The Central Bank of Nigeria has expressed displeasure over the non-accessibility of the N220 billion Development Fund for Micro, Small and Medium Enterprises (MSMEs).
Speaking at a workshop organised by the Bankers Committee on Funding Nigeria’s SMEs, Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, through the Senior Manager, Development Finance Department, Mr. Chinedu Zephaniah, said that out of the N220 billion earmarked for MSMEs, a whopping N50 billion remains un-utilised because beneficiaries cannot access it. Mr. Zephaniah added the plaintive moan that most recipients are unable to repay their loans.
Translation: This CBN-inspired MSME Fund set up three years ago, on August 15, 2015 to be precise, has only succeeded in disbursing N170 billion, and the apex bank is having difficulty in finding takers for the remaining N50 billion, in spite of the presumed easy access to the Fund, and the agony and cry of MSMEs in search of access to finance.
Meanwhile, the Central Bank of Nigeria, at an earlier Forum on the same subject, held in conjunction with the Bank of Industry (BoI) and Lagos State Employment Trust Fund (LSETF), had agreed with its co-conveners that the MSMEs are experiencing serious challenges in accessing funds domiciled in financial institutions.
According to estimates reeled out at the above-mentioned gathering, only 4.2 percent of 37.07 million Micro, Small and Medium Enterprises (MSME) in Nigeria have been able to access loans or overdrafts from financial institutions. For start-ups, they stand a less than zero chance of accessing finance from the banks. This pathetic condition is re-affirmed by Central Bank of Nigeria figures which show that out of aggregate loans of N135.9 trillion disbursed to the economy between 2011 and 2015, only N159.75 billion, representing 0.1 percent, went to SMEs.
Ironically, this is happening at a time when there is a widening basket of funds purportedly earmarked for Micro, Small and Medium Enterprises, and current estimates indicate that  intervention funds, across various segments, amount to N3 trillion. What this means is that the mere fact of funds being set aside, and being available, do not mean that they are accessible to their targeted end users.
What is responsible for this lacuna? The banks pay lip service to the strategic role of MSMEs in driving economic development and the growing opportunities that exist in banking MSMEs, but they put their monies and their mouths in different places! They rehash the recurring chorus that MSMEs are unable to access credit because they lack strong corporate governance, proper accounting records, financial statements, bankable business plans, acceptable security, etc. They continue to sound like cracked gramophone records.
The CBN, and the nation, cannot afford to toe this line. Rather than talking from all sides, and shedding crocodile tears, the CBN Governor (in conjunction with the Bankers Committee, of which he is a distinguished alumnus) must stop reading from the Book of Lamentations, and apply new solutions to resolve the disconnect between availability and accessibility of intervention funds.
They must address the question of why intervention funds are available but are not accessible. My hunch is that while the Central Bank of Nigeria is making some real effort to assist Small Business Owners in accessing finance, in line with its pivotal role in the nation’s financial ecosystem, the banks don’t really care, because they are primarily driven by the profit motive, by returns on their investments. Given this reality, what must both entities do to truly assist Nigeria’s burgeoning rank of entrepreneurs? Asked differently, what must the CBN and the banks do to ensure that intervention funds are not only readily available but also easily accessible?
My modest proposals:

  1. Entrepreneurship Training. While the CBN is making efforts to fund new and expanding enterprises, it is clear that the disbursements are not fully achieving the desired objective of making credit available and accessible to the nation’s Small Business Owners. A major reason for this under-performance is that most of the potential beneficiaries are not qualified to access credit, and many of those who manage to access credit can hardly pay back!

Which is why the CBN must reset its thinking, and move beyond simply providing funds for Small Business Owners. It must see training, to prepare and position beneficiaries, as an essential component and a pre-condition for its intervention initiatives. Training must be a condition precedent for disbursement of funds for new and growing enterprises.
Entrepreneurship has its discipline and must be learned, formally or by apprenticeship. It is training that will produce the Small Business Owners who possess the capacity to access, absorb and profitably utilise CBN and other intervention funds. In the absence of this rigour, the CBN and similar providers of intervention funds may as well be operating an inverted Gresham scheme of throwing good money after bad money.

  1. Mitigating Risks of Lending to Small Business Owners. Talk with as many bank executives and Fund Managers as you wish. They all speak with one voice. The reason banks don’t lend to Micro, Small and Medium Enterprises is that they are not able to figure out ways of mitigating the risks of lending to Small Business Owners. To say it in simpler words, small businesses are high-risk borrowers and banks are not ready or willing to bear the risk of funding them.

The underside of this is that even monies earmarked for credit to small businesses end up with ‘big’ businesses that can meet the high-hurdle requirements of borrowing in Nigeria. A case in point is the recent advance of N5.6 billion by the Bank of Industry to the food and beverage giant, Promasidor Nigeria Limited.
Bottom line: The CBN Governor and his banking colleagues must accelerate the process of making MSME operators bankable, through training, AND through working with the Bankers Committee to find effective ways of mitigating the risks of banks, to enable them lend to Small Business Owners. With these done, current efforts at making funds available to Small Business Owners would yield more than meagre results in terms of real access to facilities, and produce better  results in terms of Small Business Owners being able to liquidate the credits extended to them.
Only then can we rest assured that the Governor of the Central Bank, and the bankers, are not double-speaking and shedding crocodile tears when they lament the fact that less than five percent of commercial credit goes to Small Business Owners in the midst of  a ready N3 trillion that is available but cannot be accessed by possible beneficiaries who are starving for want of investible funds.