Capital Market Financing for SMEs

Tuesday, July 09,2019 / 12:49PM / By SEC Nigeria / Header Image Credit: SEC and APKPure.com

EXECUTIVE SUMMARY

Micro, Small and Medium Enterprises(MSMEs) in Nigeria face a financing gap that restricts their economicprosperity. This report examines the prospects of capital markets solutions forMSMEs financing in Nigeria. It maps out the main features of capital marketfinancing technique. It details the enabling factors, listing requirement andreviews international experiences. The report appraise IOSCOs recommendationson how to close the financing gap and outlines actionable solutions that couldmake the capital market a more effective and viable source of finance.

1.0 Introduction

1.1. Background and rationale

There are an estimated 37,067,416million Micro, Small and Medium Enterprises (MSMEs) in Nigeria, out of whichover 36,994,578 million are micro-enterprises, 68,168 are Small and 4,670 aremedium (SMEDAN 2013). MSMEs represent 96% of the businesses in Nigeria andcontribute 84.02% of national employment1. In nominal terms, the sectorcontributes an estimated 46.54% to the nation’s Gross Domestic Product(NEPZA2013). Thus growth in the MSME sector is directly linked with growth in theNigerian economy and in the level of employment.

World Bank estimate2 identifies MSMEslack of access to formal financing of their productive activities as a keyconstraint to business. 73.24% of the top most priority of assistance needed byMSME operators was access to finance(SMEDAN 2010).As a result, many NigerianMSMEs fund their activities through retained earnings as only a few largeenterprises benefit from formal financial sector intermediation for theirworking capital or investment needs(IMF 2013). It is estimated that, despitethe fact that 80 percent of MSMEs seek financing only 5 percent of enterpriseshave a loan (ibid).

In light of the important role MSMEsplay as engines of growth, it is critical to ensure that MSMEs in Nigeria haveaccess to the necessary credit they need to expand and continue to performtheir function in investment, growth, innovation and employment. In a countrywhere underemployment is estimated at 70.5%3, MSMEs finance is important insupporting growth and reducing poverty through employment creation. Nigerianeeds to support the sector given its potential opportunities for growth andpoverty reduction.

The capital market presents anopportunity of financing the MSME sector. Capital markets have always played arole in bringing together those with savings to invest and those who needcapital thereby supporting economic growth. The International Organisation ofSecurities Commissions (IOSCO) has emphasized the need for capitalmarkets to support small and medium-scale enterprises in addressing thisfinancing challenge by providing alternative funding sources.

This report examines MSMEs access tothe Nigerian capital market and explores possible measures to develop andenhance their access. The report is structured as follows. Section 2 providesan overview of the classification of MSMEs in Nigeria and briefly reviews theNational policy on MSMEs. Section 3 begins by exploring the state of MSMEsfinance and provides an overview of select number of interventions. Section 4,introduces the concept of Capital market financing and introduce the NigerianAlternative Securities Market Board (ASEM). In section 5, we outline IOSCOsguidelines on SME financing through the capital market while Section 6concludes.

2.0 Overview of the MSME Market

2.1 Definition of Micro, Small andMedium Enterprises (MSMEs)

According to the National Policy onMSMEs, the definition for micro, small and medium enterprises adopt aclassification based on the dual criteria of employment and assets (excludingland and buildings) as shown below. Whenever there exist a conflict onclassification between employment and assets criteria the employment- basedclassification will take precedence.

Micro Enterprises employ between 1 and9 persons. The 2013 National MSME collaborative survey put the estimated numberof micro enterprises at 36.99 million with a minimum total employment of 57.84million. This group is dominated by those who engage in wholesale & retailtrade, repair of motor vehicles and household goods which accounts for about54.67% followed by manufacturing (13.21%). Other numerically significantsectors include agriculture (8.92%), other services (7.80%), accommodation andfood services (5.51%), transport & storage (4.76%) and arts, entertainment& recreation (1.06%).

Classification of MSMEs (according tothe National Policy on MSMEs)

Proshare Nigeria Pvt. Ltd.

Source: NationalPolicy of MSMEs

Small enterprises employ from 10 - 49persons and cover the same range of enterprise types concentrated in the moremodern end. The 2013 National MSMEs Survey put the number of small enterprisesin Nigeria at 68,168.

