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- N50bn Micro Credit Fund: Refusing to Fly
N50bn Micro Credit Fund: Refusing to Fly
- By Saka Khaliq
- Published March 24th, 2009
- MicroFinanceWorld
- Unrated
The N50 billion Micro Credit Fund (MCF) was launched last year by the federal government through the Central Bank of Nigeria (CBN). A year after, ZAKA KHALIQ looks at the issues surrounding the ‘fund’ and concludes that this may be another dream project, if certain steps are not taken.
Introduction
THE launch of the N50 billion Micro Credit Fund (MCF) by the federal government through the CBN last year February gave rise to wide jubilation among Nigerians who though are active but are financially poor.
It sounded like a new lease of life for the operators of microfinance institutions in the country because they believed the fund would be channeled to the citizens through microfinance institutions in the country. Many were of the opinion that their dreams of being employers of labour was no doubt becoming a reality.
Unknown to them, it was a Greek gift, as positive steps are yet to be taken on the N50 billion Micro Credit Fund (MCF). The question on the lips of many microfinance operators and finance experts is where is the N50 billion Micro Credit Fund?
The Micro Credit Fund
To enhance the development of Small and Medium scale Enterprises (SMEs) and develop the informal and microfinance sector of the economy, the federal government through the CBN launched N50 billion micro credit schemes in February, last year. The Central Bank while unveiling the guidelines for accessing the loan said the Micro Credit Fund would be made available to all state governments with viable microfinance proposals.
To access the funds, according to CBN, a state would have to put in place appropriate institutional arrangements for disbursing and recovering the amount to be accessed, which shall be confirmed by the CBN; show commitment to supporting small and micro enterprises through setting aside a counterpart fund equal to the amount of the loan being sought and deposit the counterpart fund in the bank from which it is obtaining the fund. The guidelines stated further that where the state governments are unable to exhaust the fund set aside by the banks in any year, microfinance banks (MFBs) and non-governmental organisation/microfinance institutions (NGO/MFIs) may also borrow from the fund for on-lending to small and micro enterprises. It added that after each government must have passed its budget, the CBN would assess the amount set aside by the state for micro credit vis-a-vis the amount that banks are likely to set aside for the year and announce the amount available for borrowing by the MFBs and NGO-MFIs.
States with wide distribution of MFBs and NGO-MFIs, according to the apex bank, would be encouraged to use the MFBs and NGO-MFIs in the administration of their micro credit funds.
According to the CBN, the MCF is an interim response, to be phased-out as the legal and institutional infrastructure for efficient and effective administration of credit to small and micro enterprises as the banking system improves. In the first instance, this programme is applicable for three years (2008 –2010).
The apex bank said the loans obtained shall be used for any of the following activities engaged in by small and micro entrepreneurs: Agriculture and agro-allied; cottage industries; trade/commerce; and services among others.
The launch of the scheme was also 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.
Operators Concern
Apparently waiting for one year after the launch of the MCF, BusinessWorld findings show that neither microfinance institutions nor state governments have benefited from the fund. The fund, it was gathered, has remained inaccessible to any of the microfinance banks in the country.
The states governments are expected to disburse the fund by partnering MFBs in their respective states. Findings show that parts of the reasons states have not accessed the fund is that, so far, only 12 states of the federation have been able to put in place proper microfinance schemes.
As part of the procedures to access the fund, state governments are expected to put in place a proper microfinance scheme which will serve as counterpart fund to the federal government MCF.
So far, the states that are able to launch their microfinance schemes are Lagos, Oyo, Kano, Bauchi, River, Niger State among others. While none of these States are yet to dip into the MCF, there are indications that unless the federal government properly implement the one per cent contribution from the each State allocation for microfinance programme in their respective state, this initiative may end up like SMEEIS fund, where only 22 States benefited from the scheme.
If they set up their microfinance scheme, the state can now apply for the federal government fund.
BusinessWorld however learnt that about 24 states of the federation are yet to launch their microfinance schemes while others that have launched have yet to apply for the fund.
Since States governments are mandated to set aside one per cent of their annual capital value for microfinance in their respective states, the amount set aside is expected to serve as counterpart fund to access the N50 billion MCF.
With the reduction in allocation going to states, there is serious concern as to whether states would be able to set aside one per cent of their annual budget for MF which would allow them access the MCF.
