Lack of KYC, BVN impede access to CBN’s N50bn COVID-19 fund

The N50 billion Targeted Credit Facility for households and Small and Medium Enterprises (SMEs) introduced in March 2020 by the Central Bank of Nigeria (CBN) has been poorly accessed so far.

The low access to the fund released as a stimulus package to mitigate the impact of COVID-19 is attributed to low adoption of Bank Verification Number (BVN) and poor Know Your Customer (KYC).

The CBN in March set up the N50bn facility to be disbursed at single digits through the NIRSAL Microfinance Bank for households and small- and medium-sized enterprises (SMEs) that would be particularly hard hit by COVID-19, including hoteliers, airline service providers, healthcare merchants, among others.

Godwin Emefiele, governor of the CBN, said at the last Monetary Policy Committee (MPC) meeting on May 28, 2020 that the apex bank has approved N10.9 billion to 14,331 beneficiaries under the N50 billion Targeted Credit Facility for households and SMEs, out of which N4.1 billion has been disbursed to 5,868 successful beneficiaries.

“I think it is too low considering that the impact of COVID-19 is now being felt especially by businesses and households,” Bunmi Lawson, managing director/CEO, EdFin Microfinance Bank Limited, said.

Lawson was concerned that the economy is not digitalised as much as possible for people at the bottom of the pyramid. She was also worried that some of these people do not have BVN and that KYC should be able to identify those who have applied two or three times.

Lawson said if everybody has the National Identity Number which could be linked to BVN and credit bureau, it would help to ensure that the people who applied for the facility actually need the money and can be traced in case of default.

“This really highlights why government needs to push for financial inclusion at the bottom of the pyramid. They need to make the process transparent, even the ones that have been disbursed,” she told BusinessDay on phone.

However, some organisations are engaging businesses on how to access the CBN facility through webinar series.

For instance, EdFin MFB, with special focus on education, has been engaging with school owners on how to assist them access the CBN intervention fund.

“As part of our plans to help our customers mitigate the impact of COVID-19 pandemic, we have scheduled a webinar for all our school owners to help them access the NIRSAL CBN Intervention Funds for COVID-19,” Lawson said.

Another organisation said, “Are you struggling with your finances due to the Covid-19 crisis? Do you desire to grow your business and thrive even in these times? 1. Get equipped to Reset, Renew and Reposition for success at our virtual strategy session; 2. Get tips on how to access the N50 Billion Covid Fund and Bank of Industry (BOI) Loans during the Covid Crisis; 3. Get the opportunity to connect with and learn from 4 highly experienced practitioners.”

The CBN had scrapped the submission of business plan as a compulsory requirement to apply for its N50bn loan facility.

Abubakar Abdullahi Kure, managing director, NIRSAL Microfinance Bank (NMFB), announced the development in Abuja following recent concerns that the bank was charging application fees on the loan.
He said the reason for scrapping this requirement was to simplify the process, ensure speedy disbursements so that the intervention does not lose its essence through additional costs.

Meanwhile, the CBN has changed moratorium and repayment period for household applicants.
The reason for the change in moratorium and repayment period for household applicants is to get more beneficiaries and save them from paying more on interest. (If the 12 months moratorium and three years repayment is kept, household applicants will end up paying more interest over the long repayment period than they would pay in just 12 months. This is what happens with bank credit.)

The MPC directed management of the CBN to reach out to the banks to encourage them to offer and disburse these funds to those priority sectors of the economy so as to stimulate aggregate demand and create more jobs.