By Providence Emmanuel

SECTORAL allocation of credit would help to direct credit to critical sectors of the Nigerian economy, said Managing Director, Hasal Microfinance Bank Limited, Mr. Rogers Nwoke.

He said this while reacting to difficulties that confront the agricultural and small & medium enterprises, SMEs, sectors in their quest  to access credit  from commercial banks to grow their businesses.

In an exclusive chat with Financial Vanguard, Nwoke  stated: “Sectoral allocation of credit would help us direct credit to sectors that are important in the economy. As I speak, you cannot compel any commercial bank to lend money to agric and SMEs. He lends money to where he feels he has higher returns and lesser risk.

“I would have loved to see a situation where, if you want me to cater for the bottom of the pyramid, then let there be restriction. If you look at the microfinance policy when it was launched in 2005, it was hinged on a linkage programme, that linkage programme says: Ät the economic strata, the rock bottom of the pyramid requires specialised skills which a microfinance bank should deal and as I grow these people up, I begin to link them up to the commercial banks.´”

Describing what he called the two alternative suggestions, he noted that it is pertinent to go back to sectoral allocation of credits which was formally in use but later removed.

“For instance, the Reserve Bank of India makes it compulsory for commercial banks in India to lend between a minimum of 11 and maximum of 19 percent of their sectoral allocation of credit to microfinance banks, MfBs.    Now MfBs in return are not allowed to take deposits, so it means that as I get my licence, I go to a commercial bank and apply for say N1billion for un-lending.

“All I do is to collect my loan repayment; if they want to do savings they can go the commercial bank. So that is the alternative. The regulator can also allow the commercial banks to take the deposits but force them to lend money to MfBs because they cannot get to the retail end that the MfBs can get to. These are the two ways we can solve this problem. Both works better. There has to be sectoral allocation.

“Foreign institutions are coming into the country to lend money worth about $5 million to $10 million to the top States and National MfBs, based on a simple analytics on our business. If foreign people can come and pick a microfinance bank and give it $5million without collecting any collateral, then, why will a Nigerian bank not lend us money.

“Apart from the issues of foreign exchange to pay, otherwise, all the MfBs in Nigeria that have foreign loans are liquid enough to pay those loans. That is a major issue for liquidity,” he said.