Small and medium scale enterprises in Nigeria-How startups can leverage SMEs to Scale
Small and Medium Scale Enterprises, otherwise known as SMEs are the major backbone of every developing and developed economy, and the case is so true for Nigeria. According to the Nigeria SME Survey, conducted and published by Pricewaterhousecoopers, SMEs account for a staggering 96% of all businesses in Nigeria and contributes 48% of the nation’s Gross Domestic Product. The report also states that 84% of Nigerians in employment are working for one SME or the other.
It does not even take a survey by a multinational consulting firm to realize the above facts about SMEs in Nigeria. Trek few meters away from your home anywhere in Nigeria, and you will discover vibrant battallions of enterprises, conducting businesses in the way they know best. These range from foodstuff vendors to food hawkers, wandering shoe shiners to static barbing saloons, provision shops, airtime sellers, phone battery charging spots, and car washs.
Beside this booming small business economy in Nigeria stands a booming tech startup ecosystem that has severally been recognized as one of the most vibrant in the continent. Young people, with big ideas, are busy working on disrupting entire industries or creating new ones in different sectors ranging from finance to healthcare.
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A senior Cisco executive recently averred that “SMEs need technology support for growth”, and I agree with him. Partnership (or you can call it a collaboration) between SMEs and startups could prove to be the proverbial match made in Heaven, unfortunately, this is something that is rarely even discussed talk more of being implemented.
It is not late, however. Tech startups can build products that can enable SMEs sell more of their goods. The end result is that startups get to solve the nagging problem they are always on about, and SMEs make more money and have the best experience selling their goods and services.
The following discusses the different ways startups can grow by solving the plentiful needs of the huge number of SMEs in Nigeria.
Build products that enable SMEs cut down costs
Startups should build products that enable SMEs cut down their cost of operation in the way of rent, generator maintenance cost, and internet data cost.
A second hand cloth dealer going into business in an expensive city like Abuja might not be able to pay millions upfront to rent a shop in their choice location. This kind of situation is not one that is too difficult for startup founders to handle.
An ecommerce platform where Abuja residents can search and order their choice second-hand clothings could be an ultimate solution. Renting out a single shopping space to a number of second-hand clothing dealers could be another wonderful idea of a startup founder that could drastically reduce the cost the dealers individually incur at the end of the end.
Startups can also provide cheaper and more reliable power source to SMEs, boosting their productivity and sales while also moving their own ministries.
Build products that enable SMEs reach their customers easily
Small services providers, like shoe makers, lead a hazardous, everly-mobile lifestyle, with most wandering from one street to another in search of customers for a significant part of their working hours. Startup founders can change this, and change their own story while changing the lives of these small services providers for good.
A SaaS product that enables people within an area call the service of a nearby cobbler by pushing a button on their smartphone is not impossible and could be commercially viable. Such a product would mean that the cobbler won’t need to wander around in search of a client he might never see. He just has to stay at a select location and wait to be called to deliver his service.
The app could charge the users a small percentage of the transaction, thus earning money to sustain itself while solving society’s problem that the founders are out to solve.
Offer loan facilities to SMEs
Fintech startups in particular can leverage the huge number of small and medium scale enterprises in Nigeria to grow.
You are wondering how?
They can offer loan facilities to these business that often cannot tick all the boxes required by traditional lenders, like banks, so cannot get loans they need to grow their businesses. SMEs are as hungry for growth as big businesses. And going by the fact that SMEs account for a whooping 96% of businesses in Nigeria, you realize that this is a whole lot of untapped market and an opportunity to scale a startup. Engineering a product for this hugely underserved section of the economy means startups stand a better chance of even upstaging their traditional counterparts in a very short period.
I know, lending to small, majorly undocumented and unbanked businesses come with very high risks, but this is not a problem that startups cannot find their way around.
Away from providing loan facilities, startups can also build accounting products for SMEs, come up with products to help perishable foodstuff sellers preserve their products, and build a more efficient and cost-effective SME supply chain.* ADS**
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