The Nation Newspaper

Tag: MSME

  • N220b MSMEs fund: MfBs, finance houses shun loan over collateral

    N220b MSMEs fund: MfBs, finance houses shun loan over collateral

    Microfinance Banks (MfBs), finance houses and Designated Non-Financial Businesses and Professions (DNFBPs) are not drawing from the N220 billion Micro Small and Medium Enterprises (MSMEs) fund because of stringent drawn-down policy of the Central Bank of Nigeria (CBN).

    An insider in Finance Houses Association of Nigeria (FHAN) expressed the group’s challenges in drawing from the fund.

    The source said CBN’s demand that borrowers provide 100 per cent near-cash cover in treasury bills or fixed deposit has made it difficult for any finance house operator to draw from the fund three months after drawn-down started.

    The source said there was no point providing total coverage for loans and still lend according to the CBN’s directive.

    “The demand that borrowers provide 100 per cent near-cash cover on loans is unacceptable. As I speak with you, no finance house operator has drawn from the loan because the CBN cannot force people to invest in treasury bills or keep fixed deposits because they want to borrow,” the source said.

    The source claimed that as the situation is now, only commercial banks are meeting the drawn-down policy and are accessing the loans, a practice, he said, defeats the objective of setting up the fund.

    Part of the CBN’s policy guideline on the loan requires 80:20 ratio for on-lending to micro enterprises and Small and Medium Enterprises (SMEs) and request that 60 per cent of the fund, representing N132 billion, be earmarked for providing financial services to women-owned businesses were said to be reviewed in the final guidelines concluded at last week’s meeting with stakeholders.

    There is also a clause that participating financial institutions can only finance agricultural value chain activities, trade and commerce; cottage industries, artisans, among others.

    The banking watchdog said to ensure that productive sectors of the economy continued to attract more finance necessary for employment creation and diversification of the country’s economic base, a maximum of 10 per cent of the commercial component of the fund will be channeled to trading and commerce.

    CBN Governor, Godwin Emefiele said MSMEs are globally recognised as the critical engines of economic growth due to their potential to create jobs, boost production, generate income and reduce poverty.

    In spite of this recognition, MSMEs do not have the adequate financing needed to play this pivotal role in its development trajectory.

    A joint report by the International Finance Corporation (IFC) and McKinsey, the financing gap of this critical sub-sector of the country, is about N9.6 trillion as of 2010.

    The N220 billion, Emefiele said, is meant to address this gap and unlock the potential of the MSMEs  as an innovative way of improving their access to finance, shoring up their potential for job creation and enabling them reduce poverty within the country.

    Emefiele said the CBN would be committing human, material, and financial resources to monitoring both the disbursement and utilisation of the funds by the participating financial institutions. These stakeholders, he said, will be required to submit periodic returns on disbursements as well as an analysis of the social impacts of the Fund adding that the regulator will also undertake regular on and off site checks to ascertain veracity of the reports received.

    The CBN chief said while the micro-loans would be administered through private or state owned microfinance institutions, Finance Houses, and Cooperative Finance Agencies, the SME loans would be disbursed through the DMBs. State governments will be able to access up to N2 billion each for lending to eligible beneficiaries through participating financial institutions in their states.

    He said the fund is also in conformity with CBN’s resolve to create a professional and people-centred central bank that will act as a financial catalyst for job creation and inclusive economic growth.

    “While these are our ultimate goals, our main intermediate objective is to ensure that these funds get to people at the very bottom of our social pyramid at single digit interest rates. Without achieving this objective, I have no doubt that it would be impossible to achieve the ultimate goal of job creation and poverty reduction,” he said.

     

  • N220b MSMEs’ Fund for launch today

    N220b MSMEs’ Fund for launch today

    •Women entrepreneurs to draw N132b 

    The N220 billion Micro, Small and Medium Enterprises Development (MSME) Fund designed by the Central Bank of Nigeria (CBN) to support entrepreneurs will be launched today by President Goodluck Jonathan in Abuja.

