Collateral, Interest Rate on MSMEs Fund, has being slashes to 2% by FG

As part of strategies to encourage micro and small business owners, including those owned by women and people with disabilities, the Federal Government has said it would reduce security requirement for the N220 billion Micro Small and Medium Enterprises (MSMEs) fund from 75 per cent to 50 per cent. Government would also drop interest paid to banks from 3 per cent to 2 per cent.

This is even as it is set to send a draft bill on jobs creation with 15 different sections, after wide consultations to the National Assembly,  with the hope of getting the Job Act in place before the expiration of current administration on May 29.

The reduction of collateral requirement of the N220 billion is all inclusive interest rate, which must not exceed nine per cent, it restated.

Already, the Central Bank of Nigeria (CBN) has began disbursing to banks and financial institutions and others on lending organisations at 2 per cent from the original interest rate of 3 per cent.

The reduction in collateral requirement is expected to progressively last between six and nine months.

This is even as 2 per cent of the lump sum of N4.5 billion has been set aside to be accessed by entrepreneurs with disabilities.

Meanwhile, about 18 states of the federation are said to have accessed the fund but no concrete figure was given as to how much has been disbursed so far.

Briefing State House Correspondents after its second meeting since it was set up last year, the National Council on Small and Medium Enterprises (MSMEs) chaired by Vice President Namadi Sambo, the Minister of Industry, Trade and Investment, Olusegun Aganga, said the CBN has maintained that the all inclusive interest rate must not exceed 9 per cent and had decided to reduce its rate to banks and financial institutions.

The National Council on MSMEs was constituted by President Goodluck Jonathan to work out modalities that will drive access to the fund as well as other funds to be accessed by entrepreneurs in the country.

After its first meeting, the council had set up a subcommittee to look at the funds as well as the conditions that are required or the criteria you have to meet to access the fund.

Aganga said the report of the committee chaired by the Minister of National Planning called for the reduction of the access to collateral requirement and the CBN rate to financial institutions.

The council said henceforth 60 per cent of the fund would be reserved for women entrepreneurs and priority would also be given to men and women with disability.

In addition to the collateral requirements approved by council, the Minister of National Planning, Abubakar Suleiman, said that council also approved that the collateral requirements of 50 per cent of micro finance banks “be progressively reduced by a period of six to nine months based on the ratings of the Micro Finance Banks (MFBs).”

The other ones in long terms MFB should be rated by independent rating agency to such that access to MSMEs funds will be based on their rating.”

Council also approved that special focus be given to the banks with the strongest infrastructure and capacity for lending to the MSME sub-sector in the CBN strategy.

It approved that the loan tenure for micro loans across agriculture ‎value chain be determined on a case by case basis based on the gestation period.

“Council also approved the interest rate for the MSME fund to be reduced to 2 per cent  the spend for the participating financial institutions (PFIs) to further accommodate their cost. Council also approved that the interest rate for the fund be further reduced to 2 per cent as an insentive for PFIs that have paid for four long circles as at when due,” the minister said.

The minister said council also agreed and approved that SMEDAN, which is an apex body for coordinating and regulating enterprising activities in the country and the National Planning Commission (NPC), the agency for coordinating all monitoring and evaluation activities of agencies in the country, in partnership with Monitoring Unit of CBN, should monitor and evaluate all processes for the MSMEs.

It equally approved that 70 per cent of MSMEs should be disbursed by Development Finance Institutions (DFIs) and micro finance banks, while 30 per cent should be disbursed by commercial banks with at least 40 per cent of the entire fund disbursed to micro enterprises.

It approved that the CBN should engage the National Orientation Agency (NOA) and SMEDAN to assist in disseminating information on the MSMEs fund to all states and local governments.

Aganga said council further deliberated sustainable funding. “That aside from the CBN fund, there has to be sustainable funding across the board for micro finance institutions. The council’s focus today was not just on MSMEs but was more on the micro businesses at the grassroots. These are the ones that constitute 99 per cent of the total MSMEs sector and those are the ones that require the support of the Federal Government.

“We also agreed that all government programmes should be better coordinated. As a result, we are looking at all the funds available and we will be making information available to all Nigerians on the funds that are available and the guidelines on how each of them can be accessed by the average Nigerian. That should be put on the website and made public for Nigerians.”

Meanwhile, CBN Governor, Godwin Emefiele, who was also at the briefing said the apex bank remains committed to disbursing the N220 billion micro, small and medium enterprises facility to all economic sectors in Nigeria cutting across agriculture, the barbers, mechanics, hairdressers in different parts of the country.

“But we realise that there is need to embark more on sensitisation and awareness and the council has mandated the CBN to work with SMEDAN, NOA and other agencies of government to spread the news about this facility so that Nigerians can benefit from it.

ABUJA