Deputy Managing Director, First Bank of Nigeria, FBN, Limited, Mr Gbenga Shobo has revealed that the bank has disbursed about N200 million from the Central Bank of Nigeria’s N220 billion Intervention Fund for SMEs.
Mr. Shobo, who made this remark recently in Lagos at the bank’s Economy & You forum with owners of small businesses, said the bank has also extended over N12 billion credit facilities to Small and Medium Enterprises, SMEs, to support the growth of their business.
He said that the poor rate of assessment of the SME Intervention Fund, would have been higher, but for basic problems associated with SMEs, especially unavailability of tangible collateral.
Shobo stated that guarantees is the way to go if lending to SMEs is to be increased, adding that most small businesses do not have right structures on ground to attract bank lending.
“I think for us in Nigeria, we only determine whether a loan is accessible or not accessible based on the pricing, but there are other elements of lending that we need to look at. Apart from the pricing, the precondition by way of collateral has to be available. Is it something we all have. “
There are SMEs that don’t have tangible collateral which is what the banks are looking. So, the CBN Intervention Fund, aside from making it available at a single digit of nine per cent, also comes with some terms and conditions which the banks and customers must comply with. For example, you must have security, which is tangible collateral, you must have Treasury Bills and cash deposit. Do all SMEs have all these,” he queried.
Explaining further, he said “that is why the disbursement of this Fund has been very slow. We are not going to affect that because it is not directly from the bank’s pursue.
“It is CBN Fund and CBN has said there must be collateral. If First Bank, for instance, lends to a customer and the customers don’t pay back, the bank is liable. So, this is the other side of the coin and this is why we need to apply the risk appetite criteria.” He explained that rising domestic prices indicate a further tightening of monetary policy, which for SMEs means tighter borrowing conditions marked by increase in interest rates; and tighter credit processes in the banks.
He stressed that banks are going to find it increasingly difficult to lend to SMEs due to the Non-Performing Loans (NPL) arising from SME lending which is in double digits.
He, however, stated that FBN would continue to lend even though it recognises the need to tighten risk control. He noted that as a result of the drive to help small businesses in the country, a lot of SME lending carried out in the First Bank require zero security.