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Imperatives of MSMEs’ development for nation’s growth

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CBNTHE Central Bank of Nigeria (CBN) has reiterated the need to strategically position the Micro Small and Medium Enterprises (MSMEs) to enhance the growth of the nation’s economy.

But as a test of its commitment, the apex bank disclosed that it had already disbursed N40.3 billion out of N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) to state governments, and Participating Financial Institutions (PFIs).

The Head, Relationship Management, MSMEDF, of the Development Finance Department, CBN, Tobin Jonathan who made the disclosure at a three-day workshop organized by the Bankers’ Committee, explained that due to the low access to the N220 billion, CBN reviewed the criteria for accessing the funds.

According to him, the process was aimed at facilitating disbursements of the funds to targeted operators in the MSMED sector of the economy, adding that since 2014 when the fund was introduced, only N814 million had been assessed by commercial banks, which according to him was not good enough for just 21 projects.

Already, the Project Manager of the International Finance Corporation (IFC), Ubong Awah, had said that IFC was collaborating with CBN to establish a National Collateral Registry to stabilize MSME financing and also boost the confidence of Nigerian banks in playing active roles in financing the sector.

According to him, the MSME sector is an important catalyst for economic growth and financing the sector needs serious attention.

But Jonathan, who represented the Director of Development Finance Department, Dr. Mudashiru Olaitan, said the workshop was organized to cross-fertilize ideas and bridge the knowledge about the MSME sector by the lending institution and to also correct the wrong perception of the risky nature of the sector.

“The rejection rate of MSME applications by commercial banks is very high. We are aware this is necessitated by the banks’ aversion to risk due to lack of entrepreneurial skills and poor governance structure of most MSMEs, hence the need for the workshop to enlighten the bankers and encourage them more on the need to partner with us to grow the sector.

He pointed out that CBN was looking at other PFIs, microfinance companies, among others, to help facilitate access to funds by entrepreneurs and collaborations, to enable the funds get’s out of the treasury chest for people to use it.

“As we speak, N40.3 billion has been disbursed to state governments, to commercial banks, to MFBs, to cooperatives. We have disbursed to 19 state governments and some of them have taken first tranche of N1 billion; N2 billion. We have also disbursed to many microfinance banks (MFBs).

“MFBS have received N2 billion so far; commercial banks N814 million, and Micro Finance Institutions N100 million, plus applications we are also processing. It is an ongoing process. We believe that very soon, the effect of this fund will begin to impact on the economy,” he said.

He disclosed that complaints from the MSME operators showed that the criteria were too strict and difficult to meet, the reasons that made the CBN governor, Godwin Emefiele, to relax the criteria across board to make the funds more accessible.

According to him, when the PFIs said that the collateral required to access the funds was an issue, the governor reduced it significantly, stressing that with that reduction there have been some improvement in the application level.

He added that the CBN has also addressed all other complaints raised by PFIs including the spread of profit to cover their cost of operations.
“So they can collect the forms at two per cent and give it out at five per cent. So they have seven per cent spread which is good enough. That has encouraged so many of them to begin to apply,” said Jonathan.

Awah, a resource person at the workshop, reassured that IFC and CBN are collaborating to establish the National Collateral Registry, which will be launched by June”.
He said it is important, as part of effort to stimulate financing to the MSME sector in Nigeria stressing that collateral registry will provide part of the infrastructure for pushing the initiative ahead.

“So we are here to create awareness on this, and also enlighten operators, the banks together with the CBN on the benefit of collateral registry. MSME sector is important. And financing in that sector is something that also needs to be attended to.

“It needs some level of capacity. Some level of capability we are bringing to the table because we are involved in many projects on this.
We are collaborating with government to do this. So we are bringing expertise and experiences we have over the years and all over the world to make it available to credit offices with the understanding that they will be knowledgeable in this; better equipped and enabled to better drive the process.

“As an organization, IFC is bringing the experience we have garnered over the years across geographies to bridge the knowledge gaps and to lay emphasis on the fact that globally, collateral for MSME is moving away from fixed assets to movable assets, hence the need to establish a collateral registry for the financial industry. We are excited to partner with Central Bank on this initiative”, Awah said.



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