CBN Launches N220bn for MSMEs

The Central Bank of Nigeria (CBN) has, over the weekend, officially launched N220 billion intervention fund for Micro, Small and Medium Enterprises (MSMEs) in the country. Mr. Sanusi Lamido Sanusi, governor, CBN, who spoke at the launch of the fund in Abuja said the financial intervention is designed to further enhance access to finance by MSMEs, while it is also expected to provide wholesale financing windows for Participating Financial Institutions (PFIs). While it would improve the capacity of the PFIs to meet credit needs of the MSMEs, he added that the fund would provide funds at reduced cost to PFIs. Sanusi stressed that microfinance institutions and Non-Governmental Organisations can also participate in the scheme, even as it would enhance access of women entrepreneurs to finance by allocating 60 per cent of the fund to them. This intervention, he said, are specific in scope and time and should be seen as stimulus for addressing financing, thus, stirring the market dynamics towards MSME development. To him, "The ultimate responsibility for sustainable intermediation for the subsector lies with the financial markets. Moreover, these interventions serve to integrate the micro-entrepreneurs, the low-income earners, farmers, artisans and active poor who operate in the informal sector, into the financial system to improve the effectiveness of public policy." Speaking earlier, he said, Nigeria had 17.6 million MSMEs employing 32.4 million people and contributing 46.54 per cent of nominal GDR A recent survey by 1FC and Mckinsey (2010), suggests that 80 per cent of these MSMEs are excluded from the financial markets, Sanusi noted. Speaking on motives behind the fund, he said the state of MSMEs funding in the country is pathetic, saying, between 2003 and 2012, commercial bank loans to small scale enterprises dropped at an exponential rate. Analysis of the annual trend in the share of commercial bank credit to small-scale industries, he added, indicates a decline from about 7.5 per cent in 2003 to less than one per cent in 2006 and a further decline in 2012 to 0.14 percent. He disclosed that CBN, on its own part, has been working assiduously towards developing a robust regulatory and supervisory framework and initiatives for improved access to finance for the sub-sector. To further de-risk and encourage lending to the MSME sub-sector, he said, CBN has also intervened with a number of initiatives such as; the Power and Airlines Intervention Fund (PAIF) to help address the constraints of electricity, Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), SME Refinancing and Restructuring Facility (RRF), among others. Speaking earlier in Lagos. Mr. Femi Fabanwo, director, Other Financial Institutions Department (Ofid), CBN said, the fund is co-funded by government, CBN, as well as the private sector. He stating that the fund is not a bail-out for illiquid Microfinance Institutions (MFls): "The MSMEs fund is not medicine for those who are weak, the MSME fund is going to be assessed by institutions that have shown proven record of performance; it is not for any microfinance bank. It is not a bailout fund. There is going to be a social window for capacity building in any area that will augur well for the development of the sub-sector." The fund, he said, would have several windows, including commercial and social components, in order to enhance its operations and outreach. It is also expected to support capacity building activities of ihe microfinance institutions nationwide. The fund is expected to be accessed by strong microfinance institutions that are credible enough to repay to the apex bank. The benefiting banks, it was learnt, will access it at an agreed interest rate and maturity period.