CBN Blame Banks For N9.6tn MSME Financing Gap

Yemisi Izuora
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The Central Bank of Nigeria (CBN)has said that inadequate financing faced by the Micro, Small and Medium Enterprises (MSME) is partly due to banks attitude towards that sector.

The Assistant Director, Development Finance Department, Mr. Jonathan Tobin while speaking at the MSME development fund workshop organised by the Bankers Committee in Abuja
Put financing gap in the sector at N9.6tn.

He said if the sector is adequately funded it will assist the MSMEs create jobs and contribute significantly to the Gross Domestic Product (GDP) of the economy.

He pointed out that if banks had played their roles effectively in lending to the sector, the huge funding gap would have been reduced drastically.

According to him, banks lending to the sector has been declining since 2003, adding that lending from financial institutions to the sector is currently less than one per cent of total credit to the economy.

He said it was because of the risk-aversed nature of the banking sector that the apex bank introduced some of the intervention funds to boost the development of the MSMEs.

Some of these funds are the N220bn MSME fund, and the N200bn Agriculture Credit Guarantee Scheme.

He said, “Nigeria banks are aversed to taking risks. They like to play safe. The economy is virtually collapsing yet banks keep declaring huge profits.

There are currently 17.3 million MSMEs in Nigeria, employing about 33 million people, yet only 4.2 million of these have access to finance.

Tobin noted that despite this, from 2002 to date, lending by Money Deposit Banks to the sector has reduced significantly adding that N9.6tn is currently needed to bridge the financing gap in the sector.

Beside funding, the sector also faces dearth of entrepreneurial skills, adoption of ‘one size fits all products’ strategy for loans by banks and poor governance structure.

He charged banks and other lending institutions to offer tailor-made solutions to lending to the MSMEs instead of the current one-size-fits-all approach.

“Customised risk management lending method in place of collateral driven lending currently employed by banks should be developed.

“We strongly recommend that banks start lending from their balance sheet. There is also need for collaboration between CBN and other government agencies on the implementation of various initiatives geared towards de-risking the sector and making finance available to MSMEs, he added.

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