CBN To Relieve Collateral Conditions For SMEs

NIGERIA– The Central Bank of Nigeria (CBN) said it is making plans to simplify collateral requirement for lending to Micro, Small Medium-Scale Enterprises (MSMEs) by 2014.

Speaking at the end of the MSME financing conference and D-8 workshop in Abuja on Friday, Director, Development Finance Institution, CBN, Paul Eluhaiwe, said the scheme which would commence next year will help entrepreneurs use moveable collaterals to secure credits from financial institutions.

“We will ensure that collateral registry are movable collateral and we would be able to use it beginning from next year in this country.”

Eluhaiwe said that the initiative became necessary since most banks depended on fixed collateral security to lend to the MSMEs.

“Most banks are not ready to give SMEs facilities and banks depend only on fixed collateral in this country.”

Commercial bank loans to the MSMEs had dropped from 7.5 percent in 2003 to only about 0.14 percent in 2012, CBN Governor, Lamido Sanusi revealed last week.

The initiative would ensure that entrepreneurs have easy access to capital and that these funds are made available for entrepreneurs to grow their businesses at cheaper rates.

Eluhaiwe believes that “If this is done, operators will be able to operate because there will be funds and capacities will be built to create sustainability in the sector.”

“Entrepreneurs themselves, who are supposed to benefit, with movable collateral will have access to more financial services,” he added.

Eluhaiwe said the project has secured the approval of the CBN.

The apex bank will be working with the International Finance Corporation (IFC) to ensure the successful implementation of the initiative.