• Friday, July 12, 2024
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BusinessDay

Relaxing conditions for accessing N220bn MSMED

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Efforts are geared towards relaxing conditions for accessing the N220 billion Micro Small and Medium Enterprise (MSME) Development Fund established by the Central Bank of Nigeria (CBN).

As of last week, stakeholders in the microfinance sub-sector engaged in a serious discussion towards realising this objective.

Whensu Valentine, president, National Association of Microfinance Banks (NAMB), who spoke with BusinessDay, noted that the interest rate for accessing the fund had been cut down to 2 percent from 3 percent, while the low income earners will have to borrow at 9 percent, saying the collateral for the fund had been brought down to 50 percent from 75 percent.

“Because the fund is not a grant but loan, it takes process. You have to meet the conditions before you can access it,” he said.

The conditions to be satisfied by eligible microfinance banks/finance company as contained in the guidelines include – Compliance with Regulatory Capital, Compliance with prevailing Prudential Ratios, Average deposit growth rate of 20 percent per annum (for institutions operating for over two years), Average clientele base growth rate of 20 percent per annum (for institutions operating for over two years), Risk Management Framework acceptable to the regulators, Corporate Governance Culture acceptable to the regulators and as indicated by: Adherence to Sound Ethical Values, Degree of Separation of Ownership from Control/Management, Number of non-performing Insider Related Facilities, Evidence of Membership of apex association and up-to-date payment of annual subscription, Compliance with up-to-date and timely rendition of monthly returns to the CBN as stipulated in the revised Microfinance Policy, Regulatory and Supervisory Framework of Nigeria.

The CBN had identified low access to the N220 billion MSME fund to poor status of participating finance institutions (PFIs), specifically microfinance banks.

The PFIs include microfinance banks, microfinance institutions, financial corporatives, finance companies, and deposit money banks – Bank of Industry (BoI), Bank of Agriculture (BoA).

The CBN was concerned that microfinance banks have about 70 percent portfolio-at-risk (PAR) with negative shareholders’ fund, a development that had declared most of them ineligible for the fund.

The CBN disclosed that about N769 million of the fund had been accessed by six participating finance institutions while N1.3 billion had been released to state government for lending through microfinance banks, so far by the regulator.

Meanwhile, one deposit money bank had accessed N50 million for SMEs lending while five deposit money banks including UBA, Skye Bank, GTBank, Zenith Bank and Fidelity Bank signed memorandum of understanding (MoU) with the CBN for the fund as of December last year.

Mudashiru Olaitan, acting director, development finance department, CBN, who was represented by Babatunde Ogulaja, assistant director, development finance department, disclosed this at a three-day workshop for business editors and members of Finance Correspondents Association of Nigeria (FICAN) organised by Nigeria Deposit Insurance Corporation (NDIC), last year December in Katsina State.

According to him, the CBN is making the microfinance banks, which is about 900, to go through house cleaning, as “we have about 900 microfinance banks, a good number of them have stomach ache. A lot of things are wrong with them. We are making them to go through house cleaning.”

The director made it clear that the CBN will not take physical assets as collateral to access fund, but instead accept 50 percent financial assets, which most microfinance banks and some expected participating institutions were unable to give.

This, he said, was to securitise the fund, such that the monies are paid at the right time without problem.

On the facility limit, Olaitan said the maximum amount per cycle of wholesale lending include N10 million facility for unit microfinance banks, N50 million for state microfinance banks, and N10 million for NGO-MFIs, financial corporatives and finance companies each.

The apex bank has put in place a robust monitoring and enforcement strategy to ensure compliance with the guidelines for operations of the fund.

According to him, the MSMED fund would provide a long-term standing affordable funding for MSMEs sub-sector. This he said will require the commitment of all stakeholders in order to achieve the desired objectives of real sector growth of the Nigerian economy.

The CBN acting director said the CBN usually require participating banks to come up with the expected list of beneficiaries, their names, phone numbers and address, so that if the entrepreneurs failed to repay, the apex bank can track them.

The CBN does not disburse the fund to state governments directly but through PFIs, as “no government will come to us without the list of beneficiaries,” he said.

 

HOPE MOSES-ASHIKE