Medium enterprises are the formal faceof Nigerian enterprises employing between 50 and 199 persons. The 2013 NationalMSMEs Survey put the number of medium enterprises in Nigeria at 4,670. Themedium enterprises are concentrated in manufacturing, transportation,information and communication technology, agro & agro-allied and oil &gas.

2.2 National Policy on micro, smalland medium enterprises (MSMEs)4

In May 2015 the Federal Government ofNigeria approved the revised national policy on MSMEs. It is a comprehensiveand robust national policy to appropriately guide the current MSME environment.The current policy will be in place from 2015 to 2025 and be reviewed everyfour years. The original National Policy on MSMEs was developed and launched in2007 by the Small and Medium Enterprises Development Agency of Nigeria(SMEDAN). However initial implementation was plagued by limited stakeholderbuy-in from public and private sector institutions, lack of strong commitmentto MSME development by all tiers of Government, weak synergy amongstinstitutions involved in MSME development, Ineffective funding of the MSMEdevelopment process(SMEDAN,2015; Agusto & Co, 2016).

The National Policy on MSMEs outlineskey objectives, strategies and programmes for influencing development of MSMEs.The Policy delineates several programmatic areas as follows: finance, institutional,legal and regulatory framework, human resources development, technology,research and development, extension and support services, marketing andinfrastructure & cost of doing businesses. The policy will give thenecessary sturdy framework and guidance for the MSME stakeholders and willcreate an enabling environment for MSMEs to thrive.

3.0 Access to Finance

3.1 The State of SME Finance inNigeria

Nigeria’s businesses are starved ofcapital, poor access to finance constitutes a major constraint for NigerianSMEs5 and is continuously touted as the main challenge affecting MSMEs inNigeria. The exorbitant lending rates (ranging from 21% - 30% for commercialbanks to as high as 48% - 60% per annum for microfinance banks) discourageMSMEs from accessing bank loans6. Nigeria is also reported to have the shortestaverage loan maturity (21 months) among comparison countries, such as Kenya,Brazil, China and India(Iarossi, Mousley et al. 2009).

High interest rates on Governmentsecurities also act as disincentive to banks to intensify lending to MSMEs7.These reasons are why the bulk of Nigerian MSMEs rely on equity from personalsavings and contributions from family and friends as capital, which largelyproves inadequate.

According to World bank estimates, asof 2012, only 5 percent of SMEs have a loan, despite the fact that 80 percentof them seek financing. Furthermore, financing constraints seems to depend onthe size of the firm. An estimated 59 percent of small firms reportdifficulties in accessing finance compared to 35 percent of medium firms and 11percent of large SME firms.

The main reasons Nigerian SMEs givefor not applying for loans are:

short loan maturities,
inaccessible collateral requirements,
high interest rates and
cumbersome application procedures.

3.2 Access to funding for Micro, Smalland Medium Enterprises (MSMEs)

Over the past few years, the FederalGovernment has introduced a number of financing schemes in order to increaseaccess to finance for the MSME sector. Below is a list of a select few;

Small and Medium EnterprisesEquity Investment Scheme (SMEEIS)

The scheme was launched in 1999 andrequired all banks in Nigeria to set aside 10% of their profit after tax (PAT)for investment and promotion of small and medium enterprises.

CBN’s ₦200 billionRefinancing and Rediscounting Scheme (RRF)

The scheme was launched in 2002 toencourage medium and long-term loans to the real sector for growth anddevelopment. Eligible projects have a concessionary rate of 2% below minimumrediscounting rate (MRR). The scheme also aimed to encourage medium and longterm lending in order to expand and diversify the country’s production base.

CBN’s ₦235 billionSmall and Medium Enterprises Credit Guarantee Scheme (SMECGS)

Launched in April 2010, the fund isadministered at the prime lending rate of the participating bank. The schemetarget market was Manufacturing, Agricultural value chain, Educationalinstitutions. The Fund objectives were to accelerating the development of theSME manufacturing segment by providing credit guarantee from banks to SMEs andmanufacturers.

Increasing output, generatingemployment, diversifying the revenue base increasing forex earnings andproviding sustainable inputs for the industrial segment.

Real Sector Support Facility(RSSF)

The ₦300 billion fund launched in 2014 targeted Manufacturing,Producing and processing of tangible goods, Fabricating, deploying plants,machinery or equipment to deliver goods or providing infrastructure tofacilitate economic activity in the real sector Agriculture, Services. The fundobjectives were to fast track the development of SMEs in the manufacturing,agricultural value chain and services sub-sectors.

