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Bridging trade finance gap in a sustainable way


Petty traders selling food items in one of the markets in Lagos

Issues of access to credit remain a persistent problem for businesses everywhere, especially for those in developing economies. In Nigeria, development financial institutions are exploring new measures to reach the bottom of the pyramid for deepened market access and economic development. FEMI ADEKOYA writes.

Micro, Small and Medium Enterprises (MSMEs) are often described as the engines of growth and employment generation in the country.

The sector has always discussed problems arising due to the scarcity of capital.


Not because capital is scarce but the ease of access is almost non-existent due to the risks of lending to the sector.

Nearly all banks prefer to lend to MSMEs only against collateral.

Current trend is that majority of lending to MSME sector is against property mortgaged by promoters or owners or partners of MSME unit to the bank.

De-risking small businesses for ease of access to finance however requires innovative measures that look beyond the conventional practice and structures.

MSMEs’ finance gap and the challenge for everyone

Though figures from the Central Bank of Nigeria (CBN) showed that credit to the private sector fell in May 2018 to N22.207 trillion year-on-year, as against the N22.254 trillion it was in April, very little percentage of this volume was accessed by small businesses.

A survey by International Finance Corporation (IFC), shows that only 31% of Nigerian MSMEs have ever obtained a loan from a commercial or microfinance banks.


The main reason for this low figure is that MSMEs lack the assets or collateral required by banks to guarantee the borrowed funds.

Thus, lending remains concentrated to sectors where tangible assets are available.

In Q1, 21.9% of total banking credit was allocated to the Oil & Gas sector, while another 13.29% was given to the manufacturing sector.

On the other hand, sectors such as Agriculture and Education account for only 3.21% and 0.47% respectively.

The country ranks sixth globally on the Getting Credit sub-index of the Ease of Doing Business.

The index focuses on the credit infrastructure and assesses the laws that surround credit information gathering and movable collateral.

“Nigeria must improve its ranking by 45 places in the World Bank Ease of Doing Business Index over the next two years to achieve its goal of attaining the top 100 by 2020,” Dr. Jumoke Oduwole, the PEBEC Secretary and Senior Special Assistant to the President on Industry, Trade and Investment, said after the presentation of the “2018 Making Business Work Report” of PEBEC, at a meeting of the Council recently.


“Such an ambitious goal requires accelerated and focused execution of Government Executive Order and National Action Plans (NAP),” she added.

For the banks, the challenge is to reach MSME segment and for small business owners to access finance.

The key products through which banks lend to MSMEs is working capital finance (in form receivable discounting and / or basis trade assets), loan vehicle / equipment purchase, project finance, and long term finance.

The challenges faced by MSME in accessing finance is lack of comprehensive formal documentation relating to accounts, income and business transactions.

Therefore MSMEs end up accessing finance mostly through mortgage of property whereby banks comparatively, rely more on the security given than the understanding of the business and the strength of it in terms of cash flow.

In this scenario, the majority of MSMEs with absence of collateral find it difficult to access credit through formal sources.


BoI’s response to the challenge

In any market, it is the onus of the service provider to devise methods and design products to meet the customer requirement.

Therefore, financiers/ banks have to take upon themselves to understand the MSME sector better, design relevant products and processes and reach out to target MSMEs and fulfil their responsibility of an efficient financial intermediary towards nation building.

While more developed countries have an array of formal financial institutions offering credit in the form of private equity, venture capital, credit union loans and peer to peer-financing, the Bank of Industry (BoI) has deployed Trader Moni, an initiative of Government Enterprise and Empowerment Programme (GEEP) to deepen access to finance to the class of MSMEs that are under-served.

According to Mrs Toyin Adeniji, Executive Director, Bank of Industry, “The goal of Trader Moni is to take financial inclusion down to the grassroots.

The President Muhammadu Buhari-led administration recognised the contribution of petty traders to economic development and identified the fact that some of them may not have what the commercial banks may require to grant loan, hence, his support for this initiative to help them grow their businesses.”


Chief Operating Officer, GEEP, Uzoma Nwagba said: “This initiative is aimed to expand financial inclusion because we have over 23 million Nigerians that are financially excluded, this administration aimed to reach them so that they can grow their businesses.”

In addition to Trader Moni, GEEP has ‘Farmer moni’ for farmers which avail them opportunity to access up to N300,000 loan each; ‘Market moni’ which targets market women, traders and artisans to get between N50,000 and N100,000.

Under Trader Moni, an MSME can access N10,000 and pay back N10,250 to qualify for N15,000. Once such business pays back N15,375, the business qualifies for N20,000 loan and when N21,000 is paid back on such a loan, the MSME will get N50,000.

All loan categories have payback duration of six months.

Repayments can be made to BOI-GEEP loan account under PayDirect at banks.

Stakeholders’ response

Though Trader Moni was launched on recently in five markets in Lagos; Ketu, Mushin, Ikotun, Agege and Abule Egba, Chief Mrs. Mufliat Adewunmi, Iyaloja of Ojuwoye Market was full of praise for the government for this laudable initiative.


“We are happy about Trader Moni because it is a thing we have been expecting.

The government should assist the masses especially the traders.

We thank Trader Moni, we thank the Federal Government for bringing this program to us.

It will help a lot, especially we traders because we all know what we have been facing to get loans”, she added.

For traders like Lucy who never believed the government could do anything for her, she is now singing a new song.

She says the money will not just benefit her business but help to provide for her family.

Regarding the repayment, she said, “Before that six months, I will repay the N10, 000.

Trader Moni, I like it so much. Government, thank you.”

To make the scheme sustainable however, small business owners have to equally understand their responsibility in providing all necessary information in a transparent manner so as to enable the financier make their decisions as well as increase the chances of other businesses in access soft loans.

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