SMEDAN Seeks CBN License To Float Microfinance Bank For MSMEs

The Small and Medium Enterprise Development Agency of Nigeria has opened discussions with the Central Bank of Nigeria to establish a Microfinance Bank for the Micro, Small and Medium Enterprises.

The Director-General, SMEDAN, Dikko Radda confirmed the development during a media briefing on Thursday in Abuja.

He said the need to set up a Microfinance Bank for MSMEs became imperative as it was becoming increasing difficult for the sector to attract funding from conventional banks.

He described the interest rate of about 25 per cent being charged by banks on loans as high, adding that with such high lending rate, it would be practically impossible for businesses to survive in Nigeria.

The SMEDAN Boss said barring any change in plans, the bank would become operational by next year and would be owned by SMEDAN and MSME operators.

Dikko said, “We are in the process of establishing our own Microfinance Bank that will enable the Nigerian MSME to have direct access to credit with a very simplified and modern means of achieving that.

“The interest rate of the conventional banks is unbearable because it is over 20 per cent. And we are working hard to establish a Microfinance Bank.”

The SMEDAN Boss said since access to finance has been identified as one of the major impediments to MSMEs operations, the agency has also opened discussions with the Bank of Agriculture to set up a matching fund for the sector.

Under the Matching Fund structure, a fund would be set up under an arrangement that would enable SMEDAN and the Bank of Agriculture to contribute in a certain proportion for MSME financing.

Radda said through the matching fund arrangement with BoA, SMEDAN would be able to unlock funding for the MSME sector at a single digit interest rate.

He said, “We have gone into an MoU with Bank of Agriculture to provide Matching Fund. SMEDAN will contribute certain amount and then Bank of Agriculture will also provide certain amount of money to enable us provide loans to MSMEs.

“This is bearing in mind the fact that one of the major challenges of MSMEs is funding and most of the requirement provided by the commercial and even development banks in Nigeria are very high for the MSME to achieve.

“So we will provide this matching fund so that we equally reduce the requirements to enable MSMEs benefit from that fund and SMEDAN has forfeited its own part of interest from the money it is contributing as a matching fund to bring down the interest rate to single digit. This will enable us help the MSME make up the challenge under the facility.”

He also said the agency is setting up Industrial Development Centre that would serve as a platform for the development of MSMEs.

The Centre, according to him would be completed by next year.