CBN may end interventions to SMEs soon

In from Ali Smart…

Apparently discomfited over the nonchalant attitude of banks towards supporting the ailing sectors of the economy, especially the small and medium scale enterprises (SMEs), the Central Bank of Nigeria (CBN) has said its interventions to these troubled sectors may end soon.
Giving this hint in Abuja on Tuesday, the Assistant Director Development Finance Department of the CBN Mr. Jonathan Tobin at a workshop for Micro Small and Medium Enterprises (MSMEs) funding organised by the Bankers’ Committee, said the apex bank is no longer keen with giving bailouts to the SMEs.

“Interventions will not be forever. A day will come when we will close the tap and you will be compelled to lend from your balance sheets. We want to encourage banks to lend.”

Many of the interventions initiated by the CBN to fund Small and Medium Enterprises, Tobin observed, have failed because banks refused to lend from their balance sheets as directed by the CBN.

Specifically, he said “the National Secured Collateral Registry (NSCR) is one of the schemes we have come up with to manage the issue of collateral and it’s being done in other countries with serious success. We believe we can do it here. It is an MSME development fund by the CBN towards assisting the economy. There is also the Agricultural Credit Guarantee Scheme, many banks are not participating in this scheme because they are supposed to lend from their balance sheets.

Read also: Beware of virtual money, CBN warns

“In the event that the loan goes delinquent, CBN will pay 75% of the amount in default after you have normalised the collateral. It is mainly for agricultural projects but many banks are not participating because CBN said they should lend from their balance sheets. They don’t want anything to tamper with their balance sheets but immediately it is an intervention fund from the CBN, all banks will jump at it.”

The Agricultural Credit Support Scheme, he stressed, “is virtually going into extinction because nobody (banks) is going there. We say lend from your balance sheet at not more than 14% to agricultural projects then the CBN will pay when the customer pays the bank back. CBN will also give the customer a rebate of 60% or 40% of the interest.”

The Commercial Agricultural Credit Scheme, Tobin hinted, was to terminate next year 2016 but banks pushed and begged the CBN not to wind it up because the money is from the CBN.

“The CBN has started revolving the loan and it has done a little above N300 billion. Finally we have extended it to 2025 and the banks are happy. 2025 will soon come but we want to encourage banks to lend.”

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