Nigeria: MFBs and the challenge of accessing funds

By Hope Moses-Ashike, Business Day Online

It is easier to announce the launch of development or intervention funds for any financial institution but accessing such funds is usually difficult.

This is the challenge faced by microfinance banks as they find it difficult to access the Central Bank of Nigeria (CBN)’s pronounced funds for Micro, Small, and Medium Enterprise (MSME) funds.

There was the N54 billion Small and Medium Industries Equity Investment Scheme (SMEIS), a voluntary initiative of the Bankers Committee whose membership includes all managing directors and chief executive officers of banks in Nigeria that requires all licensed banks in the country to set aside 10 percent of their profit before tax (PBT) for equity investment in and promotion of small and medium enterprises (SME’s). However, this fund could not be accessed by microfinance banks till date.

Now, the CBN has launched the N220 billion MSMED fund which seeks to provide wholesale funding requirements of microfinance banks and microfinance institutions for on-lending to micro and medium enterprises.

Operators of microfinance banks have expressed concern over the possibility of accessing the fund. Sunny Akhamiokhor, managing director of Support Microfinance Bank Limited, Lagos, said he hoped MSMED fund was not going to be a theory. He urged the CBN to ensure the fund is properly disbursed and used for the purpose it is being set aside for.

Some of the operators who were present at the Sterling Bank told the managing director to assist them in making sure that the fund is accessed by microfinance banks.

Deposit Money Banks and microfinance banks are partnering to take advantage of the CBN’s N220 billion, Micro, Small and Meduim Enterprise Development Fund (MSMEDF) that will be launched very soon.

Yemi Adeola, managing director, Sterling Bank plc, in Lagos, shared with operators of microfinance banks on the available intervention funds from the CBN they can benefit from.

Such intervention funds include the N600 billion for MFBs to access for onward lending to agricultural sector, N220 billion MSMEDF, and N400 million renewable energy among others.

Speaking with journalists shortly after the MFBs customer forum organised by the bank, Adeola said: “We realise that government is coming up with intervention fund and they are asking microfinance banks to access this fund through commercial banks. We knew that a good number of them might not know how to go about it. So it will be nice to bring everybody together, share with them of all available intervention funds that they can benefit from and offer to them our willingness to help them access the fund.

“We are here to discuss these opportunities and to show you what else we can do for you and I hope this partnership will be mutually rewarding.”

However, operators of microfinance banks urged Sterling Bank to focus on reducing cost of operation, ensure value relationship and assist them in accessing the funds.

Making a presentation at the forum, Abubarka Suleiman, chief operating officer, Sterling Bank said the bank believes strongly in strategic partnerships and is already in partnership with some microfinance institutions in relation to electronic business and agricultural finance.

According to him, the bank identifies with the brand promise of microfinance banks and believes there is need to leverage on technology to increase their retail penetration and enable their customers enjoy electronic banking facilities.

Nigeria: MFBs push for more funding windows to close liquidity gap

While waiting for the launch of Micro Small and Medium Enterprise (MSME) Fund, formerly Microfinance Development Fund, next month, microfinance banks in Lagos State are devising other means of getting finance to support one other.

This time, the National Association of Microfinance Banks (NAMB), Lagos chapter, is making arrangement to constitute Microfinance Money Market Association (MMMA), aimed at providing short term liquidity for its members.

According to Valentine Whensu, chairman of the association, MMMA was an initiative of Lagos Island Local Government unit which the state chapter wants to improve upon.

“In order to give credibility and to get the members required, Lagos State chapter is to improve on the Lagos Island unit initiative. We thank them for this development”.

Apart from the new initiative, MMMA, the state chapter of microfinance banks had earlier established a Trust Fund known as NAMBLAG Trust Fund. The Fund was aimed at closing the liquidity gap in the sub-sector and offers the micro business operators the opportunity to have access to cheaper funds.

Three years ago, Inter-bank market for MFBs was launched. It was envisaged by Financial Derivative Company in conjunction with the Kakawa Discount House aimed at providing an opportunity for increased mobility of funds among microfinance banking operators, reducing the cost of funding and improving the net interest margin by providing these micro credit banks with a solid funding base to address short and medium term requirements.

The Inter-bank market died with the crisis that hit microfinance banks in the recent past. The question now is, will this microfinance bank money market be sustained?

