CBN’s Intervention Fund

Aimed at addressing the funding challenges being experienced by MSMEs, the funds would be made available to participating financial institutions (PFI), thereby improving their capacity to meet the credit needs of MSMEs.According to CBN Governor Sanusi Lamido Sanusi, the fund specifically made provision for small farmers and women entrepreneurs towards facilitating efficient produce marketing in […]

Aimed at addressing the funding challenges being experienced by MSMEs, the funds would be made available to participating financial institutions (PFI), thereby improving their capacity to meet the credit needs of MSMEs.
According to CBN Governor Sanusi Lamido Sanusi, the fund specifically made provision for small farmers and women entrepreneurs towards facilitating efficient produce marketing in order to reduce post-harvest loss. Similarly, 60 per cent of the fund has been reserved for women to ensure easy access to credits by them. Provision of micro-credit has been identified as one way to combat the ever prevalent poverty in the country, through enabling people to embark on ventures of their own rather than waiting for someone else to provide them with employment. Thus, the CBN’s N220 billion intervention fund, in principle, demonstrates the seriousness with which the policy of financing MSMEs is being implemented as an aspect of the overall policy of combating poverty.
However, laudable as the outlay of the fund is, a cursory perusal of the measure as enunciated indicates that it could face certain obvious hurdles while being implemented. First, in the disbursement of the funds effort should be made to ensure that those for whom it is meant actually get to access it. Many well-intentioned policies have floundered during implementation, as evinced by the special funds established for small scale industries such as the cocoa and textile funds which have purportedly been disbursed but with little or no impact on the areas concerned. This one too could be susceptible to such a fate if it is not well policed. Funds of this nature are targeted by greedy and unscrupulous politicians who use their influence to corner them to the detriment of those for whom they are actually meant. To avoid this, a well thought out plan must be put in place by the CBN to supervise and monitor their disbursement appropriately.
The ceiling of 9 per cent lending rate fixed by the CBN seems rather high considering the group of people the fund is meant for, who mainly are artisans, small farmers engaged in subsistence farming and small scale business owners. This point is even more poignant because the CBN has left it to the micro-finance banks (MFBs) to fix their own individual interests when they lend to the small scale industrialists. As at now the MFBs charge between 30 and 40 per cent as interest. Considering their predilection to make mouth-watering profits, the MFBs could decide to charge as high as what they are charging now. Surely, such an eventuality would bankrupt any borrower, thereby frustrating the entire aim of the scheme.
Hence, the CBN must find a way to put a ceiling on the amount chargeable as interests that would be mutually beneficial to both the MFBs and the borrowers. A way to achieve this is for the CBN not to leave the borrowers to the whims of the MFBs, particularly by insisting that clauses that could put borrowers in perpetual peonage are not inserted in the loan contracts or agreements.
The special provision for women in the fund is a recognition of the fact that they constitute the bulk of those engaged in small businesses, but whose interests have not been properly served. They therefore deserve the priority accorded them in the scheme. But it will remain mere provision unless and until the CBN enforces the disbursement of the fund to reflect the 60 per cent reserved for women. Lastly, for the scheme to achieve its set goals the CBN must supervise the participating banks closely and carefully monitor the implementation of the scheme in order to safeguard the funds from being appropriated by the owners of these banks or their relatives.