While there are serious concerns from finance experts that States may not want to set aside one per cent of their budget to microfinance scheme since it is not fully backed by law, there are strong indication that the fund would only lie idle with nobody to access it.
Microfinance banks chiefs who spoke to BusinessWorld said, unless the one per cent deduction from State budget for microfinance scheme in each State is implemented and backed up by law, there are indication that States government would not want to be willingly involved.
Mrs. Ifeoma Ana, managing director, Elim microfinance bank who spoke to BusinessWorld said, there is no State benefiting from the micro credit fund. She said the reason is that the federal government has not taken bold steps to legislate on the allocation of one per cent by state government to poverty alleviation. She added that ‘it is only when this is successful that they can now tap into the N50 billion micro credit fund’.
As at now, the fund is only on paper, there is no where the fund has got to, even the Lagos State government that has so long been giving funds to some MFBs has not tapped into the fund, she said. Mr. Yusuf Kunle Hassan, managing director, Treasures Microfinance Bank said, “What they said is the fund would be disbursed through States government while the States are going to add their own counter-part funds that will make it up to N100 billion.’
The State would now, through their own microfinance scheme, distribute the fund in form of micro credit, he said.
The Future Pointer
Analysts say the CBN should also directly disburse this fund to microfinance banks without necessarily passing through states governments.
Operators of MFBs believe the implementation of the scheme would not only help the micro businesses and SMEs growth in Nigeria, it will also increase the financial structure of the benefiting microfinance banks so that they can impact more lives. Since we don’t have access to funding, the MCF is the only hope we rely on, an operator said.
CBN should also come out and speak on the latest development on the fund and steps that has been taken or would be taken to make sure the funds get to the target Nigerians.
Barrister Nsikak Ekure, chairman, Elim Microfinance Bank called on the federal government to pass into law the one per cent capital budget of States and Local government’s annual votes to be mandatorily used for poverty alleviation. This, he said is the only ticket to access the N50 billion micro credit fund.
Advising that the states governments should not be allowed to solely disburse the MCF, he noted that ‘If states are asked to disburse the fund, it will be like other projects that people are given loans and doesn’t come back again. People would think it is another national cake.’
He advised that the money be disbursed to MFBs directly through the CBN to reach the real needy.
On her part, the managing director, Elim microfinance bank advised that there is the need for strict sanction on states that failed to earmark one per cent of its capital votes to microfinance scheme.
Introduction
THE launch of the N50 billion Micro Credit Fund (MCF) by the federal government through the CBN last year February gave rise to wide jubilation among Nigerians who though are active but are financially poor.
It sounded like a new lease of life for the operators of microfinance institutions in the country because they believed the fund would be channeled to the citizens through microfinance institutions in the country. Many were of the opinion that their dreams of being employers of labour was no doubt becoming a reality.
Unknown to them, it was a Greek gift, as positive steps are yet to be taken on the N50 billion Micro Credit Fund (MCF). The question on the lips of many microfinance operators and finance experts is where is the N50 billion Micro Credit Fund?
The Micro Credit Fund
To enhance the development of Small and Medium scale Enterprises (SMEs) and develop the informal and microfinance sector of the economy, the federal government through the CBN launched N50 billion micro credit schemes in February, last year. The Central Bank while unveiling the guidelines for accessing the loan said the Micro Credit Fund would be made available to all state governments with viable microfinance proposals.
To access the funds, according to CBN, a state would have to put in place appropriate institutional arrangements for disbursing and recovering the amount to be accessed, which shall be confirmed by the CBN; show commitment to supporting small and micro enterprises through setting aside a counterpart fund equal to the amount of the loan being sought and deposit the counterpart fund in the bank from which it is obtaining the fund. The guidelines stated further that where the state governments are unable to exhaust the fund set aside by the banks in any year, microfinance banks (MFBs) and non-governmental organisation/microfinance institutions (NGO/MFIs) may also borrow from the fund for on-lending to small and micro enterprises. It added that after each government must have passed its budget, the CBN would assess the amount set aside by the state for micro credit vis-a-vis the amount that banks are likely to set aside for the year and announce the amount available for borrowing by the MFBs and NGO-MFIs.
States with wide distribution of MFBs and NGO-MFIs, according to the apex bank, would be encouraged to use the MFBs and NGO-MFIs in the administration of their micro credit funds.