Responding to this, Whensu said the then Inter-bank did not work because there was no proper structure. “They did not register it. We are going to register this one. There is a structure that will involve collateral, our treasury bill. It is the body that will work with conventional money market. We are using Kakawa Discount House as lenders of last resort.

They did not have any lender of last resort. They did not have consultant that was piloting them. We are working with a consultant. We are ensuring that people don’t just collect money rather they must collatarise it until we get to the level that we can accept the risk. We are engaging CBN to back it up. We are going to register with CAC. If we go four or five, we are sure that it will survive.

“It was a Lagos Island initiative, but now, it has been taken over by state so it is the state that is doing it now because of number.

“We are going to engage with CBN in two weeks’ time and after that give or take, within the next one month, we will start. When we finish with CBN we will get all the approval necessary.

It is a state something. By the time we start, information will be made available on net for people to see how we are operating. You can go to Kakawa Discount House to get information. It is going to be an open transparent activity. The main purpose is to help our members for short term liquidity.”

Whensu assumed office as the state chairman after the successful election held in June 2012, with the commitment to ensure that the microfinance banking sector and NAMBLAG state are moved to an enviable position among other states in the country. He listed 10-point agenda to accomplish within his administration.

By Hope Moses-Ashike, Business Day Online

Nigeria: Microfinance Banks to face stress test before accessing funds

By Nduka Chiejina and Adeola Adeyoye, The Nation

The Federal Government will assess Micro, Small and Medium Enterprises (MSMEs) and Micro Finance Banks to determine their viability, before they would be eligible to access funds from the MSMEs development funds and the N200 billion Small and Medium Enterprise Credit Guarantee Scheme (SMECGS), the Minister of State for Finance, Dr. Yerima Lawan Ngama, has said.

Ngana, who spoke at the Annual Lecture of Microfinance banks in Abuja, yesterday, said the development funds and the N200 billion SMECGS, were established for the sub sector and they are available to eligible institutions.

Despite the September 2010 mass liquidation of 103 microfinance banks, the minister lamented that the challenges are still noticeable.

The minister who was represented by the Executive Director, Operations, Nigeria Deposit Insurance Corporation (NDIC), Prince Erediuwa, said, “drawing rights for both funds will be based on viability of the applying institution.”

He said the Central Bank of Nigeria (CBN) and other relevant agencies of the government, will come out with a clear policy/framework for eligibility.

In his presentation, the CBN governor Mallam Sanusi Lamido Sanusi represented by Mr. A. A. Sowunmi, Deputy Director in charge of microfinance issues, said the apex bank has proposed the establishment of the MSME Development Fund to provide liquidity support for MFBs.

The fund he said will cover refinancing, guarantee and wholesale facilities through various windows to support the MFBs to lend to entrepreneurs adding that arrangements to establish the Fund is at an advanced stage.

Nigeria: FCTA to establish microfinance banks in area councils

The Federal Capital Territory Administration (FCTA) will establish microfinance banks in the six area councils of the territory to provide easy access to financial services for the administration’s business operators, the Minister of State (FCT), Oloye Olajumoke Akinjide, has disclosed.

The minister, who stated this at the commissioning of HATLAB Place in Abuja, explained that the establishment of the microfinance banks would substantially address the funding limitation of micro, small and medium enterprises (MSMEs).

“Needless to remind that inadequate funding of micro, small and medium enterprises (MSMEs) affects positive economic growth. I once more use this opportunity to reaffirm our commitment towards the establishment of FCT Microfinance Banks in all the area councils of the FCT.

“We are also positioned to encourage value addition and linkages and ensure the establishment of business clusters, trade zones and business incubators in the FCT through the Abuja Enterprise Agency (AEA),” she said.

She also noted that FCTA was being strengthened in line with the FCT Trade and Investment policy aimed at meeting the current economic realities and attaining Vision 20:2020.

“The AEA as one of vehicles for the delivery of the FCT Trade and Investment policy is being supported to reach all the area councils and also to maintain a functional desk in all the area councils,” she added.

Akinjide assured women that the FCTA was committed to providing of an enabling environment for them to take their rightful place in the area of business.

She added that the administration would partner with HATLAB Delite Limited in the area of mentorship through the AEA facilities.

