AFRICANGLOBE – The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has disclosed that the N220 billion micro small and medium enterprises (MSMEs) fund will be accessed by Microfinance Banks (MFBs) at a maximum interest rate of nine percent.
The fund was officially launched in Abuja Thursday. The MFBs are in turn expected make the funds available for on-lending to young entrepreneurs, particularly businesses managed by women at reasonable rates.
Sanusi, who inaugurated the facility at the 7th Annual MSMEs Finance Conference and D-8 workshop on microfinance for SMEs themed: “Strategies for Sustainable MSMEs Financing”, said the fund would further boost access to finance by MSMEs by providing wholesale financing windows for participating financial institutions (PFIs) as well as improve their capacity to meet credit needs of MSMEs.
The central bank governor further said the initiative was expected to offer funds at reduced cost to PFIs and particularly improve access of women entrepreneurs to finance, reiterating that 60 per cent of the fund would be allocated to women.
According to him, the intervention would also improve access of Non-Governmental Organisations (NGOs) to finance.
Sanusi however, cautioned that MFBs’ access to the fund would not be automatic as they would still need to apply for the fund and meet certain regulatory requirements including competence as well as a record of good behaviour.
It was learnt that prospective beneficiaries of the fund would also need to present a three-year financial report.
The CBN governor said it would be premature to estimate the actual economic impact of the fund because governments at all levels also needed to improve the state of infrastructure in their states in order to complement access to finance.
Sanusi said as at 2012, the country had about 17.6 million MSMEs employing about 32.4 million people, who contribute about 46.54 percent of nominal GDP.
However, citing a survey by the International Finance Corporation (IFC) in 2010, he said 80 per cent of the MSMEs were excluded from the financial markets.
According to him, commercial bank loans to small scale enterprises declined from 7.5 percent in 2003 to only about 0.14 percent in 2012. He said: “A number of reasons have been proffered for this financing gap. The banks readily attribute their risk aversion stance for not lending to MSMEs to demand-side constraints, which include the lack of managerial capacity, inadequate collateral, and poor record keeping, amongst others.
“However, there also exist supply-side issues such as high transaction costs and lack of understanding by the banks of the nature and operations of MSMEs Other constraints plaguing the MSME sub-sector in Nigeria include infrastructure deficit (especially, power and transport), policy inconsistencies, bureaucracy, multiple taxation and levies, weak intellectual property protection and contract enforcement, and insecurity.” Meanwhile, the Governor of Edo State, Comrade Adams Oshiomole, his Ekiti State counterpart, Dr. Kayode Fayemi as well as the Kano State Governor, Alhaji Rabiu Kwankwaso-all commended the CBN intervention fund in the MSME sector.
Oshiomole at a joint media briefing shortly after the event, said the new MSME scheme showed that the CBN Governor was still in touch with the masses especially the youths and women in the country.
He said the CBN must go beyond the launch and employ aggressive supervision to ensure that MFBs adhered to stipulated interest regime to customers if the scheme must succeed.
Fayemi on his part said the fact that a huge chunk of the fund would be provide to women was a commendable move adding that women were key to economic development and poverty reduction in the country.
The President, National Association of Microfinance Banks (NAMB), Mr. Jethro Akun, welcomed the initiative stressing that it would provide liquidity and force down lending rates.
By: James Emejo