According to the CBN, the MCF is an interim response, to be phased-out as the legal and institutional infrastructure for efficient and effective administration of credit to small and micro enterprises as the banking system improves. In the first instance, this programme is applicable for three years (2008 –2010).
The apex bank said the loans obtained shall be used for any of the following activities engaged in by small and micro entrepreneurs: Agriculture and agro-allied; cottage industries; trade/commerce; and services among others.
The launch of the scheme was also 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.
Operators Concern
Apparently waiting for one year after the launch of the MCF, BusinessWorld findings show that neither microfinance institutions nor state governments have benefited from the fund. The fund, it was gathered, has remained inaccessible to any of the microfinance banks in the country.
The states governments are expected to disburse the fund by partnering MFBs in their respective states. Findings show that parts of the reasons states have not accessed the fund is that, so far, only 12 states of the federation have been able to put in place proper microfinance schemes.
As part of the procedures to access the fund, state governments are expected to put in place a proper microfinance scheme which will serve as counterpart fund to the federal government MCF.
So far, the states that are able to launch their microfinance schemes are Lagos, Oyo, Kano, Bauchi, River, Niger State among others. While none of these States are yet to dip into the MCF, there are indications that unless the federal government properly implement the one per cent contribution from the each State allocation for microfinance programme in their respective state, this initiative may end up like SMEEIS fund, where only 22 States benefited from the scheme.
If they set up their microfinance scheme, the state can now apply for the federal government fund.
BusinessWorld however learnt that about 24 states of the federation are yet to launch their microfinance schemes while others that have launched have yet to apply for the fund.
Since States governments are mandated to set aside one per cent of their annual capital value for microfinance in their respective states, the amount set aside is expected to serve as counterpart fund to access the N50 billion MCF.
With the reduction in allocation going to states, there is serious concern as to whether states would be able to set aside one per cent of their annual budget for MF which would allow them access the MCF.
While there are serious concerns from finance experts that States may not want to set aside one per cent of their budget to microfinance scheme since it is not fully backed by law, there are strong indication that the fund would only lie idle with nobody to access it.
Microfinance banks chiefs who spoke to BusinessWorld said, unless the one per cent deduction from State budget for microfinance scheme in each State is implemented and backed up by law, there are indication that States government would not want to be willingly involved.
Mrs. Ifeoma Ana, managing director, Elim microfinance bank who spoke to BusinessWorld said, there is no State benefiting from the micro credit fund. She said the reason is that the federal government has not taken bold steps to legislate on the allocation of one per cent by state government to poverty alleviation. She added that ‘it is only when this is successful that they can now tap into the N50 billion micro credit fund’.
As at now, the fund is only on paper, there is no where the fund has got to, even the Lagos State government that has so long been giving funds to some MFBs has not tapped into the fund, she said. Mr. Yusuf Kunle Hassan, managing director, Treasures Microfinance Bank said, “What they said is the fund would be disbursed through States government while the States are going to add their own counter-part funds that will make it up to N100 billion.’
The State would now, through their own microfinance scheme, distribute the fund in form of micro credit, he said.
The Future Pointer
Analysts say the CBN should also directly disburse this fund to microfinance banks without necessarily passing through states governments.
Operators of MFBs believe the implementation of the scheme would not only help the micro businesses and SMEs growth in Nigeria, it will also increase the financial structure of the benefiting microfinance banks so that they can impact more lives. Since we don’t have access to funding, the MCF is the only hope we rely on, an operator said.
CBN should also come out and speak on the latest development on the fund and steps that has been taken or would be taken to make sure the funds get to the target Nigerians.
Barrister Nsikak Ekure, chairman, Elim Microfinance Bank called on the federal government to pass into law the one per cent capital budget of States and Local government’s annual votes to be mandatorily used for poverty alleviation. This, he said is the only ticket to access the N50 billion micro credit fund.
Advising that the states governments should not be allowed to solely disburse the MCF, he noted that ‘If states are asked to disburse the fund, it will be like other projects that people are given loans and doesn’t come back again. People would think it is another national cake.’
He advised that the money be disbursed to MFBs directly through the CBN to reach the real needy.
On her part, the managing director, Elim microfinance bank advised that there is the need for strict sanction on states that failed to earmark one per cent of its capital votes to microfinance scheme.