    CBN Director, Banking Supervision, Mrs. Tokunbo Martins, said the launch would hold at the MSMEs Finance Conference organised by the CBN.

    President Jonathan will declare the conference open and kick off the disbursement, which begins tomorrow.

    He would also award prizes to MSMEs, Deposit Money Banks and state governments, which distinguished themselves in Entrepreneurship Development last year.

    Participants at the conference include Micro, Small and Medium Entrepreneurs (SMEs), banks, MFIs, MFBs, deposit money banks, governors, federal ministers, heads of government agencies and departments, international development agencies and captains of industries.

    The guidelines for disbursement showed that a 80:20 ratio for on-lending to micro enterprises and  SMEs and request that 60 per cent of the fund, representing N132 billion, be earmarked for providing financial services to women-owned businesses.

    The banking watchdog said to ensure that productive sectors of the economy continued to attract more finance necessary for employment creation and diversification of the country’s economic base, a maximum of 10 per cent of the commercial component of the fund will be channelled to trading and commerce.

    CBN Governor, Godwin Emefiele said at the N220 billion MOU Signing Ceremony between the CBN and participating state governments that MSMEs are globally recognised as the critical engines of economic growth due to their potential to create jobs, boost production, generate income, and reduce poverty. Despite this recognition, MSMEs in the country do not have the adequate financing needed to play this pivotal role in its development trajectory.

    A joint report by the International Finance Corporation and McKinsey, the financing gap of this critical sub-sector of the country is about N9.6 trillion as at 2010.

    The N220 billion, he said, is meant to address this gap and unlock the potential of the MSMEs  as an innovative way of improving their access to finance, shoring up their potentials for job creation, and enabling them reduce poverty within the country.

    “This effort is in furtherance of the bank’s earlier endeavour at establishing six Entrepreneurship Development Centres (EDCs) in each geopolitical zone to support the mandate of the 23 Industrial Development Centres (IDCs) under the purview of the Small and Medium Enterprises Development Agency (SMEDAN),” he said.

    Emefiele said while the micro-loans will be administered through private or state-owned microfinance institutions, finance houses, and cooperative finance agencies, the SME loans will be disbursed through the DMBs. State governments will be able to access up to N2 billion each for lending to eligible beneficiaries through participating financial institutions in their states.

     

  • Banks, others rush for N220b MSME’s fund

    Banks, others rush for N220b MSME’s fund

    The Central Bank of Nigeria (CBN) has been inundated with requests to draw from the N220 billion Micro Small and Medium Enterprise (MSME) fund, The Nation has learnt.

    The loan applications are money deposit banks, microfinance banks (MfBs), finance companies (FCs) and designated non-financial businesses and professions (DNFBPs).

    They sent the applications following a meeting with stakeholders at the CBN Headquarters in Abuja last week to review the drawdown guidelines, sources said.

    It was learnt that beneficiary institutions can come for fresh applications when the previous loan is paid. The source said no one has benefited from the fund since it was released last year because CBN wanted to agree with stakeholders on the drawdown criteria.

    The 80:20 ratio for on-lending to micro enterprises and Small and Medium Enterprises (SMEs), and request that 60 per cent of the fund, representing N132 billion be earmarked for providing financial services to women-owned businesses, is being reviewed in the final guidelines approved at the meeting.

    The clause that participating financial institutions can only finance agricultural value chain activities; trade and general commerce; cottage industries and artisans, among others, is also on the table for review.

    CBN said to ensure that productive sectors continue to attract more financing necessary for employment creation and diversification of the economy, a maximum of 10 per cent of the commercial component of the fund will be channelled to trading and commerce. This clause, the source said, is also under review.

    CBN Governor Godwin Emefiele said MSMEs were globally recognised as the critical engines of economic growth due to their potential to creating jobs, boost production, generate income, and reduce poverty. Despite this recognition, MSMEs in the country do not have the adequate financing needed to play this pivotal role in the development trajectory.

