THE COMMITTEE ON MSMES
The Council should work hard to clear obstacles in the way of small business enterprises
In 2005, the Central Bank of Nigeria (CBN) came up with a regulatory and supervisory framework for the establishment of microfinance banks (MFBs) as a means of providing access to financial services to the unbanked population. The MFBs are allowed to solicit deposits, which are guaranteed by the Nigeria Deposit Insurance Corporation (NDIC). That the idea failed is one area the recently constituted National Council on Micro, Small and Medium Enterprises (MSMEs) should be looking at in its efforts to interface with the CBN to enhance the financing of small businesses in the country.
Vice-President Kashim Shettima said last week that the federal government, working in collaboration with other stakeholders, will be more deliberate in ensuring growth in the MSMEs space in the country. “Some of these initiatives are laudable and will need to outlive the present administrations in the States. Regardless of political affiliations, Nigerians must be seen to be the ultimate beneficiaries of these schemes that we are trying to put in place,” Shettima said while pledging a partnership between state governments and financial institutions aimed at enhancing access to finance MSMEs at single-digit rates across the country.
We hope the council will walk its talk. Across the world, micro-lending carries the image of social investment, classified as a development issue in the mould of education, health, and related policies. The scheme provides financial services to MSMEs across numerous industries such as trade, commerce, education, tailoring, carpentry, fishing, and transportation. Besides the fact that they account for a significant percentage of businesses in Nigeria, they can help to address the challenge of insecurity if properly harnessed.
The Shettima council should learn from the past. “The major reason MSMEs cannot access loans of commercial banks was that they cannot provide collateral,” the Presidential Committee on Fiscal Policy and Tax Reforms chairman, Taiwo Oyedele, once said. “But the MFIs were asking them all manner of things they could not provide. You cannot treat MSMEs like multinationals, asking them to provide financials, cash flow and projects, they will go away.” Only last week, Oyedele said he has encountered many small business owners who argue that the Nigerian system and the government are holding them down. This issue must also be addressed by the Shettima council.
Meanwhile, there are no adequate data on the total credit of the industry, but stakeholders believe its performance is a far cry of the need of MSMEs. All these are not helped by the impact of technology. The microfinance banks are competing with online banks which do not have to set up elaborate structures such as offices and more. Perhaps, all this prompted the CBN, in 2013, to issue the revised regulatory and supervisory guidelines for microfinance banks, to address challenges observed in the implementation of the microfinance policy of 2005 and emerging developments in the industry. But for now, the impact is hardly noticeable.
Out of desperation, many of these MFBs have resorted to using criminal and unorthodox methods to compel their borrowers to pay. They not only name and shame but also deploy the services of thugs. Going forward, the Shettima council should prescribe standards to address the issue of poor management of funds meant for credit disbursement. Besides, the capital base of micro finance institutions should be strengthened in order to mobilise domestic savings and promote banking culture among low-income groups.
Perhaps the most important area the Shettima council will have to examine if the MSMEs are to be helped is the number of government agencies that imposes undue levies on them. It is becoming increasingly difficult to do business in Nigeria due to this multiplicity of agencies.
