CBN Launches N220 Billion SMEs Fund At Nine Percent Interest Rate

The Central Bank of Nigeria yesterday launched a N220 billion fund to be distributed to Micro, Small and Medium Scale Enterprises (MSMEs) by the micro finance institutions at 9 percent interest rate.

The CBN governor, Sanusi Lamido Sanusi, said yesterday that the fund is to address the funding challenges currently faced by the SMEs in the country.

“The CBN is presenting for launch today (yesterday) the N 220Billion Micro, Small and Medium Enterprises Development Fund (MSMEDF). The Fund is designed to further enhance access to finance by MSMEs with the following major objectives: (i) Provide wholesale financing windows for participating financial institutions (PFIs); (ii) Improve the capacity of the PFIs to meet credit needs of MSMEs; (iii) Provide funds at reduced cost to PFIs;(iv) Enhance access of women entrepreneurs to finance by allocating 60 per cent of the Fund to them; and (v) Improve access of NGOs/MFIs to finance.”

The fund is one of the elements in the Micro Finance Policy of the federal government which was launched in 2005, the governor said

According to him, “the policy is being implemented in stages, we got the micro finance banks, which are now strong and capable of handling such fund.”

“After we have done competency requirement test on them, we are now confident that we can inject such fund into the micro finance banks,” the governor said.

Sanusi said the package did not only stop at funding the MSMEs but will address issues that are related to marketing of final products and how to help address post harvest loss by the small farmers.

The CBN governor said sixty percent of the fund would be channeled to women with strict monitoring in collaboration with other government institutions. He said choosing women to be the major beneficiaries is as a result of the role they play in the economic cycle of the country. There are over 1,000 micro finance banks across the country but presently the interest rate at which they give loans is as high as 30 percent with very short tenure.

The CBN fund has a long tenure that will give enough room for MSMEs to break even.

He said: “The ultimate responsi-bility for sustainable intermediation for the subsector lies with the financial markets. Moreover, these interventions serve to integrate the micro-entrepreneurs, the low-income earners, farmers, artisans and the active poor who operate in the informal sector, into the financial system to improve the effectiveness of public policy.”

“In 2012, Nigeria had about 17.6 million MSMEs employing about 32.4 million people, and contributing about 46.54 per cent of nominal GDP. A recent survey by IFC and Mckinsey (2010) suggests that 80 per cent of these MSMEs are excluded from the financial markets. The state of MSMEs in the country underscores the importance of this conference. Suffice it to say that between 2003 and 2012, commercial bank loans to small scale enterprises dropped at an exponential rate. Analysis of the annual trend in the share of commercial bank credit to small-scale industries indicates a decline from about 7.5 per cent in 2003 to less than 1% in 2006 and a further decline in 2012 to 0.14 per cent.”