Again, Emefiele warns against bad borrowing, says era of loan default gone

Governor Godwin Emefiele, the governor of the Central Bank of Nigeria (CBN), has again warned against bad borrowing in the country, saying that the era of serial loan default is gone.

Emefiele was speaking in Abuja at the opening of the 8th annual Micro Small and Medium Enterprises Finance Conference and Entrepreneurship Award where he reassured that the N220 billion MSMEDF expected to kick of tomorrow would be disbursed at not more than nine percent interest.

“…And I want to say this, the era when people take loans and don’t pay has gone,” he told the conference participants.

Emefiele noted that while efforts were being intensified by the apex bank to drive real sector development, he said the N220 billion MSMEDF is not a grant but a loan that must be repaid. “Do not go for it if you can’t pay, because if you do and don’t pay, you will be ruining your credit record and no institution will lend money to you again”, the governor warned.

The governor also assured that measures to ensure that the loans get to the intended beneficiaries were already in place as he informed that the borrowers reserve the right to report to the authorities of any institution that charges above the stipulated nine percent interest.

He said the disbursement would be channeled through two major routes- one through the microfinance institutions and secondly the state governments.

He explained that for SMEs that would require monies running into millions of naira, they would present the required collateral. However, for those micro enterprises that would be seeking smaller amount of loans, say N50,000 or N100,000, the governor said the structure is such that they will not present collateral but will need to provide their biometrics for proper identification.
According to him, this is not only to ensure that such businesses can continue to access loans under the scheme as long as there is no default, but also to avoid the incidence of people bringing fake identities to access the loans.

“We need to begin to build people with strong credit culture where you will take a loan, you are committed and pay otherwise don’t take the loan,” he further warned.

Restating his earlier commitment to driving real sector development, and to ensure that the disbursement of the N220 billion is not truncated, Emefiele stressed, “We will do all that is necessary even if it means converting half of CBN staff into development finance or offside supervision departments, we will to ensure that this money gets to where it is supposed to go.

“We will not allow the monies to be truncated, but that they need the corporation of everybody”, the governor reassured.
A major innovation to this year’s CBN MSME annual conference is entrepreneur clinic, a component designed to provide intensive capacity building for selected youth entrepreneurs and create opportunity to listen to success stories of entrepreneurs and providers.

The governor said in this regard, 60 enterprising graduates have been invited to be trained and mentored on how to identify business opportunities and source finance.

The young entrepreneurs would be exposed to different aspects of entrepreneurship during the conference, while efforts would be made to link them with financial services on a pilot basis.

Emefiele also noted that the entrepreneurs would be provided with tool kits to start and grow their businesses and that all of them will be monitored with respect to their achievements before the next conference.
He implored the private sector to complement efforts of the CBN to improving access to finance in view of limited funds.