The National EnterpriseDevelopment Programme

The National Enterprise developmentprogramme is a strategic way of addressing the critical factors that haverestricted the growth of the MSME sector. NEDEP interventions cuts across alltiers of enterprise and provides the tools to assist enterprises grow frommicro to small, small to medium and medium to large.

4.0 SMEs funding through the capitalmarket

4.1 Capital Market financing

In order to address financingchallenges that are facing small and medium sized businesses capital marketsolutions are increasing being adopted. Capital markets are clear alternativeto bank lending and MSME funding could be sourced from the capital markets10.However, raising capital by issuing equity or debt securities attracts highaverage transaction costs, arduous listing requirements and complex legal andregulatory frameworks11. For these reasons, it has been mainly large firms thatusually access the capital market (Peterhoff et al, 2014).

SME focused equity platform is acapital market solution available to well established SMEs offering analternative to the main listing boards on national stock exchanges. The SMEplatform acts as a second-tier listing alternative and such platforms arecharacterized by lower listing requirements and costs to list than the mainboard. SME equity platforms are best suited to the largest SMEs such as themedium segment due to the initial cost and ongoing listing requirements most platformsdemand (Peterhoff et al, 2014).

According to IOSCO(2015)12, certain jurisdictions have implementedthe SME platforms differentiating SME issuers from others in capital markets.Successful platforms across the world that have grown briskly and maintained asubstantial number of listings include the Alternate Investment Market(London), TSX Venture (Canada), HK GEM (Hong Kong), Mothers (Japan), Alternext(Europe) and AltX (South Africa) (Peterhoff et al, 2014).

4.2 Nigerian Alternatives SecurityMarket (“ASeM’’)

The Alternative Securities Market(ASeM) is a specialized board of the Nigerian Stock Exchange (NSE) for emergingenterprises with high growth potential. ASeM provides smaller companies theavenue to access the capital market and raise longterm finance through lessstringent listing rules and requirements in line with regulatory requirements,of the Corporate Affairs Commission(CAC) and the Securities and ExchangeCommission (SEC)(Onyema 2013; NSE ND).

Businesses could list in one of thetwelve sectors on the NSE: Agriculture, Construction/Real Estate, ConsumerGoods, Financial Services, Industrial Goods, Information &CommunicationsTechnology (ICT), Natural Resources, Oil & Gas, Services Utilities, andConglomerates. ASeM is designed to address issues and challenges associatedwith emerging businesses in Nigeria, which include but are not limited to:Difficulty in accessing long term capital due to high cost of funds as a resultof perceived high risk Increased cost of operations due to inadequate basicpublic infrastructure, including access roads, power, security, etc. Inabilityto build capacity required to deliver results due to high staff turnoverInformal nature of operations, which undermines strategies, policies, processesand corporate governance Lack of proper accounting standards, controls andmanagement of financial resources (NSE ND).

Small and medium sized companies withhigh growth potential are given the opportunity to raise long-term capital fromthe capital market at a relatively low cost, thereby enabling them to grow andinstitutionalize.(Ajumogobia&Okeke 2015).

GMA (2013) listed the benefits oflisting as follows:

Access to long term capital for growth and expansion
Platform for facilitating long term sustainability of the company
Reduction of financial burden and spreading of risks amongst shareholders
Access to investors focused on high growth potential SMEs in emerging markets
Professional guidance (Designated Adviser) to ensure company benefits
Opportunity for initial investors to realize some or all of their investments
Liquidity of the market
Reduced stringent listing requirements
Transparent price discovery mechanism

Before a company can be listed on theASeM, it must satisfy the following pre-listing requirements:

Pre Tax Profits-Medium term (at least 2 years) comprehensive business plan
The company must submit financial statements/business records for the 2years prior
Financials-Date of last audited accounts must not be more than 9 months
Minimum of 15% of share capital must be offered to the public
At least 51 shareholders

Listing on the ASeM can be done eitherthrough:

Initial Public Offer or
Introduction

Owners may retain up to 85% of totalshareholdings of the company; requirement is for 15% minimum public ownership .Concern about associated cost of being listed:The benefits of being listed faroutweigh cost as applicable fees on ASeM are relatively low. Disclosures willimprove the adherence of the company to transparency, which improves confidenceand brand integrity(Onyema 2013).

