CBN to reduce CRR of banks that lend to SMEs
The Central Bank of Nigeria (CBN) has promised to provide forbearance to deposit money banks by way of reducing their Cash Reserve Ratio (CRR), for lending to Small and Medium Enterprises (SMEs).
“The CBN will provide some form of forbearance. For example if you are a banker that have lent some percentage of your SME loan to a set of people in the target area, maybe your CRR will be lower than other banks that have not reached that level. In other words, if you want us to ease your CRR to have more money to loan to these set of people, then certain per cent of the loan should go to this people”, Godwin Emefiele, CBN governor said on Sunday in Lagos after the bankers committee retreat.
This is coming after the CBN and the Bankers Committee at the weekend revaluated the various intervention schemes available to SMEs with the aim of ensuring access to finance for productivity that would create jobs and result to inclusive growth.
Consequently, the CBN has relaxed some stringent conditions for accessing the N26.8 billion Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS. The fund can now be accessed at five percent interest rate instead of nine percent.
Godwin Emefiele, CBN governor, who addressed journalist in Lagos after the 9th Bankers Committee retreat with the theme “Improving financial access, job creation, and inclusive growth in Nigeria”’, was worried that no one has been able to access the AGSMEIS fund since its establishment in April this year.
“In the month of April this year, we were able to put together about N26bn but as we speak even at this time, not one penny of that fund has been disbursed. It was a shame, according to the views expressed that for year we will have N26bn sitting in the CBN whereas there are people who needed access to funding. We decided to re-evaluate the conditions under which the facilities were to be made available”, he said.
The fund which was set up as an equity fund will no longer be equity fund rather there would be some form of preference share arrangement or like a debt structure which makes it easy for those who want to access it.
The bankers committee agreed that at least 50 per cent of the fund would be set aside for direct SME disbursement. As a result of this the CBN said banks must set up MSME Desks.
“On the part of the CBN, the central bank has entrepreneurial development centres in the six geo-political zones in the country and that the central bank on its part would make its Enterprise Development Centres available to train people that would benefit from the scheme”.
Speaking further, he said “We are going to have some venture companies that would take about 45 per cent of the fund to identify specific projects. What are those projects? We still talk about someone who will go into the business of converting cassava to starch, or someone or group of people by way of cooperative, who want to go into the business of producing toothpick. These will walk under certain structure after we have built capacity for them, with maybe a 10 per cent or 20 per cent equity stake just to make them have a stake in the project and then we provide the remaining fund under the venture capital arrangement”.
Emefiele noted that the banks raised the issue of risks embedded in lending to small businesses. “We came up and said that between the DFIs and banks there should be some risk sharing agreement where the risk is not only borne by the banks, just to assure that in case risks crystalises that there should be a basis for sharing. What that does is that it makes both banks and DFIs to ensure that they put their eyes down to ensure that the loans perform”.
He spoke about using technology to increase financial inclusion and that the CBN will work with NCC to review mobile banking operations.
He said the CBN will grant the banks interest draw back and that latest January 1 2018, regulations and measures would be put in place.
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