Crowdfunding As An Efficient Source Of Financing SME’s In Nigeria


Financing is very important for a business whether it is an SME or a multi-national conglomerate because it allows them to thrive and become more competitive. In global economies, SME’s represent the engine room of an economy due to their proliferation and the impact on gross domestic product (GDP) of individual economies. SME’s are represented in all sectors of the industry whether manufacturing, agriculture, trade, commerce or shipping.

There is a good number of SME’s in Nigeria but they have not significantly contributed to the economy because they have poor access to financing. SME’s require credit for different purposes but mainly for working capital, for the lease and purchase of assets and for expansion. Access to financing, macroeconomic conditions and poor infrastructure are the major problems that affect the growth of SME’s in Nigeria. Even with the initiatives taken by the government to assist SME’s, the problems are not solved.

Traditional lending sources are the financing options open to SME’s; banks can only provide them short term funds because SME’s do not have bankable properties. For example, if a small business entrepreneur were to approach a bank for financing, he has to comply with the bank’s terms and conditions such as substantial collateral to be able to take out a loan. Small businesses cannot usually fulfill the bank’s conditions which prevents them from carrying out business. There are also instances when banks are prepared to take the risk but the interest rates are quite high that the business defaults on the loan payments and eventually folds up. In short, lack of financial assistance to Nigerians has affected their ability to do business.

An option for SME’s is crowdfunding which a cost effective and efficient process of raising funds instead of banks and venture capital. The internet is the best source of information regarding crowdfunding for SME’s in Nigeria.

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