Operators say CBN conditions hamper access to MSME fund

By Chibisi Ohakah

Stringent conditions set by the Central Bank of Nigeria (CBN) for accessing the N220 billion (US$1.3 million) micro, small and medium enterprise (MSME) development fund may be hampering access to the money by enterprises to expand and develop
Investigations reveal that the fund, launched last August by CBN is still sitting idle as the requirements for accessing it are proving too difficult for microfinance banks (MFBs) operators to access.

The fund was set up to bridge the funding requirements of a large number of unserved and under-served clients in the Nigerian MSME sub-sector.
The conditions set by the apex bank for eligible MFBs/finance companies include compliance with regulatory capital, compliance with prevailing prudential ratios, and average deposit growth rate of 20% per annum (for institutions operating for over two years),
Others are average clientele base growth rate of 20% per annum (for institutions operating for over two years), risk management framework acceptable to the regulators and corporate governance culture acceptable to the regulators.

In addition, the MFBs must adhere to sound ethical values, degree of separation of ownership from control/management, number of non-performing insider-related facilities, evidence of membership of apex association and up-to-date payment of annual subscription and compliance with up-to-date and timely rendition of monthly returns to the CBN.
About 60% of the more than 800 MFBs operating in Nigeria are believed to be having difficulties accessing the fund due to their inability to meet most of the the required conditions.

An MFB operator, Wale Adeleke, said some of the conditions set by CBN are stringent. “An MFB has to be doing pretty well to readily meet those requirements and could survive without the funds, hence the requirement would have to be stepped down to achieve more reach and impact on our target populace,” he said.
Another operator, OnojaUsman, said most of the MFBs would not be able to access the fund because of the difficult criteria the CBN is using for the loan.
“We understand that rating agencies are being used to determine those that merit accessing the fund. Most MFBs that are units can’t access the fund because before now they had impaired shareholders’ fund and some are already struggling to operate as result of lack of capital for operation. The fund will only serve few MFBs,” he added.
But the apex bank has explained that the delay in the disbursement of the fund was because of its plan to establish a Special Purpose Vehicle to manage it.