31% SMEs access loans in 2018
Only 31percent of micro, small and medium enterprises in Nigeria obtained loans from financial institution in 2018.
The Development Bank of Nigeria, DBN, identified the lack of collateral as majorly responsible for the poor access to credit facilities from financial institutions including commercial or micro finance banks.
Speaking at the fifth edition of the Refined Economic Development quarterly lecture in Abuja, the Chief Economist, DBN, Prof Joseph Nnanna, said other reasons for the low figure included problems with credit history and unfavourable worthiness of the prospective borrowers.
The economist who made reference to a 2018 survey by the International Finance Corporation, said limited access to finance for the MSME segment severely constrained opportunities for economic diversification in Nigeria.
To achieve more access to finance for the MSMEs, Nnanna said the bank will empower the segment with N100billion before the end of 2019.
Nnanna reiterated that MSMEs were the backbone of any economy, considering the fact that the segment made up over 90 percent of all firms and accounted for an average of 60 to 70 percent of total employment, and roughly 50 percent of Gross Domestic Product of Nigeria.
He said, “For Nigeria as a whole, we are trying to achieve more access to finance for the MSMEs, because we believe they are the engine that grows any economy in any part of the world.
“This year alone, the DBN plans to disburse N100billion to MSMEs and we are quite on track as it is already. We are very confident that we will achieve that this year and beyond.”
To aid in reducing the risks associated with the MSME segment, Nnanna said, “DBN offered partial risk sharing (credit guarantees) with prospective financial institutions granting credit to the operators in the segment.
“In 2018, 22.74 percent of total credit was allocated to the oil and gas sector and 13 .75 percent was allocated to the manufacturing sector. Conversely, sectors where the MSME participants operate include agriculture which total credit allocated was a paltry 3 .16 percent, general / trade and commerce 6.89 percent and education which credit to this sector remains subdued, received 0.41 percent (NBS, 2018).”
He noted that from a macro -economic examination, there was “a crowding out effect,” due to government borrowing.
“As a result, over a period of one year, we witnessed an increase in treasury bill rates peaking at 18 percent in 2017. At the same time, banks facing a challenging external environment worked to reduce risks, crowding out liquidity to real sector including MSMEs.”