4.3 Challenges of AlternativesSecurities Market (“ASeM’’)

Omoluabi Savings and Loans PLCrecapitalized to meet the CBN capital base requirement for the primary mortgageinstitutions through ASeM in the twilight of 2013 (Morgancapitalgroup 2014).This was the first straight equity IPO in the capital market since therecession of 2008. This gave impetus to the IPO market and the ASeM as moreinvestors and institutions signified interest in raising capital through ASeMplatform.

However, as of June 30, 2016, ASeMcurrently had 9 Equities listed with a market capitalization ofN8,443,180,449:00. The 52-week change of the NSE ASeM index from July 2015 toJune 2016 is only 0.01%(NSE). The NSE ASEM Index is currently 1,213.68 pointsas investors shy away from these companies’ stocks. In spite of regulatoryefforts at reviving the alternative securities market (ASeM) of the NigerianStock Exchange (NSE), companies listed on this segment of the market are yet toattract the needed liquidity from local and foreign investors.

ASeM was meant to provide the opportunity for small companies toraise long-term capital at relatively low cost from the capital market. TheAlternative Securities Market (ASeM) appears to be heading the same path as theSecond Tier Securities Market (SSM). Consequently, the NSE’s goal of achievinga $1 trillion market capitalisation by 2016, has not been realized.

5.0 IOSCO guidelines to ease SMEs’access to capital markets

In its detailed report on 'SMEFinancing through Capital Markets', IOSCO issued the following sevenrecommendations to make it easier for SMEs to access capital market.

(i) Review current securities regulatoryrequirements on SME issuers1314

Regulators should remove disclosure requirements that are of less significance to SMEs
Make relevant information on SMEs more readily available to allow for informed decisions
Reduce the scale of requirements such as: amount of minimum paid up capital, the number of years of operation and minimum free float, revenue, market capitalization, the number of public shareholders, the number of minimum shareholders, equity, paid up capital and profitability.
To reduce the cost of capital, it is necessary for regulators to reduce registration and listing fees for SMEs.
Regulators should delegate market operators with the responsibilities of appraising the prospectuses of companies seeking admission to SME markets.
Consider paving way for an SME agency to bear the cost of IPOs

(ii) Offer alternatives to a publicoffering.

In terms of access route, an alternative window for SMEs should be provided to access financing from capital markets. Even with no prospectus or modified prospectus or offering document certain prescribed SMEs could be allowed to conduct Private placements. Given the costs, time, and disclosure requirements associated with a public offering, SMEs that prefer to stay private with no intention to ever become public entities can still be able to obtain funds through the capital markets.
Issuance options such as private placements and hybrid offer regimes should be made more available. These options will increase the flexibility of the primary market’s regulatory framework and attract and facilitate SME financing.

(iii) Ensure investor protection.

Investor confidence is important for increase in investment flows into the SME markets. Retail investor need to be particularly protected given their importance as the main investors in SMEs securities. Hence, the challenge for regulators is to strike the right balance between an adequate level of investor protection and the optimum level of requirements for issuers. Although less disclosure should not necessarily mean less investor protection.
Where necessary, additional disclosure requirements can be placed on SME issuers to underscore any big investment risks unique to them.

(iv) Support the market for SMEshares.

For the benefit of the market, regulators should introduce a market making system for liquidity of SME shares. This will guarantee SME securities have reliable price formation process and increase the number of shares held by the public. The reverse will be the case where there is inadequate liquidity.
Regulators should promote accessibility to good investment research information. Inducements that will promote independent research on and ratings of SMEs should be provided. Investors are generally not eager to pay for research on SMEs due to high cost. Potential investors should have access to research and rating information in order to reduce the information asymmetries associated with smaller companies. This can be improved through publishing periodic analysis and rating reports by relevant institutions on SME securities.
In order for SMEs management to remain committed and that securities issued are appropriately valued. Policymakers could consider introducing lock up provisions that would allow an SME to grant another company the option to buy its stock as a prelude to an acquisition,15 this will guarantee that.

A low number of outstanding shares and a narrow investor base can make it difficult to sell SME shares. Introducing a market-making system may help.
Frequent investment research on SME securities by relevant institutions should be encouraged so that investors interested in SMEs could easily and cheaply access the analysis and rating information.
Policymakers should consider introducing provisions that would allow an SME to grant another company the choice to buy its stock as a prelude to an acquisition. This will protect the integrity of the SME market. Similar lock-up provision would ensure that management remains committed and that securities issued are appropriately valued.

