Lack of sufficient capital to support Small Medium Enterprise (SMEs) is said be responsible for the failure of microfinance banks in the country, just as the management of TechnoGlass Industries Limited(TGI) lamented the huge monthly electricity bill paid to Power Holding Company of Nigeria (PHCN) without getting the desired services from PHCN.
These were the submissions of the Managing Director of TechnoGlass Industries Limited, Mr. John Aluya in an interview with Daily Sun. Specifically, he said SMEs that are supposed to be the major beneficiaries of microfinance banks are not in anyway getting the little funds at the disposal of the banks because the banks prefer to go into other line of businesses, which they consider more profitable than giving funds to SMEs.
“From inception microfinance banks are not well structured. There is no sufficient capital to support the SMEs.And for any economy to grow; new SMEs, businesses must spring up on a daily basis. But in Nigeria, the reverse is the case because the SMEs that are already established find it difficult to survive” he said. Besides, Aluya explained that his firm pays a monthly electricity bill of five million to PHCN without getting power for its plants and machineries, adding that his company constantly operates on three different generators because they cannot afford to have power interruption during production process.
All these things are added cost to production. And like I often say, power alone is about 40 per cent of production cost in Nigeria. And that is what makes our products in Nigeria very expensive because there is no way our products would be competitive under such unfriendly business condition. Not that we cannot produce good products as manufacturers or as a country, we can. But because of our cost structure, it makes our products very expensive compared to what others are bringing into the country.
Credit squeeze has really impacted negatively on the working capital of our business operations to a great extent, especially as it relates to those of us operating in the real sector. Most manufacturers depend so much on banks for our working capital. That is; our day to day operational expenses. And when banks started recalling credit, of course, we had no choice other than to scale down the magnitude of our business operations because you must have adequate funds in order to be able to get raw materials, pay salaries and other sundry bills.