Small businesses spring on low cost N220bn MSME Fund

There is rising optimism that small businesses will be springing up as more Participating Financial Institutions (PFIs) rush to partake in the N220 billion Micro Small and Medium Enterprises (MSME) development fund. Following the reduction of the interest rate from 3 to 2 percent for PFIs and 9 percent for beneficiaries and the relaxing of other stringent conditions by the Central Bank of Nigeria (CBN), many banks have developed interest and are ready to avail themselves of the fund.

The CBN in August 2013 launched the N220 billion MSME development fund to address the huge financing gap hindering the development of MSMEs.

Analysts looked at the impact of the reduction of interest rates and financing collateral, and said it would enable microfinance banks grant loans to the real active poor, to enable them widen the scope of their micro credit outreach and also increase the depth and breadth of their operations.

It will also enable them to promote innovation, particularly for micro ventures with bankable ideas and projects which could not be attended to either as a result of lack of collateral or high interest rate.

BusinessDay investigation reveals that about 100 new micro enterprises have been registered in one of the clusters in Anambra State, and more new businesses springing up in other states are being added to over 17 million existing MSMEs in the country.

After the review of the guidelines for the fund, about 30 Microfinance Banks (MFBs) have applied, while over ten have successfully accessed the fund.

BusinessDay found out that about N40.3 billion has been disbursed to PFIs and state governments by the regulator.

Peter Ugwuneke is one of the small enterprise operators who deals in packaging for pharmaceutical industries. Ugwuneke had accessed loans at 25 percent interest from deposit money banks and 10 percent from the Bank of Industry.

But recently, he accessed about N26.7 million from the N220 MSME development fund at nine percent interest, through Fidelity Bank. He intends to use the loan to increase the number of Nigerians on his pay-roll from 40 to 50, a rise of 25 percent. He has also ordered for more machines in addition to his existing 20 machines.

Abimbola Adewale, certified microfinance practitioner/analysts, said that the development marked the beginning of the era of non – discriminatory opportunity for the low income earners with acceptable trade to approach participating MFBs to seek for micro loan.

According to him, it offered a reasonable and sustainable cost of fund for the SMEs at 9 percent per annum as against 60 percent per annum (5 percent per month) offered by many microfinance banks, particularly, those established in the high brow cities of Lagos, Port Harcourt and Abuja.

“The release of the fund is an impetus for the re – emergence of cottage and home grown industries, which will produce raw materials and semi finished goods for big industries in the country.

“Employment opportunities are definitely going to be created with the springing up of the cottage industries. With this intervention, I want to state categorically that government has just woken up to its responsibilities, and more than ever before,is ready to tackle unemployment and close the gap between the haves and the have nots in accessing credit facilities,” he said.

Godwin Ehigiamusoe, managing director/CEO LAPO Microfinance Bank Limited, who has disbursed N100 million from the fund, said, “for the beneficiaries, it is cheaper for them than anywhere. Institutions may have their reservation, but the main objective is to ensure that people get access to funds on affordable terms.”

HOPE MOSES-ASHIKE