As the Small and Medium Enterprises (SMEs ) are adjudged the largest employers of labour, the Central Bank of Nigeria (CBN) said it is determined to reposition the microfinance banks ( MFBs) in the country to lend a helping hand in enhancing their growth.
According to the apex bank, addressing the challenges of the SMEs on access to credit is very necessary as the third wheel of economic growth.
That formed the theme of the seminar organised for media professionals last weekend by the CBN in Gombe, Gombe State.
According to its governor, Godwin Emefiele, by increasing access to credit and related services in an economically active sector of low income population, microfinance banks directly contribute to expanding the production base and is, therefore, a credible strategy for increasing financial inclusion and reducing unemployment.
“Development economists would tell you that economic growth rides on four wheels”, added Mrs Tokunbo Martins, the Director of Other Financial Institutions Supervision Department of the CBN, in her paper: Appraisal of the new National Microfinance Policy Framework.
“The four wheels start with human capital, natural rsources, capital formation and technological advancement”, she stated,
On the importance of credit to SMEs, she said: “We have a population of 190 million. The World Bank says that over 50 per cent of that live in poverty. The microfinance policy came into being for reasons such as this. If you have such a huge population but many of them are living in squalor, what can you do to improve the quality of life, the standard of living and the output of the nation generally.
“Out of the 36 million micro enterprises that we have, if you have a very good business that is profitable, you can amplify that profit by borrowing more to expand that business as the cost of that borrowing is less than the returns you get on that business. Imagine where these small businesses that make profits would be if they get much more credit and put into that business, amplify that business, improve the quality of life, improve the living standard, contributing more to GDP, economic growth and economic development. But unfortunately, they have not been able to receive the kind of credit that they require. That is why the National Microfinance Policy that came out in 2005 was enacted.
“What exactly the operators and stakeholders in this sector are supposed to be doing? What are they made to achieve? They are supposed to take people out of destitution; they are supposed to contribute to poverty alleviation; they are supposed to help people at the bottom of the ladder; the destitute, the vulnerable, the desperate, the weakest people in the society.That is what they were made to do!
“And so the CBN looked across the world, chose the best practices, and came up with policies to help our own nation. This was the policy that was supported by the World Bank.So we came up with this policy that gave birth to the microfinance banks.
“The policy is to serve as a guide for the activities of the operators in the microfinance sub-sector. It is to ensure that the operators are guided by the rules , principles and a robust legal framework.
“But some of the microfinance banks, after getting the licence, started doing other things. We have seen some that are trading in oil and gas. The owner is the only depositor. The rest of his stocks are in oil and gas.”
Matching the MfBs’ goals with achievements, she said: “ The following targets are in the Microfinance Policy of 2011.But what we had hoped and what we worked towards was to increase access to financial services by 10 per cent annually. We didn’t achieve that. What we had is that there was an increase of 17 per cent between 2008 till date and an increase of 4.8 per cent between 2016 till date, which is something. It means that what we are doing is having effect. What we need to do is to refine it more and more until it has exactly the effect that we want.
Another target:The increase in share of micro-credit as a percentage of total credit from 0.9 per cent in 2005 to 20 per cent in 2020. Well, we are not in 2020 yet . Currently, if you are looking at outstanding credit as at September 2018, it is 4.9 per cent. We are working on the figure to make sure that we improve on it. If you are looking at the total credit that the MfBs made in 2018, it is 5 per cent.
“We targeted to increase the share of microcredit as a percentage of GDP from 0.2 per cent in 2005 to 5 per cent in 2020. Currently we have doubled where we were in 2005 to 0.4 per cent.Various challenges did make it impossible for us achieve better than this.”
On gender disparity, Mrs Martins explained that there supposed to be an increase in women’s access by 15 per cent annually: “Well, I don’t know whether the increase is by 15 per cent annually. But looking at statistics as at today: The number of credit customers that the microfinance banks have is six million. Sixty three per cent of this are women; men, 37 per cent. In fact there are some MFBs that lend only to women. But when you look at the total amount granted, about N900million last year, 55 per cent of that went to the men and only 45 per cent went to the women.
“Financial inclusion has had a positive grip in Nigeria. The exclusion rate reduced from 43 per cent in 2008 to 36.8 per cent in 2018.There is an increase in the use of MFBs from 1.9 per cent in 2016 to 3.3 per cent in 2018. “Between 2014 and 2018, total assets of MFBs have doubled; shareholders’ funds have doubled; profits have almost doubled; loans have also doubled.
“We want people to know that CBN is working tirelessly to clean up the industry of the bad eggs so that those that are doing well can grow and multiply to the benefit of all of us.”