 Welcome back from that feature on tech incubation programs. My guest, Dr. Ayokulna Dayame, is an experienced supply chain manager, client service manager and procurement. He has helped organization with these operational costs and increased valve or value offer until customers through a strong, valuable industry experience ranging from business management, supplier management, negotiation, procurement and cost management. He has a proven record or track record of improving the market position of a company and maximizing opportunities for financial growth. Many thanks for joining me, Dr. Ayokulna Dayame, on Business Insights. Thank you for having me, Justin. It is indeed a pleasure. Let me just try and break down what supply chain finance is and how exactly it works. Okay. Thank you. Good morning viewers. Supply chain financing, I must say, is a new innovation not only in Nigeria, but in Africa generally. There is a sub-setment of supply chain management, which enables suppliers to have access to quick financing of their invoices or they're allowed to increase their capital fees. As a result of that, medium, small, and micro enterprises have been able to participate in these new innovations in the field of supply chain, unlike the conventional ways of raising capital through the commercial banks. The new, we call them, precipitating financial institutions, that is what the CBN called them. The funds that have been made available for them at the rate of 2% given to microfinances, SMEs, medium enterprises at the rate of not more than 9%. And so this is to really boost innovations among the supply chains, among the value chains in the field of supply chain, and looking at the track record of says when this innovation has come up. It has really hit a lot of businesses in the rural area, in businesses in the city, those that have been struggling with security loan as a result of some of the restrictions, some of the regulations or requirements in getting all these loans. The supply chain finances, those participating financial institutions have really helped in building out a lot of these micro, small, and medium enterprises to hit their business. Okay, let me try and get it clear. Maybe in the late times now, for instance, I own a small business and I just got an invoice to supply to maybe, not necessarily a blue chip company, maybe a very well-organized business company, and what does it really mean? I'm giving an invoice to supply about, let's say, about 10 million. Is it like there is an automated process that I have to go to get fundings to get the supplies and send to the buyer, per se, or how is it really done? Is it like I have to interface with them one-on-one or just how does it work? Okay, the conventional way we are known is to go to the bank, to the commercial bank, and then they assess your credit rating. They try to check out your collateral, they try to see, to pre-qualify you. They may even check for your experience, years of experience in the business. They could equally ask for your existing financial statements to see how well you've been doing. That's the conventional way we know before. And then it could take like three months, it could before the approval comes, but the supply chain financing is like more or less like the digital system of financing. Yes, there are some checks and balances that comes into it as well, not that the money will be disbursed just like that, that some steps that goes on, but what it simply means is that you bring in your invoice, and then the company, the participating financial institution, we call the PFI, gets to understand what supply you are into to your buyers, and then they stand in for you, the liars with your buyers and they go to understand that, okay, this is the dynamism of the supply. And definitely when you get an invoice, there's always a payment terms, either 30 days, 40 days or 45 days, so they stand in between, they give you the fund to go execute the project or to supply whatever you need to supply to your clients, and then from there, in their own perspective with your client, their own agreement with your own client, they extend the payment day. Instead of the agreement on the invoice of 45 days or 40 days, they extend it to like 60 days, like giving room for additional parameters that may come in to, you know, so they allow you to get the fund bit by bit to execute your, to meet your buyers' needs, and then from there, after this, you've done quite well of supplying your buyer, gives a kind of a prover that you've done the job to them, and then the money is paid to the PFI, and then your own quota is released to you. Why they take some percentage from it? Usually, what's the percentage like? Usually, it's to be from 5% to 10%. Okay, just a single digit? Yes, single digits. Okay. You know, the brain behind it, or the logic behind it is just to, number one, enable SMEs to be able to raise more funds, you know, and then also be able to be pruned in delivery of the obligations to their buyers, also to stay afloat in business, you know, and also to be able to innovate more, you know. So, because once you have, we have a lot of value chains, it's been practiced more for those in agricultural sector because the economy gives in room for more people in agricultural sector. We call them agricultural value chains, you know. Even if you go to BOI, you know, you'll find out that they attend more to those in agricultural sector because of the policies, and because of the lot of value chains that is around it. Also, there's also a provision for women as well. How does that work? Oh, the women are giving 60% opportunity. Higher than the other men. Yeah, higher than the other men. It's to encourage women to, exactly, entrepreneurship, to encourage women to be more involved in entrepreneurship, you know, because maybe probably they look at it that they are weaker in virtue or weaker gender, you know, and they feel that women are more innovative and they have better management of fund, you know, as it were. So, when the CBM brought out, if you look at the report in 2014, there was a report of 220 billion naira that was given out for SMB to support SMBs. And I could recollect that 10% of that fund was used for developmental projects, like grants, like administrative purposes, and the rest. And then 90% of the fund, which is in tune of 180 billion naira, was made available to this PFI, the Participative Financial Institution, which we're talking about now under the supply chain financing, you know. So, and there was a kind of instruction or agreement that was given to them because the CBM gave them the facility at the rate of 2%. And in strut or participating financial institution, not to