By Yinka Kolawole, with agency reports

THE Micro, Small and Medium Enterprises (MSME) sector is acknowledged globally as the oil that lubricates the engine of socioeconomic transformation of any nation. The sector is strategically positioned to create up to 80 percent of jobs, improve per capita income and contribute significantly to Gross Domestic Product (GDP).

According to National Bureau of Statistics (NBS) data, in 2010 MSMEs contributed 46.54 percent to the Nigeria’s GDP in nominal terms, with the potential to contribute more in view of their large numbers within the country. But the sector is characterised by huge financing gap and has been unable to realise its huge potential as operators continue to lament their dwindling fortunes.

This is due mainly limited access to credit facility traceable to the reluctance of banks to extend credit to them. Even the establishment of Microfinance Banks (MFBs) has not helped to bridge the gap of providing loans to this critical sector of the economy.

MSME Dev Fund: It was in recognition of the significant contributions the MSME sub-sector can make to the economy that the Central Bank of Nigeria (CBN) launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF) on August 15, 2013, an Intervention Fund with a take-off seed capital of N220 billion. This was in furtherance to the apex bank’s developmental functions and mandate of promoting a sound financial system in the country.

Financialsystem

While launching the fund, former CBN Governor, Mallam Sanusi Lamido Sanusi said: “In 2012, Nigeria had about 17.6 million MSMEs employing about 32.4 million people, and contributing about 46.54 per cent of nominal GDP. A survey by IFC and Mckinsey in 2010 noted that 80 per cent of these MSMEs are excluded from the financial markets. The state of MSMEs in this country underscores the importance of this fund.”

Objective

The broad objective of the Fund is to channel low interest funds to the MSME sub-sector through Participating Financial Institutions (PFIs) to enhance access by MSMEs to financial services; increase productivity and output of micro-enterprises; increase employment and create wealth; and engender inclusive growth.

Eligibility: Eligible activities under the Fund include: Agricultural value chain activities; Cottage Industries; Artisans; Services to hotels, schools, restaurants, laundry etc.; Renewable energy/energy efficient product and technologies; Trade and general commerce; and any other income generating enterprise as may be prescribed by the CBN.

A maximum of 10 percent of the Commercial component of the Fund is channelled to trade and commerce, to ensure that productive sectors of the economy attract more financing necessary for employment creation and diversification of the country’s economic base.

Loan tenor and rates: The facility has a maximum tenor of one year for micro enterprises and up to five years for SMEs with option of moratorium. The Fund is administered at an interest rate of 3 percent per annum under the wholesale funding to the PFIs with a spread of 6 percent bringing the lending rate to borrowers at a maximum of 9 percent per annum inclusive of all charges.

Accessibility hurdles

Two years after the launching of the intervention fund, MSMEs operators are lamenting their inability to access the fund, noting that the process of accessing the loan is cumbersome.

Mr Segun Kuti-George, Chairman, Nigerian Association of Small Scale Industrialists (NASSI), Lagos Chapter, told NAN that his members had been unable to access the fund, despite deliberate efforts by his association to assist members in writing presentable proposals. He said that the slow disbursement of the loans had made most SME operators to lose confidence in the scheme.

“Up till now, we just hear that some amount has been disbursed to some SMEs. We don’t know the people who have received the funds, because I don’t think any of our members have accessed any loans,” he said. Mr Olufemi Egbesola, President, Association of Small Business Owners, (ASBON), also said that the announcement of the N220 billion fund brought relief to members of the association but   none of his members has been able to access any loan.

“To me, I think the process of accessing the loans is too tedious. You are asked for this, we bring, tomorrow they ask for something else, collateral documents and so on, even after fulfilling all the requirements, we still have not heard anything,” he lamented.

It was the same story for Prince Saviour Iche,Ppresident, Association of Micro Entrepreneurs of Nigeria (AMEN), as no member of the association had accessed the MSMEDF loan. He said they had written letters to relevant agencies to alert them on the need to fast-track the disbursement of the loans, but the efforts had not yielded any results.

Banks shun  participation

Findings reveal that most banks are reluctant to get involved in the disbursement of the fund because of what they perceive as unattractive interest rate, a CBN official said. Deposit money banks (DMBs) charge as high as 25 percent interest rate on commercial loans while MFBs charge between 30 to 40 percent, whereas they can only earn 6 percent from administering the Fund.

Slow disbursement: Meanwhile CBN has acknowledged the slow process of disbursing the fund with less than N100 billion disbursed so far. An official of the apex bank noted that while the criteria might be stringent, CBN was just being careful in order to ensure that those who actually got the fund had the ability to pay back. “There are conditions for microfinance banks to meet before they can assess the fund, and entrepreneurs also have to meet the conditions before the fund can be disbursed to them.”

So, it takes a lot of rigour to put on the table resources for entrepreneurs to use. We don’t want to make mistakes; we want to disburse the fund and make sure people pay back for others to assess the fund.