chima

Access Bank Plc has blamed the poor organisational structure of small and medium scale enterprises (SMEs) in the country as one of the factors obstructing lending to the sector.

However, the bank restated its resolve to continue to work with SMEs in order to grow their businesses.

Speaking at a forum for SMEs in Lagos, Head, SME Desk, Access Bank, Mr. Oyediji Atoyebi, noted that small and medium businesses are crucial to the development of any nation.

Furthermore, he described SMEs as the main driver of employment in any economy.

"The recapitalisation of the banking sector has enabled the growth of the sector with more banks offering credit facilities to eligible businesses.

"Owing to the organisational structures of majority of SME businesses and other organisational challenges, many banks find it challenging to accurately profile SME businesses and analyse their financial standing," he added.

Continuing, he pointed out that Access Bank is providing access to finance to operators in the sector.

Atoyebi said Access Bank intends to bring down cost of banking for the SMEs as well as to provide financing at all levels of the value chain in the sector.

He also identified key issues in the sector to include poor funding, low managerial expertise, poor project feasibility study/business case, lack of proper book-keeping and absence of corporate governance.

Furthermore, Atoyebi listed the challenges confronting the SMEs to include unavailability of basic infrastructure, such as electricity, road, and logistic issues, among others; pricing competition, inability to access credit facilities and collateralisation of advanced credits.

He identified the critical success factors for the SMEs to include access to funding, extensible business architecture, government policies and capacity building.

He added: "There is need for facilitation of the exchange and dissemination of knowledge and information and proper business feasibility plan.

"There is also the need for capacity and competence building, formal and informal training in educational institutions and training of technical manpower in firms and organisations."

He also called for the availability of investment account products to help manage surplus cash flow and provide acceptable yields for customers.

He stressed the need for favourable government policies to promote growth in business as well as the provision of regulatory framework, measures, standards and quality functions, such as product quality tests and provision of incentives to develop new products and services.

Nigeria Leads Africa as Frontier Markets Fetch Investors High Returns

The Nigerian stock market has led the African continent in terms of returns to investors in frontier markets since the start of 2013, a report by Wall Street Journal (WSJ) Frontiers Newsletter has shown.

The report said that investors who ventured into frontier markets-the smaller, lesser-known cousins of emerging markets-have been rewarded with impressive equity returns over the past 18 months.

According to the report while the MSCI Emerging Markets Index has been essentially flat since the start of 2013, the MSCI Frontier Markets Index has shot up by more than 50 per cent.

In terms of individual markets, the report said since the start of 2013, Bulgaria's market has soared 91 per cent, Pakistan's has jumped 88 per cent while, and Nigeria's grown by 47 per cent.

WSJ said the strong performance is helping frontier markets-usually defined as countries that have a stock exchange but don't meet the size and liquidity requirements to be in the emerging-markets index-to gain more acceptance in the investment community.

"Data from EPFR Global show that funds focused on frontier markets saw inflows of more than $1.5 billion in the first four months of this year. Since the start of 2013, the funds have attracted $5.6 billion," the report said, adding that new research shows that frontier markets, often tagged as risky and unstable because of political and economic factors, may be less volatile than commonly assumed.

A previously unpublished study by the New York-based fund manager LR Global, released by the firm in late May to selected clients, looked at the weekly returns, in U.S. dollars, of 80 stock-exchange indexes across developed, emerging and frontier markets in the 10 years to the end of 2013.

The research showed that frontier markets' stock indexes were significantly less volatile than emerging markets and slightly less bumpy than even developed markets.

LR Global, which has $200 million under management invested in frontier markets, defined volatility as the annualised standard deviation of stock market returns.

Standard deviation, which LR Global measured on a weekly basis, is a measure of how much the market swings up or down. The higher the standard deviation, the more volatile the market.

Brent Clayton, a portfolio manager at LR Global and one of the report's co-authors, acknowledged that he was surprised by the results.

"We had an inkling from looking at the indices that frontier markets would be less volatile than emerging markets, but we were shocked to find that not only was that clearly the case, but also they were less volatile than developed markets over most periods," he said.

Clayton attributes frontier markets' low volatility partly to their limited exposure to the global financial system.

"In a panic-driven flight to safety, investors tend to bail out of emerging markets. Frontier markets, because they have seen lower inflows of foreign capital, have generally been less affected by such moves.

"These are markets that are primarily driven by local investors and avoid the whims of shorter-term-driven foreign capital flows," Clayton said.

Chief Investment Officer, US-based frontier-markets hedge fund, Voltan Capital Management, Alison Graham, said another reason for the frontier markets' relatively low volatility is that the countries' economies and market drivers are so diverse.

"Individual countries can be quite volatile, but as a group there is a much lower correlation between them so when you blend them together in a portfolio you get much lower volatility," she said.

According to her, emerging markets' economies are also similarly diverse, but the performance of their stock exchanges tends to be more correlated because they are more dependent on global fund flows and they are more likely to be connected to each other by trade and financial ties.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

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