Stringent conditions set by the Central Bank of Nigeria (CBN) for accessing the 220 billion naira (US$1.3 million) Micro, Small and Medium Enterprise (MSME) Development Fund is hampering enterprises’ access to the money to expand and develop their businesses.
The fund, launched last August by the apex bank, 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.
However, the private BusinessDay newspaper reported Monday that about 60% of the more than 800 MFBs operating in the country may not have access to the fund on account of their inability to meet the required conditions.
“In my opinion, the conditions are a bit stringent for a lot of MFBs to meet. Obviously, 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,” the newspaper quoted Mr. Wale Adeleke, an MFB operator, as saying.
Another operator, Onoja Usman, 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.
The conditions to be satisfied by 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.