Ngozi Amuche
Operators of small-scale businesses in Nigeria have raised the alarm, saying they can’t access the Federal Government’s N220 billion loans meant for them, owing to “impossible conditions” set by the Central Bank of Nigeria, and the commercial banks.
Five years after the CBN launched the N220bn Micro, Small and Medium Scale Enterprises Development Funds, the small-scale entrepreneurs said less than two per cent of their members were able to meet the stringent conditions guiding the loan facility.
The MSMEDF loan was set aside to encourage people who are small business owners and employers of labour in small businesses like vulcanizing, hair dressing, fashion designing, and carpentry, among others.
Under the original programme, entrepreneurs can access loans of N500, 000, N5 million, and even, N50 million, at nine per cent interest rate, from Nigerian banks approved for the project.
It was considered a major breakthrough at its launch, as the regular interest rates were dropped by over 100 per cent for small-scale entrepreneurs under the MSME fund.
But the President, Association of Small Business Owners, Mr. Olufemi Egbesola, told our correspondent that his Association had got nothing from the N220bn funds, despite claims by banks of “so many windows open to SMEs to raise funds.”
He said, “I’m not aware of anybody that has got anything. N220 billion was supposed to be given out by the banks at nine per cent, but there are so many stringent measures and conditions that are not possible to meet, including collateral and unrealistic turnover. It is so cumbersome.”
He lamented that a lot of applications were rejected, despite deliberate efforts by his association to assist in writing presentable proposals.
He said, “The slow disbursement of the loans had made most SME operators to lose confidence in the scheme. From our part, I can authoritatively tell you that only two people were able to access the fund, out of N12, 000 of our members, which is a complete failure.
“If many of us had been able to access the funds, it would have had a positive impact on the growth of the economy. We have repeatedly tried to meet with the CBN, but that has not been possible. We have written quite a number of letters, and there has not been any direct response from the apex bank. So we are tired. At the moment, the banks’ interest rate is 32 per cent for our members.”
Corroborating him, an SME operator, Mr. Uchenna Okafor, while speaking with The Point, noted that each of the 36 states and the Federal Capital Territory were entitled to accessing as much as N2 billion, to be disbursed to the states through the banks, and the funds are expected to be disbursed directly to the beneficiaries.
“But immediately the various state governments got the MSME, many politicians became emergency entrepreneurs, appropriating the facility to themselves and their cronies,” Okafor complained.
He, however, called on the CBN to moderate and prevail on the banks to ensure that the funds actually got to the right groups.
Okafor stressed that, in developing economies like Nigeria, MSME funds held the key to government’s plan to develop the non-oil sector and generate income from it, hence the need for their empowerment through easier access to credit and specific business-friendly policies.
The Director-General of the Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, also explained that the MSME intervention fund was a concept designed to correct market failures in the financial markets.
According to him, some growth sectors would naturally find it difficult to access fund from the regular or conventional commercial banks owing to stiff competition, as well as the concerns around risk perception of the real sector.
“Besides, the Nigerian banking system has not got much of long-term funds, and the cost of funds is also very high. Intervention funds are long-term and often at single digit. These are the gaps the intervention funds are designed to fill,” he said.
The CBN had earlier explained that it initiated the fund to unlock the potential of Nigerian MSMEs; thereby shoring up their potential for job creation, and enabling them reduce poverty within the country.
But at a workshop organised by the Bankers Committee on Funding Nigeria’s SMEs, the apex bank’s Governor, Mr. Godwin Emefiele, who was represented by the Senior Manager, Development Finance Department, Mr. Chinedu Zephaniah, said out of the N220bn earmarked for SMEs, about N50 billion was still available for easy access.
Zephaniah explained that the apex bank had about N3 trillion intervention funds set aside for economic development, out of which N220bn was targeted at SMEs, and that at the moment, they had disbursed over N170bn to support SMEs, but that the percentage of people that paid back their loans at appropriate times was not encouraging.
“When people pay back as and when due, it would avail others the opportunity to access the fund. To access the intervention fund of the CBN, all you need to do is to convince your bank that when you take, you will be able to pay back,” he said.
Reacting, Head of Business Banking, Standard Chartered Bank, Mr. Benjamin Dike, said, “As SMEs, if you collect money to create wealth and you refund the money at the right time, the confidence of lending institutions will be high and there will be tangible growth.”
Dike noted that the MSMEs sector was acknowledged globally as the oil that lubricates the engine of socio-economic transformation of any nation.
“The sector is strategically positioned to create up to 80 per cent job, improve per capital income and contribute significantly to Gross Domestic Product,” he
said.
The Executive Secretary, Nigerian Association of Small and Medium Enterprise, Mr. Eke Ubiji, while explaining some of the challenges faced by his members, said the lack of access to funding was a problem for SMEs but not the major obstacle. He said that lack of information was the major problem of small businesses in Nigeria.
“There is a lot of information on the economy, on the interest rates, and on many companies on government’s website, which are highly beneficial to business owners but which we are ignorant of.
“How many business owners have the time to search for such information? Yet, we complain of lack of access to funds. Most people are not even aware of the government’s policies as they affect their businesses; they just sit and criticise the government,” he riposted.
