Positioning CBN’s NISRAL Micro-Finance Bank

The Bankers Committee in collaboration with NIRSAL and NIPOST has set up a NIRSAL Micro Finance Bank to provide funding support for Agribusinesses and SMEs.

The new NMFB with initial equity capital of N5billion is owned 50% by the Bankers Committee, while NIRSAL and NIPOST own 40% and 10% respectively.

The new NMFB is expected to provide long term credit facilities, 7 years, with 2 years moratorium to Agribusinesses/SMEs at 5% interest rate. The NMFB is expected over time to have representative offices in the 774 LGAs in Nigeria and also shall operate through licensed agents that will help in Loans disbursement, monitoring and recovery. The Loans under the NMFB would be given without the conventional collateral requirements.

To provide sustainable on-lending funding support for the NMFB, licensed deposit money banks through the banker’s committee are expected to provide 5% of their annual PAT to the NMFB.

We would recall that the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) was launched by the CBN in 2011 and incorporated in 2013 by the Central Bank of Nigeria (CBN) as a dynamic, holistic USD500 Million public-private initiative to stimulate the flow of affordable finance and investments into the agricultural sector by de-risking the agribusiness finance value chain.

The establishment and operations of the NMFB are expected to help deepen financial services to the informal sector and enhance financial inclusion.

Yours sincerely, is very excited about this latest CBN facilitated funding support for the real sector economy. In the course of my DBA research work, I discovered that for the CBN to facilitate sustainable financial inclusion and truly support real sector growth at the MSME levels, there is urgent need to create an independent financing agency (that is not a department at the CBN) that is PPP is driven and self-sustaining as is obtained in Indonesia and other progressive Asian countries. Thanks to the management of the CBN for this bold initiative.

NOW, TO TRULY DEEPEN THE OPERATIONS OF THE NMFB AND PROVIDE IT WITH WIDER SOURCES OF ON LENDING FUNDING SUPPORT BEYOND THE 5% PAT CONTRIBUTION OF DEPOSIT MONEY BANKS, the board and management of the NMFB should look towards partnering with the 36 state governments, 774 LGA authorities, Nigeria’s in Diaspora Organisation and other Global Poverty eradication intervention funding agencies .

The 36 State governments and 774 LGA authorities can be cajoled to contribute 10% of their annual revenues in partnership with the NMBF as additional on-lending funds to Agribusinesses and SMEs within their domain. The NMBF working/partnering with each states’ PPP office and development finance institutions can creatively design, structure and implement frameworks to help support the MSMEs within their domain. This will help to increase productivity in each LGA and state, enhance entrepreneurship, create jobs, boost revenues, grow GDP and tax yields.

The CBN, Bankers Committee and the Board of the NMFB should plan for speedy rollout of the representative offices in all the 774 LGAs, develop a framework that will enable it to work lean and smart, as well as grow the on-lending funding size/portfolio available to it to about N500billion-N1trillion over the next 4 years.

Once more, kudos to Godwin Emefile and the Bankers Committee. You scored a bullseye here. You got this one spot on.

Dr Nnaemeka Onyeka Obiaraeri, FICA, MIRA

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