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Public Sector SME Grading System in Emerging Markets: A Focus on Nigeria

By: Saveshen Pillay, Anywhere Sikochi, Charles Odii, Zaakirah Ismail, Regina Bamaiyi and Denise Mubaiwa
  • Format:Print
  • | Language:English
  • | Pages:40
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Abstract

In this paper, we explore the impact of creating a public sector nano, micro, small and medium enterprise (nMSME) grading system in Nigeria. Using insights from work with the Nigerian government, the first country in Africa to attempt to establish a public sector SME grading system, we showcase the potential economic benefits of the public sector model. We show that SMEs exposed to SME gradings can contribute as much as US$28 billion to the Nigerian economy over a 5-year period. This potential benefit can be used as a proxy for the potential impact that can be derived by other emerging market economies wanting to implement a similar model. Given the challenges faced by most private sector rating agencies focusing on SMEs, we propose a public sector model as an alternative solution. The public sector model has been successful in Europe, and the work completed within the Nigerian project highlights how the model can be calibrated to be effective within an emerging market setting. Subsequent survey evidence presented in the paper indicates that various stakeholders, including lenders and the nMSMEs fully support the creation of the public-sector rating agency.

Keywords

Small Business; Economic Growth; Emerging Markets; Economic Sectors; Africa; Nigeria

Citation

Pillay, Saveshen, Anywhere Sikochi, Charles Odii, Zaakirah Ismail, Regina Bamaiyi, and Denise Mubaiwa. "Public Sector SME Grading System in Emerging Markets: A Focus on Nigeria." Working Paper, October 2024.

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