A new dawn for MSMEs

The recent creation of a N220 billion fund for micro, small and medium enterprises (MSMEs) by the Central Bank of Nigeria (CBN) is indeed a milestone and a development that will definitely redefine funding for these numerous businesses that dot the business landscape of the country.

This fund has four major components: grants, refinancing, guarantee and loan components. While the grant component enables the CBN to support microfinance banks (MFBs) and other Participating Financial Institutions (PFIs) in capacity building, the refinancing component allows the MFBs to be refinanced by the CBN at a discounted rated in the event that they have given out huge facilities to their clientele.

With the guarantee component, MFBs can have proper guarantee to seek for funds from commercial banks. The loan component will be targeted directly to MSMEs using MFBs, non-governmental organisations (NGOs) and other lending institutions focussing on MSMEs. The CBN will make available this fund to these intermediary institutions at 9 percent interest rate for onward lending to beneficiary MSMEs at not more than 6 percent points.

It is also cheering that the CBN is already treading the path of caution in drawing realistic criteria, mechanisms and processes for accessing this fund. Most importantly, the CBN will keep track record of the financial health of PFIs and allow only those with good financial status to serve as conduits for the funds that will be directed to the beneficiary MSMEs.

While the news of this huge CBN funding has made many MFBs to begin what may appear to be cleansing of their operations and books, and jolted those that have since been idle into activity, we warn that what may undo the positive implications of this form of funding and sabotage the objectives and resultant multiplier effect on the economy is the possible incidence of corrupt connivance between official parties involved in the processing and disbursement of this fund. How do we ensure that only credible MSMEs access this fund?

CBN and other superintending authorities have a major challenge in ensuring that this huge fund is not frittered on the altar of official corruption, ghost MSMEs, dubious conduits, and scuttled by undue bureaucracy and red-tapism.

The Nigerian project has not suffered because of the absence of laudable schemes or initiatives, but largely because of officially-induced corruption and general absence of proper will on the part of implementation officers and agencies to pursue with required forthrightness, vigour and sense of responsibility the set processes, objectives and goals.

We urge all existing and upcoming MSMEs to understudy the set criteria and processes for accessing this N220 billion CBN fund and seek access accordingly, rather than continue to brood over the longstanding hurdle of high cost funding from commercial banks. Civil society groups, pro-entrepreneurship NGOs and the media should continually put their searchlight on this fund in order to challenge official parties and stakeholders to follow due process.

Coming at this time when the growing and staggering unemployment record in the country is a major challenge, this CBN fund is indeed welcome. We believe that if well managed and directed to its real targets, it will definitely revamp productive activities, create better capacity for employment generation, especially for the youth population.

MSMEs are the real bedrock of free market economies. Without them taking their rightful place, production and employment will always remain in doldrums. Government and large private sector organisations may never provide enough capacity to create sufficient employment.