(v) Increase financial literacy/public awareness for the need of SME financing.

Regulators and policymakers should organize promotional campaigns, public seminars and conferences to increasing public awareness on the importance, benefits and the need for SME financing
Regulators should also conduct surveys to examine why SMEs fail to exploit the full advantage of the capital markets, to determine their willingness to access the capital market
Furthermore, regulators should explore setting up an internal working group or development team to promote SME access to capital market financing.
It is important for regulators to set up training and education initiatives in order to promote SMEs compliance. Regulators could consider setting up teams to respond to SME questions relating to regulatory requirements. SMEs may be reluctant to explore the benefits of capital markets owing to a lack of professional staff that are able to comply with technical regulatory requirements.
To inform, educate, publish analyst reports and assist SMEs and investors, Policymakers could consider setting up a website

(vi) Set up a system to ensure thatSMEs comply with regulatory requirements.

Compliance with regulatory requirements should be monitored more closely. A special team for direct monitoring of SME compliance could be set up. However, proportional and lighter regulation for SMEs does not mean that supervision should also be lighter for SMEs.
Furthermore SME compliance with security regulatory requirements could also be promoted through the use of nominated advisers. These advisers will be registered with a stock exchange and will assist SMEs during the application procedure for listing on the stock exchange. The advisors will also be liable jointly with the issuer - for the accuracy of the information and documents disclosed to the public.16
To maintain investor confidence and market discipline, shares of SMEs should be closely monitored and investigated where necessary given they are likely to be more susceptible to market manipulation
SME agencies, governmental bodies, stock exchanges and public authorities needs to harmonize their efforts and also explore alternatives.

(vii) Foster investor demand for SMEshares.

There should be measures to promote long term institutional investor demand for SME securities as retail investments are likely to remain an inadequate source of financing.
The top rated SMEs should be considered for inclusion into pooled securities structures in order to draw institutional investors and lower transaction costs.

6.0 Conclusion / Key Takeaways

6.1 Conclusion

The capital market is critical to acountry's economic development. Long-term financing is an essential element forsupporting investment and growth. Access to long-term financing enables MSMEssolves their financing needs over the long term and this has a positive effecton economic growth and on employment generation.

6.2 Key takeaways

MSMEs play important roles as engines of growth therefore it is critical to ensure that MSMEs in Nigeria have access to the necessary credit they need to expand and continue to perform their function in investment, growth, innovation and employment.

The capital market presents an opportunity of financing the MSME sector. Capital markets have always played a role in bringing together those with savings to invest and those who need capital thereby supporting economic growth.

The SEC should consider reducing disclosure obligations that are of less value to SMEs. In addition to registration and listing fees for SMEs. This will go a long way to reducing the hurdles for SMEs to list in the stock market

For SMEs that have no plans to go public, the SEC should explore the possibility of backdoor listing for prescribed firms

The SEC should further strengthen its drive towards investor protection as this will build confidence on the SME capital market without putting burden of SMEs

Measures to improve liquidity of the market for SME shares should be pursued and improve the investor base

Cheap and affordable analysis and rating information related to SMEs should be readily available to interested investors. Periodic investment research on SME securities should be promoted.

There should be room for lockup provisions. In the event of an acquisition SMEs should be allowed the right to grant another company the option to buy its stock. This will ensure management remains committed and that securities issued are appropriately valued.
The benefits of capital markets can be promoted by Regulators and policymakers through such mediums as promotional campaigns, public seminars, and conferences. This will increase public awareness of the need for SME financing.

To enlighten, inform, and aid SMEs and investors, Policymakers should put up a website for publishing periodic analyst reports for SME securities.

There is need for a team to respond to SME questions and supervise compliance with regulations.

SME shares should be closely monitored and investigated when necessary for market manipulation.

Authorized Nominated advisers registered with the stock exchange should assist SMEs during the application procedure for listing on the stock exchange. The advisers along with the issuer should be held liable for the accuracy of the information and documents released to the public.