Meanwhile, the Federal Capital Territory Administration (FCTA) has begun a village – community sanitation programme in all the area councils and satellite towns as part of concerted measures to ensure a neater and healthy environment.

The programme was established by the Minister of State for FCT, Oloye Olajumoke Akinjide, in collaboration with the chairmen of the six area councils.

The minister, who spoke at the flag-off of the community sanitation exercise in Kuduru, Bwari Area Council, said filthiness and an uncleaned environment was no longer acceptable in the area councils and the satellite towns.

“We are all going to clean the area councils and satellite towns. We are going to work with the chairmen of the six area councils to rid the councils of waste.

Efforts are in top gear to clean green the various parks in the area councils and satellite towns.

“We have acquired domestic sanitation equipment for the community sanitation exercise which has been distributed to the councils for a thorough clean-up of the environment after sensitization would have been carried out,” said Akinjide, who was represented by her Senior Special Assistant on Special Duties, Mrs. Jummai Kwanashie.

The village – community sanitation programme took off in five communities of Bwari Area Council – Kuduru, Ushafa, Pambara, Kogo and Peyi communities.

About 50 members of the sanitation committee were inaugurated by the minister in Kuduru.

The minister had last month also taken the village – community sanitation to communities in Gwagwalada Area Council, including Gwako community.

Earlier, the chairman of the Bwari Area Council, Hon. Yohanna Ushafa, had lauded the minister for the community sanitation programme which, he stated, would engender a clean environment in all communities in the area councils.

Ushafa explained that the Bwari Area Council had embarked on a number of programmes to tackle sanitary problems such as the use of private refuse management firms.

The Department of Environment and sanitation has also embarked on the clearing of congested drainages across the council especially in Bwari, Kubwa and Dutse.

The council has launched aggressive health education in four major areas of open defecation, lassa fever, measles and trypanosomaisis among others,” he disclosed.

SOURCE: Nigerian tribune

Nigeria: Microfinance bank facilitates asset acquisition for customers

By Hope Moses-Ashike, Business Day Online

Every emerging market requires the invaluable contribution of micro, small and medium enterprises (MSMEs) towards its economic growth and development.

Studies have shown that small and medium enterprises (SMEs) contribute significantly to the quantum of gross domestic product (GDP) in most emerged and emerging markets.

Countries where SMEs contribute largely to GDP include Singapore, India, South Africa, Malaysia, Hong Kong, and even Kenya.

Determined to enhance customer’s value, GTI Microfinance Bank has engaged its customers on assets acquisition to fast track their production activities for greater output.

In view of this, board committee on product development of the GTI Microfinance Bank Limited has approved the introduction of a micro lease product for its clients.

The product, tagged ‘GTI Micro Lease’ is a facility for all classes of customers, corporate bodies and members of associations, societies and cooperatives, and it is aimed at facilitating the acquisition of assets such as working tools, vehicles and household appliances.

Adewale Abimbola, managing director/CEO of the bank, said it was the bank’s commitment to growing the businesses of its customers.

Abimbola said this in Lagos while handing over the keys of a Toyota Hiace bus financed under the scheme to Frank Kumi, a consumable product distributor, saying “the GTI Micro Lease is a product aimed at making life easier for our customers at very convenient repayment terms and competitive interest rates.”

He encouraged customers and non-customers alike to take advantage of the product to grow their businesses at a time financial services such as the micro lease were regarded as the exclusive of the blue chips.

In response, the beneficiary – Frank Kumi thanked the bank’s management for the opportunity and promised to abide by the terms of the facility.

In line with the Central Bank of Nigeria’s policy for microfinance banks, GTI is committed to ensuring that it reaches and affect positively the lives of individuals at the grassroots.

Francis Adeoye, head, marketing/business development, said “the bank offers wide range of products designed to improve the lives and businesses of its customers. Our products and services are unique and cut across current account, savings account, loans, L. P. O. financing and business advisory services.”

However, to facilitate its operations in the next regime, the bank is embarking on some initiatives such as the introduction of a more robust web-based information technology system to improve its service delivery, introduction of electronic banking channels such as Point of Service (PoS), ATM, mobile money, SMS, and e-mail alerts at affordable rates.

