Credit Guarantee Will Boost Funding for MSMEs—Experts

Current realities in Nigeria including the Covid-19 Pandemic has brought to light the urgent need for additional support in alleviating the financial constraints faced by Micro, Small and Medium Enterprises.

This was the main thrust of the discussion by industry experts at the Development Bank of Nigeria Webinar Series with theme “Risk Sharing: A Key Driver for Increased Financial Access and Economic Development for MSMEs.”

The virtual knowledge sharing series was attended by the Chief Executive Officer, InfraCredit, Mr. Chinua Azubike; Group Head Emerging Business, Access bank Plc, Mrs. Ayodele Olojode; Senior Financial Sector Specialist, World Bank, Mr. Ahmed Rostom and Managing Director JNC International, Mrs. Claire Omatseye.

They alluded to the fact that there is a need to increase awareness by key industry stakeholders in ensuring that the much-needed stimulus and alternative means of facilitating financing are discovered.

This, according to them, would help to stem the shock to Nigeria’s economic and financial system.

During the webinar session, the panelists highlighted that Credit Guarantees Schemes are popular policy instruments that were created to help alleviate the credit constraints faced by MSMEs.

In Nigeria, however, they argued that there exist some challenges with risk sharing in the local market as most MSMEs do not fully grasp the concepts of risk-sharing and credit guarantees.

While discussing, they also stressed the need for key industry stakeholders, MSMEs, Banks, and Regulators to openly discuss alternative means of financing and the existence of risk-sharing.

The Group Head Emerging Business, Access bank Plc, Mrs. Ayodele Olojode explained that MSMEs do not have regular and sustained access to finance because of various limitations.

She gave some of these limitations to include high interest rates, lack of tangible collateral and economic conditions.

She said, “Risk sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy.

“The credit guarantee industry in Nigeria is still at a nascent stage, where the volume of guarantees and the size of the industry contributions to SMEs remain low compared to peers in other economies.

“Credit guarantee is the future because it will compensate for insufficient collateral, provide regulatory capital relief for banks, growth for MSMEs, increase Gross Domestic Product and job creation.”