Emefiele: CBN-backed MFB will Provide Funds at 5% Interest

• To spur competition, check abuses

James Emejo in Abuja

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has disclosed that the NIRSAL Micro Finance Bank (NMFB) will provide loans to Small and Medium Enterprises (SMEs) at five per cent interest rate for about seven years tenor, as well as a two-year moratorium.

NMFB, a brainchild of the Bankers’ Committee, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and the Nigerian Postal Service (NIPOST), was set up with an initial capital base of N5 billion and designed to boost credit to small businesses by removing identified problems. Emefiele, who said the emergence of the institution would significantly boost access to credit for SMEs, however, allayed the fears expressed by existing microfinance institutions that the emergence of NMFB could be a ploy to crowd them out of business.

The CBN governor argued that it would help create some form of competitive landscape to checkmate the excesses of existing institutions particularly in the areas of exorbitant interest charges.

Speaking to journalists in Gwagwalada, Abuja, shortly after a facility tour of a model NIRSAL MFB, which will soon be formally inaugurated, Emefiele urged microfinance institutions to be fair in their dealings with their customers.
He said: “The existing microfinance institutions are doing their best and I must say that I have heard some of them say that this is an attempt to crowd them out.

“It is not an attempt to crowd them out but it is also an attempt to complement their services and also see to it that whatever services that is being provided by these microfinance institutions which are in their own right also banks- that they should be seen to be fair to their customers.”
The CBN boss added: “And when we say being fair, it also leads to what pricing are you charging for the loans you are granting?

“I also know of the rural communities where the microfinance institution charge very prohibitive interest rates, sometimes we hear about five per cent flag, ten per cent flag, but here we are talking about making loans available at very low interest rates to these people.

“I think it (NMFB) will help create some form of competitive landscape so that those kinds of practices where it’s as if “you take it or leave it” will no longer arise. Because if you are unable to provide them the kind of finance and interest which they think it is right, then they should be able to have access to our own microfinance institution support as well.”

However, commenting further on the single-digit credit provision to SMEs, Emefiele said: “You will find that if someone takes a loan of about N1 million and he has moratorium of about two years, and comes back to say for the next five years he is going to pay back the loan, the amount he is going to pay will be so paltry and the person would have really stabilised in his business and begin to earn a living to be able to survive and pay the loan.”

He said: “I am happy that with the establishment of this microfinance bank which would be in at least local government all through the federation- we are talking about 774 locations all through the country, we would have been able to really set up a financial institution that will help deepen financial inclusion, making it easy for people to access credit, particularly the small and unbanked people because we have always said these are the very weak along the chain, so we are going to use this to really improve access to credit.”

According to him: “The technology that will be used here- you are not going to see too much of cash: it is going to be a fintech technology but the important thing is that we have already set a target for ourselves to say that by the year 2020 which is just next year- about 20 months- the rate of financial inclusion in Nigeria must increase to 80 per cent from about 48 per cent about a year and a half ago.

“So, this is just part of our initiative to make sure that we deepen financial inclusion in Nigeria.”
Emefiele further explained that issues bordering on collateral to access the facility had been addressed.
“We know that those who are weak in terms of being unable to access credit- the big issue for them is also the inability to provide collateral. So what are we saying here? They will be able to access credit without necessarily providing any collateral.

“The asset that we are financing for them, like the poultry business will act as the collateral – that collateral will be registered in the National Collateral Registry as something that is eligible to serve as collateral or security for a loan that has been taken.”

Meanwhile, the Bankers’ Committee provided the set up equity capital and owns 50 per cent of the bank, while NIRSAL and NIPOST own 40 per cent and 10 per cent respectively.

One of the bank’s cardinal objectives is to expand available options and empower Small and Medium Enterprises (SMEs) across the country with structured microcredit to help them establish and expand their businesses.
The institution plans to utilise extant structures to reach the most financially excluded Nigerians in rural communities by working with all relevant partners, stakeholders and players to achieve its objectives.

NMFB is expected to be launched simultaneously across the six geopolitical zones in the country as well as at the flagship branch in Gwagwalada, Abuja, while other pilot locations include Bauchi, Ibadan, Kaduna, Enugu, Port Harcourt and Lokoja NIPOST offices.

The roll out is expected to continue in other parts of the country eventually covering all 774 local governments.
Emefiele had inspected one out of the first set of seven NMFBs with plans to scale it up to 50 in the next phase before the end of the year.