02 December 2014, Lagos — The nation’s apex bank, the Central Bank of Nigeria, CBN, said it stopped governors of some states in the country from using the N220 billion Micro, Small and Medium Enterprises Development Fund, MSMEs, launched in August 15, 2013 to score political gains and jettison the motive it was created for.
The Acting Director, Development Finance Department of CBN, Dr. Mudashiru Olaitan, disclosed this at the ongoing workshop for finance correspondents and Business Editors organised by the Nigerian Deposit Insurance Corporation, NDIC, in Katsina.
Olaitan, who was represented by Mr Babatunde Ogunlaja, Assistant Director in the same department, said the CBN took the decision in the interest of the target audience and also to cater for the interest of women who are the major target of the fund.
His words: “A state government is allowed a maximum of N2 billion under the scheme but that is the best the state can do, they are not given the oney directly because of political reason and as a result, the money will be disbursed through participating financial institutions (PFIs). A good number of states were turned down when they requested to disburse this fund directly”.
He added that access to finance has been identified as the most critical challenge to MSMEs development in Nigeria. The financing gap of the MSMEs sub sector of the country is estimated at N9.6 trillion in 2010 (IFC& McKinsey).
“In recognition of this, the CBN launched the N220 billion MSME development development fund to provide long term affordable funding the sub-sector. The Micro, Small and Medium Enterprises Development Fund (MSMEs) would provide a long term affordable funding for MSMEs sub-sector. This will require the commitment of all stakeholders in order to achieve the desired objectives of real sector growth of the Nigeria economy”.
However, the CBN has put in place a robust monitoring strategy to ensure compliance with the guidelines for operations of the fund.
Speaking on why most MfBs have yet to access the fund, he stated that most of them have about 70 per cent Portfolio-At-Risk(PAR) with negative Shareholders’ Fund, a development that have make most micro banks ineligible for the fund.
According to him, ” the challenges in the microfinance industry have limited the ability of most microfinance banks to get from this funding vehicle. Most of them have 70 per cent PAR and negative shareholders funds. It is worthy of note to state that financially sick MfBs cannot access this fund.”
Moreover, he pointed out that CBN will not take physical assets as collateral to access fund, but instead accept 50 per cent financial assets, which most MfBs and some expected participating institutions were unable to give.
This, he said, was to securitise the fund, such that the money are paid as and when due, without any hitch.
*Bamidele Ogunwusi – Daily Independent