CBN decries banks’ aversion to loan for small businesses

• ‘Nigeria needs N9.6trn to bridge MSME funding’ 

The Central Bank of Nigeria (CBN) has decried what it described as financial institutions’ aversion to lending to small businesses in the informal sector, saying N9.6 trillion is needed to adequately fund Micro, Small and Medium Enterprises (MSMEs) in the country.

CBN’s Assistant Director, Development Fund Department, Jonathan Tobin, revealed this yesterday in Abuja at a workshop on Micro, Small, Medium Enterprise Development Fund (MSMEDF) organised by the Bankers’ Committee of the apex bank.

According to him, “Nigeria banks are averse to taking risk. They like to play safe. The economy is virtually collapsing yet banks keep declaring huge profits. “There are currently 17.3 million MSMEs in Nigeria that employ about 33 million people.

Yet only 4.2 million of these have access to finance. “From 2002 till date, lending by Money Deposit Banks (MDBs) to the sector has reduced significantly.

Now N9.6 trillion is needed to bridge the financing gap in the sector.’’ Tobin listed lack of entrepreneurial skills by MSME operators, adoption of `”one size fits all products” strategies for loans by banks and poor governance structure were some of the challenges faced by sector.

Banks and other lending institutions should offer tailor made solutions to lending for MSMEs instead of the current one size fit all approach. “Customised risk management lending method in place of collateral driven lending currently employed by banks should be developed.

We strongly recommend that banks start lending from their balance sheet.” The CBN director also stressed the need for collaboration between CBN and other government agencies on the implementation of various initiatives geared towards de-risking the sector and making finance available to MSMEs.

Tobin listed policies introduced by CBN to boost MSME to include Agriculture Credit Support Scheme, N200 billion Commercial Agricultural Credit Scheme and the Nigeria Incentive Based Risk Sharing System for Agricultural Lending. Others include the N220 billion MSME Development Fund, SME Credit Guarantee Scheme and the National Secured Transaction Collateral Registry.

He urged the banks not only to patronise the CBN schemes but invest their monies in MSME. The Director, Development Finance of CBN, Mudashiru Olaitan, said inflation would reduce if MSMEs are properly supported and financed. “The country needs a strong financial system that is capable of providing innovative, dynamic and wide rage of financial services.

We must support MSME to grow because if they grow, the country will be better for it.” According to Olaitan,“the sector is already employing a lot of people but an additional 18 million people can be employed if properly funded.”

First Bank Area Manager, Kano, Ahmed Badawi, said banks were hindered from accessing CBN support schemes for MSMEs due to “long bureaucracy.’’ He noted that CBN is slow in disbursing funds thereby making it difficult for banks to attend to customers who applied for the loans.