• Monday, February 26, 2024
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New CBN target for MFBs means credit to SMEs, financial inclusion – analysts


The new policy by the Central Bank of Nigeria (CBN) that will ensure Microfinance Banks (MFB) open new 64 accounts per month is an initiative that will not only improve credit for Small to Medium Enterprises (SMEs) but also spur financial inclusion, analysts have said.

As part of attempts to reach its financial inclusion target, Nigeria’s apex bank on June 20th 2019 anchored a goal of 64 new customers per branch every month for microfinance banks in the country.

According to Gbolahan Ologunro, a Research Analyst at Lagos-based CSL Stockbrokers, the move by CBN is geared towards improving the flow of credit to the SMEs while also including them into the formal financial sector.

“What CBN is trying to achieve is to improve credits to SMEs, considering Microfinance Banks are set up for the purpose of providing traditional banking services to SMEs,” Ologunro explained.

The other objective is to “spur financial inclusion by bringing those small enterprises that are yet to be included into the formal financial sector to the banking net.” he added.

In a letter addressed to all Microfinance Banks on the revised national financial inclusion target, the apex bank said one of the resolutions reached at the recently held stakeholders’ forum was the setting up of the target for the MFBs to ensure each of their branches are able to open 774 new bank accounts per annum.

“Consequently, all MFBs are hereby requested to implement the above resolution and disseminate same to all their branches (where applicable) to ensure concerted efforts towards achieving the overarching target of 80 percent financial inclusion by the year 2020,” the CBN instructed.

On October 23, 2012, Nigeria’s apex bank in collaboration with industry stakeholders launched the National Financial Inclusion Strategy (NFIS) aimed at reducing the financial exclusion rate of adult population from 53 percent in 2008 to 20 percent by 2020.

Recall that in 2018 the industry regulator revised the NFIS with the major objective of increasing the percentage of adult Nigerians who own bank accounts and use formal financial services from the baseline figure of 46.3 percent in 2010 to 80 percent by 2020.

Microfinance banks, over the last six years of implementation of the strategy,  have contributed significantly towards the realization of the stated objective. As at the end of 2018, 63.2 percent or 63 million Nigerians were financially served leaving an inclusion gap of 36.8 percent or 36.6 million adults Nigerians that need to be included.

“The target is achievable, and it is good for both parties; the MFB and the SMEs, because it will be a win-win for all parties. But for some of the MFBs to get the new accounts, they would have to use credit as an incentive because the market will soon be saturated,”  an industry player who asked not to be quoted said.

Given it is less than 6 months to the end of the target date, the apex bank has become expedient for all stakeholders to double efforts towards the realisation of the targeted 80 percent inclusion rate.

Thus, it stated that in a bid to mobilise stakeholders on the revised NFIS and accelerate progress towards the achievement of the target, it had held stakeholders‘  forum for all financial service providers in the six geopolitical zones in the first and second quarters of 20l9 which was attended by representatives of MFBs.

“The objective of the forum was to expose stakeholders to the detailed provisions of the Revised Strategy (NFIS 2.0) and their expected roles/responsibilities in the financial inclusion agenda,” it said.

According to the data by the central bank, Nigeria has 898 microfinance banks, if each of the banks opens 64 accounts monthly, new 57,472 accounts will be created with the exclusion of their branches.

“The high rate of sourcing for funds from micro finance bank will still continue to hinder the flow of credit to SMEs , however, some SMEs will still be able to meet up the exorbitant cost of obtaining funds because the bigger commercial banks have more stringent requirement to access loans,” an analyst form the financial industry said on the condition of anonymity.

Godwin Emefiele, the governor of CBN, said over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the Payment Service Bank (PSB), the apex bank intended to broaden access to financial services to individuals in underserved parts of the country.

“Our ultimate objective is to ensure that 95 percent of eligible Nigerians have access to financial services by 2024,” Emefiele said on Monday, as he unveiled his programme for his second term of five years.

The apex bank had in October 2018 released an exposure draft in which it proposed PSB aimed at deepening financial inclusion in a country that has one of the highest exclusion rates in Africa.

At least 30 business names have since applied for registration as payment service banks with the functions to: maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse but till date none have been granted licence.


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