Other measures include the introduction of credit bureau system to check customer banking status across the industry and the establishment of additional five branches in 2012, to extend coverage.

The bank operates a unit microfinance bank, which is expected to operate on N20 million capital base, but currently operates on a N50 million capital base.

Being fully paid up and wishing to control the largest share of the market, the bank has filed an application to the Central Bank of Nigeria for enhancement to N150 million in order to obtain a state licence.

Nigeria: CBN votes N200b ($1.2bn) for MSMEs

By Franca Ochigbo, The Nation

The Central Bank of Nigeria, CBN yesterday said it has set aside N200billion for the establishment of a Micro Small and Medium Enterprises (MSMEs) fund to promote the development of the microfinance sub-sector.

The CBN Governor, Sanusi Lamido Sanusi, who was represented by the Deputy Director, Corporate Affairs, Uji Musa Amedu, disclosed this at the third D-8 workshop group meeting with the theme, ‘Promoting International Trade through SME development’ in Abuja.

He said the money would provide wholesale funding requirement for microfinance banks and microfinance institutions to support MSMEs in the country.

Nigeria: SMEs Tipped to Anchor Growth of Nigeria’s Economy

By Crusoe Osagie, This Day Live

The Federal Government has commenced moves to position the Small and Medium Enterprise sub-sector in Nigeria as growth drivers for the economy.

The Minister of Trade and Investment, Mr. Olusegun Aganga, who disclosed this recently, said with the move, SMEs in Nigeria would soon become vibrant enough to drive the required level of growth in the economy.

He spoke while briefing journalists on the sidelines of the recent World Economic Forum meetings, in Addis Ababa, Ethiopia.

Aganga said in the last year of the President Goodluck Jonathan administration, the results of new SME policies and schemes, in terms of job creation, had shown that, if given the necessary support, SMEs would provide the foundation for sustainable growth and poverty alleviation in Nigeria.

He therefore said that the priority, currently, for the Ministry of Trade and Investment was the SME sector, noting that the ministry had put plans in place to remove the major barriers to SME growth (access to affordable finance, low level of business support and high cost of operation) to boost the development of the sub-sector.

The minister said a committee, comprising of experts in the different fields relating to the major bottlenecks in the sector, was already being set up to ensure that the country achieved a turnaround before the end of this administration, adding that vehicles had already been created to achieve this goal.

“Micro, Small and Medium Enterprises remain the backbone of the development of any economy and the driving force of national growth. In Nigeria, there are currently over 17 million Micro, Small and Medium Enterprises, employing over 31 million Nigerians. They account for over 80 per cent of the total number of enterprises in Nigeria and employ 75 per cent of the total workforce,” Aganga said.

“But their contribution to the nation’s GDP is still relatively low, due to major constraints in the operating environment, which have limited their abilities to create jobs and perform the vital role of enhancing economic growth and development,” he added, noting that in the next three years, Nigerians should expect more SMEs with enhanced productivity.

He said, already, a national database had been developed in partnership with the National Bureau of Statistics, which was the first step in the effective tackling of the problems of the sector. According to him, there would also be a national SME Policy that would address the major problems in the sector.

He said the Bank of Industry was already executing matching programmes with state governments on SMEs and deepening financing penetration, using microfinance banks.

The minister said his ministry had also begun regular interaction with SME desks of banks to develop unconventional but workable means of providing affordable finance for SME growth.

He said, “For instance, we have started getting round collateral issues related with funding through cross-guarantees by members of cooperatives and setting up special intervention funds for critical sectors such as textiles.

“We are implementing the One Local Government One Product initiative to open up the rural areas for industrial development, employment generation and wealth creation; and we are partnering the Lagos Business School to develop Business Support Services,” Aganga said.
Other efforts, he said, included developing small hydropower plants in strategic areas where they could serve SMEs; creating financial inclusion by setting aside special funding schemes for women and mechanics; and establishing integrated industrial parks to enhance the productivity and profitability of SMEs; among others.

In a meeting with the Director-General, World Trade Organisation, Mr. Pascal Lamy; Aganga also reiterated the government’s commitment to deepening regional trade, saying it would open many doors for Nigeria in terms of job creation.

