Group lauds CBN, banks’ N5billion MFB initiative

CBN building

 By Chijioke Nelson

• Urges awareness, N100b capitalisation for meaningful impact
The Centre for Social Justice (CSJ), has said the establishment of the Central Bank of Nigeria (CBN), backed Micro Finance Bank (MFB), is a welcome development that embodies obvious positive goals.
The N5billion capitalised NIRSAL Micro Finance Bank, he said, is also a credit to the Bankers’ Committee, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), and
the Nigerian Postal Service (NIPOST).
The Lead Director, CSJ, Eze Onyekpere, who made the observation, commended the five per cent interest rate plan, while customers will have a two-year moratorium and five years for repayment, but however said for the expected benefits to materialise, the initiative needs to be taken to scale.
He said there is a need for sensitisation and enlightenment to SMEs on the provisions of the Secured Transactions in Movable Assets Act (No. 3 of 2017), and its peculiar contours; and ensure that persons of competence and integrity are recruited into the management.
According to him, the major downside is the share capital of N5billion, which he described as paltry sum and will not scratch the surface of the sector needs and asked for a minimum fund of N100 billion.
“The downside of this intervention is that the conventional Micro Finance Banks will stand no chance of competing with this special initiative. If it is taken to scale, it will crowd out their operations, and they will be forced to wind up. But the positive benefits crowd out this downside.
“This will tackle the challenge of access to credit for SMEs. The implication is that the loans will be available at rates below the inflation rate and monetary policy rate. This, to a great extent, implies that the beneficiaries will be enjoying a subsidy.
“Access to credit has remained a huge challenge for Small and Medium Enterprises (SMEs), and monetary policy and money deposit banks over the years have shown no inclination at easing this challenge.
“It is also expected that the conditions and terms of the credit will be easier to fulfil by the SMEs than the requirements of the conventional money deposit banks.”
The fact that SMEs will access credit without necessarily providing a collateral, as the business itself can act as collateral and will be registered in the National Collateral Registry as security for the loan is a wonderful innovation.
“This development seeks to implement the Secured Transactions in Movable Assets Act (No.3 of 2017) with the objectives, inter alia, of enhancing financial inclusion, stimulate responsible lending to micro, small and medium sized enterprises and establish and functionalise a National Collateral Registry.
“The recognition of securities, which the conventional money deposit banks have rejected as collateral is a welcome development, a step in the right direction. This should be deepened to support entrepreneurship and the blossoming of creative ideas.
“The initiative will therefore increase value addition, create new jobs as the SMEs will have access to credit to expand and deepen production. It will also create the opportunity of increased profitability, more taxable income to individuals and SMEs and reduce the unemployment figures,” he said.
The bank’s shareholding structure gives Bankers’ Committee 50 per cent stake, having provided the set-up capital, while NIRSAL and NIPOST own 40 per cent and 10 per cent respectively.