Toki Mabogunje, president of the Lagos Chamber of Commerce and Industry (LCCI), says many deposit money banks are still reluctant to offer credit to the micro, small and medium enterprises.
In an interview with Start-Up Digest in Lagos, Mabogunje says though progress has been made in terms of lending to businesses in the last 20 years, a lot more still need to be done.
“I started MSME consulting when there was nothing—around year 2000. So, I am looking at over a span of 20 years. In 20 years, the (credit) situation has greatly improved,” she says.
“There is a lot of funding, but still a lot of reluctance on the side of the banks because they consider MSMEs to be high-risk. This is what has led the CBN to use carrot and the sticks with the banks,” she says.
Mabogunje notes that banking is still not where it should be in Nigeria, stressing that every bank account holder should be able to borrow from banks to whatever degree that the business turnover justifies.
“On the side of the banks, we do not have enough banks that understand MSME lending,” she further says.
“You cannot be lending to Emmanuel & Sons the same way you are lending to Globacom. We do not have enough of them with technical competence behind MSME lending. Because of that, they are even more averse with risks that come with being an MSME. It is not as if the risks are extraordinary in Nigeria compared with any other developing country. Some of the things that the banks require in order to make good lending decision are not yet strengthened,” she explains.
She points out that the policy behind BVN is a brilliant idea that helps to determine those who are bad borrowers and good borrowers, but regretted that the country is not utilising the initiative for innovations.
“We need to leverage it. On the side of the MSMEs, there is a whole education to be done in terms of MSMEs not understanding the banks’ requirements. So, they keep complaining that the banks’ requirements are steep. Yes, in some cases, they are, but in other cases, they are looking for basic information. Are you keeping your financial records? Do you have processes in place that convince the banks that over time you will pay back? There are challenges on both sides which need to be worked upon,” she added.
ODINAKA ANUDU