    A joint report by the International Finance Corporation (IFC) and McKinsey said the financing gap of this critical sub-sector of the country is about N9.6 trillion as of 2010.

    The N220 billion, they said, is meant to address this gap and unlock the potential of the MSMEs  as an innovative way of improving their access to finance, thereby shoring up their potentials for job creation, and enabling them to reduce poverty within the country.

    Emefiele said the CBN would be committing human, material, and financial resources to monitoring both the disbursement and utilisation of the funds by participating financial institutions. These stakeholders, he said, will be required to submit periodic returns on disbursements as well as an analysis of the social impacts of the Fund adding that the regulator will also undertake regular on and off site checks to ascertain veracity of the reports received.

    “This effort is in furtherance of the bank’s earlier endeavor at establishing six Entrepreneurship Development Centres (EDCs) in each Geopolitical Zone to support the mandate of the 23 Industrial Development Centres (IDCs) under the purview of the Small and Medium Enterprises Development Agency (SMEDAN),” he said.

    Emefiele said while the micro-loans will be administered through private or state owned microfinance institutions, Finance Houses, and Cooperative Finance Agencies, the SME loans will be disbursed through the DMBs. State governments will be able to access up to N2 billion each for on lending to eligible beneficiaries through participating financial institutions in their states.

    He said the fund is also in conformity with CBN resolve to create a professional and people-centred Central Bank that will act as a financial catalyst for job creation and inclusive economic growth.

    “While these are our ultimate goals, our main intermediate objective is to ensure that these funds get to people at the very bottom of our social pyramid at single digit interest rates. Without achieving this intermediate objective, I have no doubt that it would be impossible to achieve the ultimate goal of job creation and poverty reduction,” he said.

  • Finance companies to handle N220b MSME funds

    Finance companies to handle N220b MSME funds

    Finance Companies (FCs) have secured the Central Bank of Nigeria’s (CBN) backing to participate in the disbursement of N220 billion Micro Small and Medium Enterprises (MSME) funds meant for deserving entrepreneurs.

    CBN Director, Other Financial Institutions Supervision Department, Ahmad Abdullah, said the finance companies sub-sector was planned to operate at the middle tier of the financial system, largely to cater for the financial needs of the Micro, Small and Medium Enterprises (MSMEs).

    Before the current directive, management of the MSME funds was handled by the CBN through the Special Purpose Vehicles (SPVs), or Managing Agent that included Deposit Money Banks (DMBs).

    The apex bank also directed on how the funds would be disbursed.

    The regulator said there are many un-served and under-served clients in the MSME sub-sector that needed financial backing. To address the funding requirements of this critical segment of the economy, 80:20 ratio for on-lending to micro enterprises and Small and Medium Enterprises (SMEs)  has been designed.

    The CBN said women’s access to financial services should increase by 15 per cent yearly to eliminate gender disparity in lending. It also said to achieve this, 60 per cent of the N220 billion, representing N132 billion, has been earmarked for providing financial services to women.

    Also, 10 per cent of the fund representing N11 billion, will be earmarked for social and developmental objectives  as grants;  Interest Drawback Programme, N6.60 billion; Managing Agent’s (MA) Operational Expenses N4.4 billion.

    However, the participating financial institutions can only finance agricultural value chain activities; trade and general commerce; cottage Industries; artisans, among others. The banking watchdog said to ensure that productive sectors of the economy continue to attract more financing necessary for employment creation and diversification of the country’s economic base, a maximum of 10 per cent of the commercial component of the fund will be channeled to trading and commerce.

    The CBN said in operating the fund, special consideration will be given to institutions that will provide financial services to graduates of the CBN’s Entrepreneurship Development Centers (EDCs).

    Abdullah said the CBN had in a bid to sanitise the sub-sector, revoked the licences of 208 finance companies and cancelled the approvals-in-principle of 462 others due to the distress in the sub-sector.

