Bankers Committee to Establish Micro Credit Fund

from All Africa

By Amaka Ifeakandu
Abuja

In furtherance of effort to ensure steady flow of funds in the Small and Medium scale Enterprises (SMEs), particularly micro enterprises, the Bankers' Committee is set to establish micro credit fund (MCF) of N20 billion.

A guideline released by the Development Finance Department of the Central Bank of Nigeria (CBN) said that the fund is projected to grow to N100 billion by the year 2010.

In addition to this, it said banks are expected to continue to support SMEs while the CBN, in collaboration with the fiscal authorities would work out other necessary incentives to make SME lending more attractive to banks.

The major objective of the MCF according to the guideline was to complement the poverty and small and micro credit interventions by government at all levels as well as the activities of the microfinance banks in supplying a large but cheap source of finance to the small and micro entrepreneurs.

It further stated that the move to set up the fund was to ensure a wider and equitable distribution of credit around the country to deserving entrepreneurs by allowing state governments to engage in wholesale borrowing from the banks and on-lend to the entrepreneurs in their respective states.

Other reasons why the Bankers' Committee planned to establish MCF was to motivate the state and local governments to comply with the requirements of the microfinance policy and regulatory framework that they devote at least one percent of their annual budgets to microfinance.

It said that the fund would start operations with the balance of the Small and Medium Enterprises Equity Investment Scheme (SMEEIS) funds which was put at N20.3 billion as at December 2007 and subsequently contributions would be made by each bank to make the fund up to N100 billion by the end of 2010.

To access the fund, the guideline said that the states would have to put in place appropriate institutional arrangement for disbursing and recovering the amount to be accessed which shall be confirmed by the CBN.

Apart from the States showing commitment to supporting small and micro enterprises through setting aside a counterpart fund equal to the amount of the loan being sought, it need to set up a monitoring mechanism to ensure efficient utilization of the fund.

It further stated that state governments are expected to render periodic returns to the CBN on the operation of the funds as required.

In situation where the state governments were unable to exhaust the fund set aside by the banks in any year, micro finance banks and non governmental organisation micro finance institutions might borrow from the fund for on lending to small and micro enterprises.