Zambia: Micro finance critical for SMEs growth

By Tryness Mbale, Zambia Daily Mail

THE country’s economic gains will not have meaningful impact on the livehoods of citizens unless financial service providers extend their services to peri-urban micro, small and medium enterprises (MSMEs), Pulse Financial Services Limited (PFSL) has observed.

PFSL chief executive officer Claude Lafond said understanding of the challenges faced by the private sector to fund its enterprises by financial institutions will see small-scale businesses have wider access to financial services. Mr Lafond said extending financial services to peri-urban areas will contribute to wealth creation, improvement of living conditions and development of the private sector. He said Zambia’s financial sector in its current set-up does not adequately address the unique needs of MSMEs. He said this at a press briefing in Lusaka when he announced the rebranding of PFSL to Entrepreneurs Financial Centre (EFC).
“A thriving entrepreneurship always depends on the ability to access funding that would meet the needs of the community. Once we see financial services providers reaching out to areas that need the services the most, funding for enterprises will begin to address the needs of the market. Critical to this is the need for companies to adapt to the changing landscape of finance to MSMEs,” he said.

Mr Lafond said the rebranding of the financial sector will bring the advantages of expertise and knowledge within the EFC network to deliver to MSMEs tangible growth that translates into wealth creation for communities.

He said it will cost about K300 million to rebrand and will not affect the company’s vision, mission, values and quality of service which have positioned it as market leaders of microfinance in Zambia.
He said EFC’s model is promoted by the development international Desjardins, a subsidiary of the Desjardins Group of Canada.
“The rebranding of the company is an evolution that will see us transform from a mere provider of financial services into a trusted and experienced partner in steering Zambian enterprise towards its rightful role in contributing to economic and social development,” he said.

Nigeria: Funding windows for small enterprises

By Siaka Momoh, Businessday Online

Generally, commercial banks won’t touch Small and Medium Enterprises (SMEs) or Micro Small and Medium Enterprises (MSMEs) otherwise known as small enterprises, because they consider them high risk. Owners of these enterprises disagree.

They believe MSMEs are being unjustly discriminated against, and seize every opportunity available to them to air their grievances. But they may be right after all.
What, with interested parties here and there taking up their case. Only recently, the Nigerian Stock Exchange (NSE) came up with the idea of Over The Counter Trading (OTC), a stock trading platform specially created for small enterprises.

Emmanuel Ikhazobor, renowned accountant and former interim administrator, Nigerian Stock Exchange (NSE), discussed the issue of small enterprises funding through the capital market, an alternative funding option, at BusinessDay’s organised Annual Capital Market Conference 2011.

He says this will be by Over the Counter Trading (OTC), and believes this funding approach will be very appropriate for SMEs who shun banks’ funds because of the high interest rates attached to them.

Additionally, according to him, this approach will allow for good governance which is currently absent in the sub-sector. But there have been problems.
According to experts, although this arrangement has the merit of allowing smaller companies to be listed on the exchange, in practice, the two-tier system has generally not been successful.

Many investors regard second tier companies with scepticism. For them, a Tier II label is like a badge of demerit – a Tier II listing connotes a public company that is not “good enough” to make it to the “big board.”

Hence, trading in Tier II stocks tend to be sparse, they argue. For them, this adversely affects both stock prices and liquidity (the two are linked); the potential of a Tier II listing is thus a mere inducement for small enterprises and potential investors.

Ikhazobor’s proposition is welcome but there is a caveat – Experts have argued that it would be wrong to suggest that the mere act of creating the mechanism for an OTC market was a panacea for SME liquidity problems.

For them, an OTC market requires brokerage firms willing to undertake the time and cost in its development, it requires a regulatory agency willing to adopt trading and disclosure rules, and it requires a sufficient number of companies on the OTC market to make the whole endeavour worthwhile.

They argue that one of this will happen overnight, that it will never happen without changes in statutes and other rules to allow small enterprises to more readily solicit capital from the public.

Another important argument that has been put forward is that if standards are put in place for an OTC market, such move will also facilitate trading of securities through the Internet, since the internet is becoming the trading vehicle of choice for many investors.

Only recently, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the African Development Bank (ADB) have begun fresh talks on provision of access to working capital for micro, small and medium enterprises (MSME) in Nigeria.

