CBN’s N220bn MSME devt fund sits idle on stringent conditions

The N220 billion Micro Small and Medium Enterprise (MSME) Development Fund launched in August last year by the Central Bank of Nigeria (CBN) is still sitting idle as the requirements for accessing the fund are proving too stringent for microfinance banks (MFBs), BusinessDay can now report.

The MSMED fund was set up to address the funding requirements of a large number of unserved and under-served clients in the Nigerian MSME sub-sector.

BusinessDay investigations however show that about 60 percent of the more than 800 MFBs operating in the country may not have access to the fund on account of their inability to meet the required conditions.

“In my opinion, the conditions are a bit stringent for a lot of MFBs to meet, particularly unit MFBs,” said Wale Adeleke, managing director, Corestep Microfinance Bank limited, in an e-mail response.

“Obviously, an MFB has to be doing pretty well to readily meet those requirements and could survive without the funds. Hence, the requirement would have to be stepped down to achieve more reach and impact on our target populace,” he said.

Consequently, the fund, which was launched three years after it was first pronounced in September 2010 by the CBN and President Goodluck Jonathan, may take a year or more before it is disbursed for on-lending to low-income earners.

The conditions to be satisfied by eligible MFBs/finance companies, according to the latest CBN and the Nigeria Deposit Insurance Corporation (NDIC) examination reports, 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, and corporate governance culture acceptable to the regulators.

Others are 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, and 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 earlier explained that the delay in the disbursement of the fund was as a result of its plan to establish a Special Purpose Vehicle to manage it. Industry watchers are, however, concerned about the delay, saying it is a question of bureaucracy.

BusinessDay gathered further that majority of MFBs, specifically the Unit licence MFBs, are battling with how to shore up their capital as directed by the regulatory authority and, as a result, would not be able to access the fund until that is completed.

“Our capital is eroded by losses,” one of the operators told BusinessDay on phone.

Onoja Usman, managing director, Lovonus Microfinance Bank limited, says most MFBs would not be able to access the fund because of the stringent criteria the CBN is using for the loan.

“We understand that rating agencies are being used to determine those that merit accessing the fund. Most MFBs that are units can’t access the fund because before now they had impaired shareholders’ fund and some are already struggling to operate as result of lack of capital for operation. The fund will only serve few MFBs,” he said.

HOPE MOSES-ASHIKE