Footnotes

The total number of persons employed by the MSME sector as at December, 2013 stood at 59,741,211, representing 84.02% of the total labour force
See the World Bank Enterprise Survey on Nigeria (2008) Fuchs, M. and I. Radwan (2009). " Making Finance Work for Nigeria." Retrieved 11th July 2016, from http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/Making_Finance_Work_for_Nigeria.pdf
Ibid Only 1 in 10 working Nigerians is formally employed
Please refer to SMEDAN (2015). "National Policy on MSMEs." Retrieved 10th July, 2016, from http://www.smedan.gov.ng/images/NBS2015/NATIONAL%20POLICY%20ON%20MSMEsFinal%20Copy.pdf
Iarossi, G., P. Mousley, et al. (2009). "An Assessment of the Investment Climate in Nigeria." Directions in Development. from http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/NIGERIA_ICA_EBOOK..pdf
Agusto&Co (2016). "A Review of the Nigerian MSME Policy Environment." from http://fatefoundation.com/policyreport.pdf
Berg, G. and M. Fuchs (2013). "Bank Financing of SMEs in Five Sub-Saharan African Countries." Working Paper 6563. from http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/08/08/000158349_20130808113228/Rendered/PDF/WPS6563.pdf
Agusto&Co (2016). "A Review of the Nigerian MSME Policy Environment." from http://fatefoundation.com/policyreport.pdf
Fuchs, M. and I. Radwan (2009). " Making Finance Work for Nigeria." Retrieved 11th July 2016, from http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/Making_Finance_Work_for_Nigeria.pdf
Peterhoff, D., J. Romeo, et al. (2014). "Towards Better Capital Markets Solutions For Sme Financing." from http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/files/insights/financial-services/2014/July/FINAL3_BetterCapitalMarketMechanismsSMEs.pdf
ibid
IOSCO (2015, 6th July 2016). "SME Financing Through Capital Markets ". from https://www.iosco.org/library/pubdocs/pdf/IOSCOPD493.pdf
Vollmer, S. (2015). "7 ways to ease SMEs’ access to capital markets." Retrieved 12th June, 2016, from https://www.linkedin.com/pulse/7-ways-ease-smes-access-capital-markets-rodger-stephens-cpa-cgma
IOSCO (2015, 6th July 2016). "SME Financing Through Capital Markets ". from https://www.iosco.org/library/pubdocs/pdf/IOSCOPD493.pdf
This will protect the integrity of the SME market
The Alternative Investment Market (AIM), of the London Stock Exchange delegates a company known as NOMAD with the primary responsibility to help a new company in its admission to the AIM, and to provide advice and to avoid the delisting of the new company. The London Stock Exchange sets strict criteria for becoming an AIM Nomad, in order to safeguard the integrity of the market, and to ensure that existing and prospective AIM companies have access to the high-quality advice they deserve. A similar system is found in a number of jurisdiction, albeit called different names.

References

Agusto&Co (2016). "A Review of the Nigerian MSME Policy Environment." from http://fatefoundation.com/policyreport.pdf
Ajumogobia&Okeke (2015). "A comparative guide to listing on the LSE and NSE." from http://www.ajumogobiaokeke.com/assets/media/348d7dafc86057408411ebc059b527ff.pdf
Berg, G. and M. Fuchs (2013). "Bank Financing of SMEs in Five Sub-Saharan African Countries." Working Paper 6563. from http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/08/08/000158349_20130808113228/Rendered/PDF/WPS6563.pdf
Fuchs, M. and I. Radwan (2009). " Making Finance Work for Nigeria." Retrieved 11th July 2016, from http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/Making_Finance_Work_for_Nigeria.pdf
GMA (2013). "Alternative Securities Market (ASeM)." Goldbanc Management Associates Limited News letter. from http://gma.com.ng/uploads/reports/ASeM%20NEWSLETTER_1.pdf
Iarossi, G., P. Mousley, et al. (2009). "An Assessment of the Investment Climate in Nigeria." Directions in Development. from http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/NIGERIA_ICA_EBOOK..pdf
IMF (2013). "Nigeria: Financial Sector Stability Assessment " IMF Country Report No. 13/140. Retrieved 11th July 2016, from https://www.imf.org/external/pubs/ft/scr/2013/cr13140.pdf
IOSCO (2015, 6th July 2016). "SME Financing Through Capital Markets ". from https://www.iosco.org/library/pubdocs/pdf/IOSCOPD493.pdf.
Morgancapitalgroup (2014). "The Nigerian Economy, the Capital Market, Banks & the CRR Hike To 75%, and the Outlook for 2014." from http://morgancapitalgroup.com/pdf/outlook_2014_report.pdf
NEPZA (2013). "National Enterprise Development Programme(NEDEP)." Retrieved 7th July, 2016, from http://www.nepza.gov.ng/downloads/nedep.pdf.
NSE (ND). "The Alternative Securities Market (ASeM): A Guide to Listing." from http://www.nigerianstockexchange.com/investors/becoming-an-investor/FAQs/ASeM%20-%20Guide%20to%20Listing.pdf
Onyema, O. (2013). The Alternative Securities Market Of The Nigerian Stock Exchange. Launching Of The Alternative Securities Market For Emerging Business, The Muson Centre, Onikan Lagos.
Peterhoff, D., J. Romeo, et al. (2014). "Towards Better Capital Markets Solutions For Sme Financing." from http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/files/insights/financial-services/2014/July/FINAL3_BetterCapitalMarketMechanismsSMEs.pdf
SMEDAN (2010). "2010 National MSME Collaborative Survey." from http://www.smedan.gov.ng/images/collaborative%20survey%20report.smedan-nbs.pdf.
SMEDAN (2013). "SMEDAN and NBS Collaborative Survey: Selected findings." Retrieved 9th July, 2016, from http://nigerianstat.gov.ng/pdfuploads/SMEDAN%202013_Selected%20Tables.pdf
SMEDAN (2015). "National Policy on MSMEs." Retrieved 10th July, 2016, from http://www.smedan.gov.ng/images/NBS2015/NATIONAL%20POLICY%20ON%20MSMEsFinal%20Copy.pdf
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Appendix 1: NSE Listing Requirements:

Proshare Nigeria Pvt. Ltd.

Source: NSE

Appendix II: Members of ASeM

As at 29/04/2013 ASeM had a total ofeleven(11) members with market capitalization of N4.1 billion.

These members are:

Ads Witch Plc
Afrik Pharmaceuticals Plc
Anino International Plc
Capital Oil Plc
Juli Plc
McNichols Consolidated Plc
Rak Unity Petroleum Plc
Rokanna Industries Plc
Smart Products Nigeria Plc
Union Venture & Petroleum Plc
West Africa Aluminium Products Plc

Presently, ASeM has a total of nine(9)members. These are:

Afrik Pharmaceuticals Plc.[Mrs]
Anino International Plc.[Mrs
Capital Oil Plc[Rst]
Juli Plc.[Mrs]
McNichols Plc
Navitus Energy Plc[Dip]
Omoluabi Savings And Loans Plc
Rak Unity Pet. Comp. Plc.
Smart Products Nigeria Plc[Mrf]

Appendix III: InternationalExperiences

The London Stock Exchange’sAlternative Investment Market (AIM), which was set up in 1995, has succeeded inattracting a large number of small-sized companies globally, including a fewIndian ones. AIM facilitates easy entry and less tedious disclosurerequirements, but it has in place an appropriate level of regulation forsmaller companies. It also provides a faster admission process and nopre-vetting by the regulator. Currently, firms have raised almost 30 billionpounds via IPOs on AIM with companies coming from 37 sectors, 90 sub-sectorsand 26 countries (AIM 2014).

The National Stock Exchange (NSX) inAustralia is the fully regulated main board stock exchange focused on listingSMEs. There is an alternative exchange for SMEs in South Africa (Altx). TheShenzhen Stock Exchange in South China’s Guandong Province has a board forSMEs. Similarly, Egypt launched has an SME Exchange (NILEX).

Other SME exchanges are GEM (GrowthEnterprise Market) in Hong Kong and the Market of the High-Growth and EmergingStocks (MOTHERS) in Japan. GEM is a separate dedicated stock exchange differentfom AIM and MOTHERS, which are trading platforms of their respective main stockexchanges.

Other initiatives include TSX VenturesExchange (TSX-V) in Canada, Catalist in Singapore, KOSDAQ in the Republic ofKorea and MESDAQ in Malaysia. NASDAQ also started as an SME Exchange andprovides special facilities for listing of small and medium enterprises.

The Rwanda Stock Exchange (RSE) has also started an initiative forsmall and medium enterprises’ (SMEs) listing on the alternative market segmentof the bourse. The Istanbul Stock Exchange (ISE) in Turkey has a particularsegment catering to the funding requirements of SMEs.