The discussion, which took place recently in Abuja between the Agency and a delegation from the continental development finance institution who were on a country visit to Nigeria, centred on the creation of a special pool of fund in the African Development Bank specifically for MSME funding and promotion.

Muhammad Damak, Credit Bureau manager, Africa, speaking while introducing his team from the ADB, disclosed that they were visiting selected Ministries, Department and Agencies (MDAs) of the Federal Government of Nigeria, adding that the purpose of coming to SMEDAN was to be abreast of activities of the SMEDAN and evaluate it towards promotion of MSMEs development, and also to ascertain the needs and challenges facing the MSMEs sector in general, and SMEDAN in particular.

Damak said that they had met with the Central bank of Nigeria and some commercial banks in the country on the prospects of giving loans to small scale business operators.

Welcoming the delegation to his office, the director-general of SMEDAN, Muhammad Nadada Umar, commended them for the visit, and listed among others, the challenges the Agency was facing in the discharge of its mandate, especially in the area of facilitation of access to business finance for MSMEs.

Some of these challenges include high interest rates and hidden charges, as well as demand for collateral securities by commercial banks.

Umar informed the ADB team that the Agency, however, had recorded some level of success with its collaboration with the national Economic Reconstruction Fund (NERFUND) and the Bank of Industry (BoI).

He also noted that the Agency was working in liaison with NASENI to link entrepreneurs with the research and development (R&D) results to harness them for productive uses.

Another financing window is one which is to come up from the relationship between SMEDAN and Alliance for Green Revolution in Africa (AGRA).

The two have begun partnership talks to fashion ways of unlocking the various potentials derivable from financing the agro-based enterprises. This partnership talks began during a courtesy call by AGRA to the office of the director-general of SMEDAN.

Tayo Badru, leader of the visiting team and senior consultant with Phillips Consulting Nigeria, who was accompanied by Nathan Gonzalez of McKinsey & Company, stated that the purpose of coming to SMEDAN was to share key aspects of the funding solution design, and get their perspective on the Agency right, and to better understand SMEDAN’s mandate, and explore possible areas of partnership/collaboration with the proposed incentive–based Risk Sharing Framework for Motivating Agricultural Lending in Nigeria (NIRSAL).

AGRA and McKinsey & company/Philips Consulting Nigeria are working with the CBN to support the design of proposed incentive-based NIRSAL. The overall goal of NIRSAL is to develop a new innovative mechanism for helping to unlock commercial bank financing to serve the needs of different categories of farmers, especially small-holder farmers, agro-processors, agri-businesses and input suppliers in the agricultural value chain.

Badru equally says NIRSAL is clustered into five core components, namely: risk sharing facility, insurance components, technical assistance facility, bank incentive mechanism, holistic bank rating system.

In the course of the project, the team has been involved in engaging with various NIRSAL stakeholders and potential partners in both the public and private sectors, including CEO of banks and insurance outfits, large scale farmers, and a host of others.

One other financing window of sort that small enterprises can now leverage on is the Nigeria MSME Project, a pilot initiative of the Federal Government and the World Bank in Abia, Kaduna and Lagos states, which the Nigerian Investment Promotion Corporation is driving.

The Project aims to increase the performance and employment levels of MSMEs in selected non-oil industry sub-sectors and in the three targeted states of the country listed above.

The project will develop and strengthen the capacity of local intermediaries to deliver financial and non-financial services to Micro, Small and Medium Enterprises (MSMEs), reduce selected investment climate barriers that constrain MSME performance, mobilise via (i) and (ii) above, increased private investments in MSMEs and intermediaries.

It has the following five components:
· It will seek to deepen and broaden the financial services available to MSMEs.
· It will seek to develop the market for business development services (BDS) by supporting intermediaries to respond to unmet MSME demand for BDS, focusing on the three target states.
· Technical and capacity building support will be provided through the International Development Agency (IDA) credit to assist in the following initiatives of the government of Nigeria: (a) registration reform, (b) commercial dispute resolution, (c) leasing services, (d) credit bureau, and (e) secure transaction system.
· IDA resources will be allocated to provide selected federal and target state government agencies, with MSME development responsibilities the opportunity to access global best practices.
· IDA funds will be allocated to finance the execution, reporting, review (semi-annual and mid-term) and monitoring of project components and independent evaluations of selected issues, particularly through case studies.