give it out more than 9% to the SMBs through the precipitating. And did they save like a 7% float? Well, aside the commissions that will be charged from the precipitating financial institution, but it must not exceed 9% to these SMBs. Okay, let's talk, let's take it a step further now because it sounds like a very wonderful innovation in as much as it's still a bit novel here in Nigeria and in Africa, like you have said. All about how educated SMBs are and how aware are they about the supply chain financing. And don't you think we need to talk about building their capacity in terms of technology and all of that so they can actually embrace all of this innovation? I must let you understand the structure of SM that is the micro, small and medium enterprise. The micro is the category of those that are between one to nine employees, you know. Why the small, you grade from 10 to 49. And then the medium enterprise you rate from 50 to 250. So if you look at the micro, which is in the majority, you find that the level of information or education is low, even to the entrepreneur in among them. So it's the capacity building you talks about is so needed with the micro, those in the rural areas, those in the inter-love, those in the villages, even those on our streets, a lot of them are aware of the informations that are available for their business to grow. So somehow technology has really bridged the gap for those that have access to this technology. So you find that the difference between the medium enterprise and the micro and small is very wide. Even those in the micro find it difficult to assess the financial institutions. So most time you see them in their cluster doing what they call cooperative or cloud funding or Ossusu, you understand. This is how they could raise money to fund their business. Not that they are not innovative enough, not that they don't know the business, but because of lack of capacity building that you talked about, it has made them to remain at the level where they remain. So I quite agree with you that SME's agencies needs to go into the villages, into the rural areas to find a way of passing informations to these people. And I am of the advocate and I keep on saying that I think in our educational structure, from the elementary to secondary, they need to find out a way of incorporating these subjects into the system. So that from elementary, from their younger age, they already have understanding of what to do if they need to go into business. Okay, fine. Aside from this challenge of capacity building and lack of knowledge that you have taught, what other issues do you think can mitigate against this supply chain financing and its growth in Nigeria and Africa? There are lots of challenges. Number one is enabling environments. You will find that first we have about 39.7 million SMEs as a 2001 report in Nigeria, 39.7 million. Out of this 39.7 million, 7.1 million, 7.1 million don't have a space or an office to operate their business just because there's no enabling environment. Not only that, task purposes for the federal government levies on them. How do you levies on where you have no main provisions? Aside that electricity, power. I must tell you that as from 2014 to 2021, the manufacturing association of Nigeria spent 639 million naira on generating power for their businesses. So this fund would have gone into the system if there is electricity or power supplied from the federal government. They would have used such money to like innovate, to boost their economy, to go for even more employment into the system. Aside that we have government policies, government policies that are not friendly. In fact, if you pick states, there are some states that are doing well in SMEs. If you look at the total contribution to the GDP as at last report was 48 percent. But if you categorize it by each state, Lego state took first. At Lego, they had the 7.8 percent contribution. Then the nurses cannot state with 6.8 percent. Then after that, you have a river state with 6.4 percent. And then you have your state with 5.6 percent. Each of these states, I think they need to come up with innovation to kind of give enabling environments to the micro small and medium enterprise. Okay. As we, because of time now, let's just take on the final thoughts concerning this issue. Because we need to grow the, even the mano, you know, micro, you know, small and medium enterprises in Nigeria. But aside from this issue of financing, issue of incapacity building, we'll talk about issue of packaging and a whole lot. Also, you know, the devils that go for, in your, you know, final, you know, postulation, where do you think or where should, what should be the immediate, you know, problem that should be tackled for MSMEs to really grow in Nigeria's way round off? This is a truth is that I think the immediate thing is education. Okay. Yes. Educating, that is what we'll talk about the capacity building. All right. For the past four years, I've taken it over myself as an individual to educate people small and business owners in my community. I do free training. All right. As a matter of fact, last month I concluded and I equally supported them with some finances to up his own, his own initiative for his own the internet and whatever to. So education matters a lot because a lot of people come into the set of business, haven't known what the business is meant to fulfilled. So you find out that number one, people do not know that their customer is very, very key to their business. You imagine when you're conducting training and you're telling them to give the feedback of what the experience is. You discover that a lot of them talks to their customers anyhow, and then you tell them that without that customer, you're not in business. All right. You know, so I think education, finding the cost that we have 774 local governments in Nigeria. Let each of these local governments have a office for SMEs, where they can come in and get more information or more training in order to enable their growth. All right, Dr. Ayokone Ademi, I'm sure we'll have to bring you back again to talk more because when we talk about small and medium enterprises, there's an array of issues that need to be tackled and we cannot just exhaust all of them in just one episode. Once again, and many thanks for sharing all of your useful insights on this supply chain financing. We do appreciate your time. Thank you. Thanks for having me, Justin. All right, and that's the size of the show for today. That's as much as we can take on today's edition of Business Insights. We'll return to your screen again, same time. On Monday, my name is Justin Akadone. Many thanks for being a part of the show. Bye for now.