CBN To Reduce Interest Rate On N220bn MSMSE Fund

The Acting Director, Development Finance Department of CBN, Mr Mudashir Olaitan, disclosed this  at a workshop organised by the Nigeria Deposit Insurance Corporation (NDIC) for business editors and finance correspondents in Kashina.

Olaitan said that the CBN is passionately committed to the Fund, and is seeking for avenues to improve access to the fund, especially for participating financial institutions. The challenges confronting implementation of the Fund are low awareness and reluctance of financial institutions to participate in the Fund.

He said that financial institutions are reluctant to participate in the Fund because of the interest rate margin which they consider too small. “CBN gives the money to them at three percent and they are to lend at nine percent.   But they consider the spread of six percent too small, especially given the low volume of the business. We  are however discussing with them to persuade them to participate in the Fund,” he said.

He said that so far five commercial banks have signed Memorandum of Understanding with the CBN to participate in the implementation of the Fund.  The five banks, he said are United Bank for Africa (UBA), Skye Bank, Guaranty Trust Bank, Zenith Bank and Fidelity Bank. He added that the CBN is however considering reviewing the interest rate at which it gives the money to financial instructions to two percent and also introduce measures that will make it encourage financial institutions to participate in the Fund.

Olaitan said that the apex bank is already working to address the challenges of low awareness and would soon commence an awareness campaign to publicize the Fund.

Explaining features of the Fund, Olaita said that, “The MSMEDF was established with a seed capital of N220 billion  with 60 percent earmarked for providing financial services to women to cater for their peculiar financial exclusion circumstance.   On lending to Micro enterprises and SMEs is on 50:50 percent ratio. Also two percent of the wholesale component of the Fund shall go to economically active persons with disabilities (excluding mental disabilities).