The Director-General, SMEDAN, Dikko Radda Small and Medium Enterprise Development Agency of Nigeria has said that discussions are on 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 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 said the interest rate of about 25 per cent being charged by banks on loans are 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.”
Dikko 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. Dikko 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.
