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Boost for Nigerian SMEs as Jaiz Bank formalizes $25m Islamic Corporation financing

Nigeria’s premier non-interest bank, Jaiz Bank Plc has announced the signing of a formal agreement to secure a $25 million shariah-compliant line of financing (LOF) from Islamic Corporation for the Development of the Private Sector (ICD).

The funds will enable the lender to support the growth of small and medium scale enterprises (SMEs) in Nigeria.

According to Jaiz Bank, the formal agreement to access the funds from ICD took place on September 2 during the just concluded Islamic Corporation for the Development (IsDB) annual meeting in Uzbekistan.

The signing ceremony could not hold in February 2021 due to COVID-19 restrictions, the lender said in a statement to the Nigeria Exchange Group (NGX) on Wednesday.

“Continuous cooperation between ICD and Jaiz Bank will result in easier access by SMEs to Shariah-compliant financing that will meet their funding needs, as well as assist in keeping businesses open and preserving jobs,” Ayman Sejiny, the CEO of ICD, said.

The new $25 million line of financing to Jaiz Bank is following the repayment of the lenders $20 million to ICD. Jaiz Bank has been in partnership with the Islamic Corporation for the Development of the Private Sector since 2018 when it granted the Nigerian lender $20 million.

Read also: FCMB bags best SME Bank in Nigeria, Africa

The Bank having fully repaid the LOF secured $25million LOF from ICD for onward disbursement to eligible small and medium scale enterprises in Nigeria, Jaiz Bank said in a statement to the NGX.

“We are delighted with this partnership with ICD which started in 2018 with a $20m Line of Finance to support SMEs in Nigeria, the Line was fully utilized by eligible SMEs with a substantial portion going to the Agricultural sector,” Hassan Usman, the managing director of Jaiz Bank said.

According to the CEO, the facility was fully repaid earlier this year and has helped in generating over 791 direct jobs and put the Bank among the major lenders in repatriating non-oil export proceeds for the country.

The additional $25 million line of financing facility will further enhance the Bank’s capacity to continue to provide support to the local private sector enterprises with substantial socio-economic impact, the MD of Jaiz Bank said.

Despite the significant contribution of SMEs to the Nigerian economy, challenges persist that hinder the growth and development of the sector. Primary among the myriad of challenges encountered by the sector is the lack of access to affordable capital.

Nigeria’s SMEs contribute nearly 50percent of the country’s GDP and account for over 80percent of employment in the country.

According to a survey conducted by PWC, 29 percent of businesses see the high-interest rates on loans as the most important limiting factor to getting funding for working capital and expansionary activities.

Out of which, 25 percent cited insufficient collateral or guarantees for funding and 22percent pointed to the current economic conditions as the most limiting factor. According to the NBS, less than 5 percent of SMEs have been able to access adequate finance for working capital and funding business growth/expansion.

“We have no doubt that the $25m line of financing facility to Jaiz Bank will provide much-needed support to private sector businesses including those which have been affected by the pandemic,” Sejiny of ICD said.

The Islamic Corporation for the Development of the Private Sector is a multilateral development financial institution and is a member of the Islamic Development Bank Group.

ICD was established in November 1999 to support the economic development of its member countries through the provision of finance for private sector projects, promoting competition and entrepreneurship, providing advisory services to the governments and private companies, and encouraging cross border investments.

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