Deposit Money Banks (DMBs) in the country are unwilling to key into the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) initiative of the Central Bank of Nigeria (CBN), as a result of low volume of loans and interest rate margins.
The MSMEDF, which was designed to provide loans at single interest rate to small businesses, was pegged at nine per cent, while Participating Financial Institutions (PFIs) would assess the fund from CBN at three per cent.
The Acting Director of Finance Department of CBN, Dr. Mudasir Olaitan, made the observation at the opening of the three-day workshop for Business Editors and Finance Correspondents, organised by the Nigeria Deposit Insurance Corporation (NDIC), with the theme: “Recent Developments in the Nigerian Banking System,” in Katsina, Katsina State.
He said that most banks shunned the scheme because they considered the interest margin unfavourable to their operations and invariably branded the interest rate regime as inadequate, including the volume of loans that would be turned in through the project and showed visible apathy to the initiative.
The director, who was represented by Babatunde Ogunlaja, disclosed that only five banks in the country- United Bank for Africa Plc, Guaranty Trust Bank, Zenith Bank, Skye Bank and Fidelity Bank have already embraced the scheme, while Access Bank recently returned its Memoradum of Understanding.
On the breakdown of the funds disbursed as at November 13, Olaitan revealed that a total of N2, 214.76 billion had been offered to SMEs- state governments have received N1, 394. 85 billion, participating Financial Institutions (PFIs) given N769.9 million, while Zenith Bank has disbursed N50 million.
It was gathered that DMBs would prefer higher interest rate regime for the scheme, citing operational costs, which they said the six per cent margin would not cover, but the demand will run contrary to the objective of MSMEDF.
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