By Peter OBIORA InvestAdvocate
katsina (INVESTADVOCATE)-Nigerian Banks are unwilling to lend from the N220 billion micro, small and medium scale enterprises development fund due to low volume and small margins, Mudashir Olaitan, acting director, development finance department of the Central Bank of Nigeria (CBN) said on Monday.
Olaitan represented by Babatunde Okunowo of the CBN disclosed this in his paper entitled: ‘’Framework for the N220 billion Micro, Small and Medium Enterprises Development Fund” at the Nigeria Deposit Insurance Corporation (NDIC) 2014 workshop organised for business editors and finance correspondents association of Nigeria (FICAN) in Katsina State Northern Nigeria.
He said the funds are disbursed through participating financial institutions (PFI) which include microfinance banks, microfinance institutions, financial cooperatives’, finance companies and banks.
According to Okunowo, some of these PFI’s; including banks are shying away lending from the N220 billion SMEs fund due to volume and small margins.
He disclosed that the funds are sourced at three percent (3%) and disbursed at an interest rate of nine percent.
He affirmed that institutions that are marked to come to the CBN are not coming forth on this. ‘’We held several local meetings and what we did recently was to look at the top 50 microfinance banks in Nigeria, the governor commissioned us to meet with them to find out what we can do, they told us that their cost structure cannot allowed them good margin under this fund. We take it at 3percent, lend at nine percent that is still too small, because they are used to lending at higher rates,’’ Okunowo noted.
‘’The Banks also have the same problem small margin 9 percent is not big business, no volume, if 10 of you are asking for N50 million each, how much that is, they are asking for big transactions that’s why they are foot dragging, that’s why, we have held several meetings with the bankers committee and all the other stakeholders on this matter,’’ Okunowo affirmed.
Another reason he added for the nonchalant attitude of these PFIs to lend from the N22 billion SMEs development fund is the collateral requirement to engage in lending which is pegged at 75 percent, ‘’so you must have N7.5 to come for N10 that has been the major problem of these institutions,’’ he said.
He revealed that at least five banks have signed a Memorandum of Understanding (MoU) with the CBN on the fund; these include United Bank for Africa Plc, Zenith Bank Plc, Guaranty Trust Bank Plc, Skye Bank Plc and Fidelity Bank Plc.
