BY COBHAM NSA – Nigeria’s Micro, Small and Medium Scale Enterprises (MSMEs) are under huge threat of extinction if urgent financial succour does not come their way through credit guarantee, industry experts have warned.
This is as latest statistics from the World Bank survey indicate that 42 per cent of individuals employed before March 2020, especially in hospitality and service industry, are regrettably out of jobs now.
According to the experts, current realities in Nigeria, including the raging coronavirus (COVID-19) pandemic, has thrown up the urgent need for additional support to mitigate funding pressure presently faced by most MSMEs
Rising from the Development Bank of Nigeria (DBN) Webinar Series with the theme: “Risk Sharing: A Key Driver for Increased Financial Access and Economic Development for MSMEs”, participants agreed on increased awareness by key industry stakeholders in ensuring the much-needed stimulus and alternative means of facilitating financing are discovered and exploited to stem the shocks on Nigeria’s economic and financial system.
Panelists on the virtual knowledge sharing series platform, which held via zoom, include: Chief Executive Officer (CEO), 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.
Promoting Credit Guarantees Schemes (CGS) as popular policy instruments created to help alleviate the credit constraints faced by MSMEs, the panelists however acknowledged existing challenges with risk sharing in the local market due to inexperience by most MSMEs that remained largely unschooled about risk-sharing and credit guarantees’ concepts
They also insist key industry stakeholders, MSMEs, Deposit Money Banks (DMBs) and Regulators must openly and transparently engage on issues of alternative funding means and risk-sharing in the sector.
In her intervention, Group Head, Emerging Business, Access Bank Plc, Mrs. Ayodele Olojode blamed MSMEs’ lack of regular and sustained access to finance on obvious constraints that include high interest rates; lack of tangible collateral; and generally harsh economic conditions.
Maintaining that “Risk sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy”, Olojode further said; “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.”
For her, “Credit guarantee is the future because it will compensate for insufficient collateral, provide regulatory capital relief for banks, growth for MSMEs, increased economic GDP and job creation.”
World Bank’s Senior Financial Sector Specialist, Mr. Ahmed Rostom, who dissected economic growth challenges and the impact of COVID-19 in Nigeria, described the situation as “disturbing”.
Sharing data from surveys carried out by the Bank between April and March 2020, highlighting the virus impact on the Nigerian economy, Rostom lamented that about 42% of individuals, who were working before March 2020, especially those in hospitality and service industry are no longer working now.
On her part, the Managing Director of JNC International, Mrs Claire Omatseye canvassed risk sharing among all stakeholders going forward.
“For MSMEs, risk sharing helps eliminate financial oppression and predatory lending, while also ensuring prosperity is shared equitably. For the government, risk sharing contributes to the realization of its economic objectives and stabilization policies”, she counseled.
The DBN Webinar series seek to provide capacity building for MSMEs through digital platforms to empower them in weathering current business storms through this uncommon COVID-19 period and beyond