    By 2012, there were 116 FCs in the records of the CBN; 51 licences were revoked by the CBN in September, 2012 thus leaving a balance of 65 FCs with valid licences.

    “The idea is to have finance companies that are strong and virile to perform the functions they were set up to per form. The objective of shareholders in the operation of finance companies is to make profit, but for the CBN, it is to have stable and strong finance companies,” he said.

  • ‘Empower MSMEs to reduce unemployment’

    Presiden, Association of Micro Entrepreneurs of Nigeria (AMEN), Prince Saviour Iche, has attributed the high rate of unemployment in the country to poor funding of Micro Small and Medium Enterprises (MSMEs).

    He said promoting micro and small scale enterprises (SMES) have the potential of generating employment and boosting rural development.

    Addressing the association at a forum in Lagos, Iche noted that SMEs’ ability to absorb a large portion of the country’s workforce has become its main advantage in driving the economy forward.

    He urged the government to pay more attention to SMEs and provide several policies to support its development.

    According to him, if the industry is doing well, unemployment will reduce.

    He said: “If government can encourage MSMEs, the likes of Dangotes will spring up in large numbers.

    “Let the government raise money for us to industrialise Nigeria, if Nigeria must achieve Vision 20: 2020, the micro sectors must not be neglected or the vision will be a mirage.

    On the association’s one-million man- march, he said it was a huge success.

    He said the problem of micro enterpreneurs was finance.

    He mooted the idea of establishing ‘incubation centres’ to encourage youths to set up their own firms.

    He said about 70 per cent, of businesses in Nigeria are micro businesses and informal sector businesses.

    Iche urged the government to co-ordinate its efforts to create infrastructure towards enhancing trade and building a strong domestic business environment to encourage more SMEs to participate in the economy.

  • MFBs await launch of intervention fund

    MFBs await launch of intervention fund

    The plan of the Central Bank of Nigeria (CBN) to launch Microfinance Banks (MFBs) intervention fund also known as Micro Small Medium Enterprises (MSME) fund this month is causing discontent among operators, who are awaiting the launch.

    CBN has fixed this month for the launch of the fund to ensure re-financing of the sub-sector of th economy and on-lending to the poor, but economically active poor. But, the apex bank did not give a specific date, prompting operators to conclude that the proposed launch of the fund may not take place.

    The Nation gathered that operators are no longer taking the apex bank serious on this since they have on several occasions been disappointed with moves to strengthen the sub-sector via making funding available to them. They argued that CBN has been showing a lacklustre attitude to financing the sub-sector.

    A managing director of a microfinance bank-based in Lagos, who spoke on condition of anonymity, said the operators have not been briefed on when and where the launch would take place.

    “Up till now, we have no inkling as regards arrangements for the launch of the fund. We have tried and persuaded CBN to release the N54 billion microfinance development fund, but to no avail. We have on several occasions been told that the banking watchdog would release the fund, but nothing has been done. They said the fund would be released towards the end of last year, nothing was done. At a time, we were told the fund would be released early this year. It is still the same old story. While waiting for this fund, CBN announced the introduction of a new funding scheme late last year at microfinance banks conference in Abuja,” the source said.

    Other operators said the issue has raised their expectations because they need the fund badly. They said whether the fund would be launched or not is a question begging for answer from the CBN because no specific date was given by the apex bank.

    Meanwhile, the Chairman, National Association of Microfinance Banks (NAMBs), Southwest, Mr Olufemi Babajide said the sub-sector is under-funded in the country. He said there is need for CBN to provide a bail out for the sub-sector as it has done for the commercial banks after the CBN/Nigerian Deposit Insurance Commission (NDIC) joint examination of the banks in 2009.

    He said inability of MFBs to mobilise capital has hindered the banks from achieving the its objectives.

    Chairman, King Solomon Microfinance Bank, Mrs Angela Adegboyega, advised the CBN to make funds available to MFBs.