Yemisi Izuora
Rural farmers are now in position to access funds as the Central Bank of Nigeria CBN’s new initiative of driving financial inclusion through micro finance bank kicks off.
The initiative which is in collaboration with the Bankers Committee is to put money in the hands of Nigeria farmers at low interest rate of 5 per cent with a seven year tenor and a two year moratorium.
NIRSAL has close to N60 billion funds in Nigeria Money Banks’s vault which farmers are not able to access. The microfinance initiative is to establish microfinance bank branches in all the 774 local governments in the country.
The CBN Governor Godwin Emefiele flagging off the programme said the first seven branches to be opened will be located in Ibadan, Port Harcourt, Bauchi, Kaduna, Enugu and Lokoja. Speaking during a facility tour of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, NIRSAL, microfinance bank in Gwagwalada, Emefiele said the capital base of the new NIRSAL Microfinance Bank will initially be N5 billion. He said this new microfinance banks which is collaboration between the Bankers Committee, NIRSAL and NIPOST will see the establishment of seven Microfinance banks in the six geopolitical zones and the Federal Capital Territory, FCT.
He said the number will be scaled up to 50 microfinance banks which are expected to become operational in the second phase of the launch of NIRSAL microfinance bank. “We are just inspecting one out of the first seven and we are scaling up to the next 50 in the next phase. We believe that before the end of this year, we would have moved substantially in making sure that they are set up and be able to provide finance to small businesses. This is collaboration between NIRSAL, bankers Committee and NIPOST and I want to say that we really need to set up Microfinance Bank that will reach out to the unbanked.”
The CBN Governor lamented the lack of access to cheap finance by small businesses but noted that with the presence of a Microfinance bank branch in each local government across the country, the problem would be tackled. “The biggest problem small businesses always have, is access to credit; and I am happy that with the establishment of this microfinance bank which would be in at least one local government and we are talking about the 774 locations in all the country, we would be able to have a financial institution that will help deepen financial inclusion to make it easy for people to access credit particularly the small and unbanked people because we have always said that these are the very weak”. The creation of NIRSAL Microfinance Banks across the country he said is to improve access to credit and the technology that would be used will be a fintech technology. “We have already set a target for ourselves that by 2020, the rate of financial inclusion must increase to 80 percent from about 48 percent a year and a half ago. So this is just part of our initiative to deepen financial inclusion in Nigeria.”
Emefiele said the hurdles of collateral for loans and interest rate, have been removed as the asset being financed will serve as collateral. “We know that those who are weak in terms of those who are unable to access credit, the big issue for them is inability to provide collateral. So they will be able to access credit without providing collateral. The asset that we are financing for them will act as the collateral which will be registered in our national collateral registry as something that is eligible to serve as collateral for loan. “The loan is going to be disbursed from our AGMEIS scheme which is five per cent of profit after tax that is being set aside by the banks to support the small and medium enterprises that will be in agriculture or those that are into different type of small businesses that badly need to raise finance to be able to set up and earn livelihood. Interest rate for this will be at five percent and the loan will be for tenure of seven years with two years moratorium.”
Reacting to concerns raised in some quarters that the creation of NIRSAL Microfinance Bank across the country will crowd out other Microfinance Banks, the CBN governor assured that the fear of crowding out is unfounded stating that “the existing microfinance banks are doing their best. I have heard this is an attempt to crowd them out. This is not an attempt to crowd them out, but to complement their services and see to it that whatever service is being provided by these microfinance banks should be seen to be fair to their customers. “The rural communities where the microfinance banks charge very prohibitive interest rate. But here, we are talking about making funds available to these people. This will help to create some form of competitive landscape so that those kinds of practices will no longer arise.”