Why MSMEs need financial literacy to strive best-Report

The FATE Foundation in association with the Association of Chartered Certified Accountant (ACCA) in a report has found out that not less than 73 per cent of Micro, Small and Medium-sized Enterprises (MSMEs) are financial illiterates.

The study, however, recommended that there is an urgent need for greater financial literacy skills, which plays a significant role in the low levels of successful access to external finance.

This was disclosed in a report titled: ‘Improving financial literacy amongst Nigerian MSMEs’ while recognizing financial literacy as a major life skill vital in building sustainable businesses.

The report, also, stated that for entrepreneurs, it is a skill-based on having the knowledge required to undertake a broad range of activities integral to business success, including planning and managing business finances; identifying funding requirements and financial risks, complying with regulation and understanding the financial and the economic landscape in which the business operates.

However, 82per cent of entrepreneurs interviewed said they had no accountancy knowledge, while 20 per cent of respondents interviewed believed financial literacy wasn’t important to their business.

Based on the report’s findings, which surveyed 6200 of Nigeria’s MSME entrepreneurs, several recommendations were made, including some of the following: “Demonstrates the importance of financial literacy: Entrepreneurs must recognise their knowledge gap. Action is needed to persuade a greater number of entrepreneurs that financial literacy is a key that opens the door to wider investment opportunities. This means that investors themselves also need to be clearer with MSME entrepreneurs about where their skill gaps and training needs lie.

Comments

Commenting, the head of ACCA Nigeria, Tom Isibor said, “Nigeria has a real opportunity to be the most dynamic economy in Africa. One of the biggest challenges restricting this is our problem with financial literacy. This is a timely report which provides suggestions on how this country can benefit from improving its financial literacy, especially within the MSME sector – creating more sustainable, successful businesses.

The Executive Director, FATE Foundation, Adenike Adeyemi, said, “Understanding the most important foundational knowledge (financial literacy) required by Nigerian entrepreneurs are the first step to effectively supporting and enabling them. Our report provides the framework and guidelines required by any individual or organisation providing capacity building, advisory services and business development support to Nigerian MSMEs.”

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