The Central Bank of Nigeria (CBN) and the Bankers Committee will by the end of March, launch the NIRSAL Microfinance Bank which is the new National MFB being set up by the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), the Nigeria Post Office and the Bankers Committee.
Tokunbo Martins, director, Other Financial Institutions (OFIs) department of the CBN explained that there are National microfinance banks already operating in the country but NIRSAL is a specialised MFB which would be launched at the end of March.
The CBN and the Bankers Committee announced in December 2018, a plan to establish the National Microfinance Licensed Banks in 774 local governments across the country.
This is part of efforts to enhance access to financing by Small and Medium Enterprises (SMEs), create jobs and promote financial inclusion.
Godwin Emefiele, governor of the CBN, has been worried that access to credit by SMEs was still a major issue, despite the several real sector intervention initiatives launched by the bank, like the Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS), which he said was an initiative of the Bankers’ Committee that had so far raked in over N60billion, but was still not being accessed by small businesses.
Emefiele announced last week, that the NIRSAL MFB will take off with N5bn initial capital and the loan disbursement will attract five percent interest rate with seven years tenor and two years moratorium.
However, the National Association of Microfinance Banks (NAMB) has countered the plan to establish this National MFB, saying it runs counterproductive to the salient objectives of the National Microfinance Policy, Regulatory and Supervisory Framework for Nigeria as well as the objectives of the National Financial Inclusion Strategy.
Rogers Nwoke, president, said the CBN and the Bankers Committee should utilise existing touch points and offices of existing microfinance banks which meet approved criteria to disburse its intervention funds including but not limited to the ACGSMEIS, Micro Small and Medium Enterprises Development Fund (MSMEDF).
Reacting to concerns on NIRSAL MFB crowding out the existing microfinance banks, Emefiele said, “the existing microfinance banks are doing their best. I have heard this is an attempt to crowd them out. This is not an attempt to crowd them out but to complement their services and see to it that whatever service is being provided by these microfinance banks should be seen to be fair to their customers.”
He said he has heard about the rural communities where the microfinance banks charge very prohibitive interest rates. “But here, we are talking about making funds available to these people. This will help to create some form of competitive landscape so that those kinds of practices will no longer arise.”
NAMB is planning to float a National MFB licence with N10 billion capital base, ahead of the new National MFB and the deadline for recapitalisation of microfinance banks operating in the country.
The CBN had in October 2018 increased the minimum capital requirement of Unit microfinance banks from N20 million to N200 million, State MFBs from N100 million to N1 billion and the National MFB from N2 billion to N5 billion.
The CBN recognises that the greatest challenge confronting the MSMES and local farmers is access to credit, and to unlock the growth potentials in the country ; these group must access funding seamlessly.
So far, the CBN has through its MSME development fund disbursed over N100 billion to the MSME sector, but still feels a lot can be done.
“We will continue to explore ways, in partnering with the fiscal authorities, on how we can best provide farmers and SMES with the support they need to expand their operations”, Emefiele said in November 2018.