As part of the strategy to encourage micro and small business owners, Small and Medium Enterprises Development Agency (SMEDAN) has pushed for the reduction in the interest rate on the N220billion Micro, Small and Medium Enterprises (MSMEs) Fund from 9 per cent to 6 per cent. Director-General of SMEDAN, Mr Bature Masari, said the agency is pressing for the interest rate charged by commercial banks on the MSMEs to be reduced to 6 per cent.
He said: “Our interest is to protect small business owners that constitute the MSMEs sector. The reduction of interest rate to 6 per cent will go along way to reduce poverty in the country.” Musari also counselled against high interest rate by the proposed SME bank when it is eventually established which he said should not be more than 3 per cent.
The SMEDAN boss said the current 9 per cent is too high to encourage SME owners to access the funds. “The interest rate should not be more than 6 per cent for the N220bn MSMEs fund and 3 per cent for Small and Medium Scale Enterprise (SME) bank when established.”
On July 22, 2014, CBN reviewed the guidelines that made the N220billion MSME Development Fund unattractive. The fund was established in August last year to channel long-term low interest rate funds to the MSME sub-sector of the Nigerian economy but it came at a high 15 per cent interest rate which was just 4 per cent short of the average lending rate by commercial banks.
The apex bank however dropped the interest rate to a maximum of 9 percent while on each disbursed loan, the apex bank would receive a 3 per cent interest while approved participating financial institutions (PFIs) that help distribute the funds cannot charge more than 6 per cent. The framework confirmed that under no circumstance should PFIs charge more than 6 per cent interest.
Additional interest fees- managing, processing, insurance fees et al are prohibited. Meanwhile, CBN Governor, Godwin Emefiele said the apex bank remains committed to disbursing the N220 billion MSMEs facility to all economic sectors in Nigeria cutting across agriculture, the barbers, mechanics, hairdressers etc in different parts of the country.
“We realise that there is need to embark more on sensitisation and awareness and the council has mandated the CBN to work with SMEDAN, National Orientation Agency (NOA) and other agencies of government to spread the news about this facility so that Nigerians can benefit from it.
Under the programme, each of the 36 states and the Federal Capital Territory (FCT), would be entitled to access as much as N2 billion. But the funds will not be disbursed to the states directly but through banks which are expected to effect the disbursements directly to the beneficiaries.
Already, the CBN has signed an agreement with five commercial banks to disburse part of the N220 billion Micro, Small and Medium Enterprises, MSMEs, Fund to entrepreneurs in the country. The banks include; United Bank of Africa, UBA, Skye Bank, GTBank, Zenith Bank and Fidelity Bank.