When CBN rewards microfinance houses in Enugu
From Chidi Nnadi, Enugu
Last week, the management staff of the Central Bank of Nigeria (CBN), Enugu, gathered the chairmen and managing directors of microfinance banks and Agricultural Credit Guarantee Scheme (ACGS) commercial banks in the state to take stock of the performance of the ACGS in 2016.
The event was the CBN’s sensitisation workshop on intervention schemes and programmes for microfinance banks, as well as the award ceremony for three of them that did excellently well last year.
The event organized by the Development Finance Office (DFO) of the CBN Enugu, saw the Umuchinemere Microfinance Bank taking the first position; LAPO Microfinance Bank, second; and Ifeanyichukwu Microfinance Bank, the third position.
The three banks were selected from the over 20 microfinance banks the CBN reviewed their performance on ACGS last year.
The acting Head, DFO, Mr. Henry Longui, who moderated activities at the workshop and ceremony told Oriental News that “we considered over 20 of them who are participating in the agricultural credit guarantee scheme fund; they were considered in terms of the volume of their participation, that is, the number of farmers they got to participate in the scheme.”
He said that the CBN was satisfied on the turnout for workshop, but added that they are working very hard “to getting a lot of them to come on board, so that we can expand the scope, we want to sensitize the farmers that there is a programme like this; they are being paid 40 per cent for repaying back their load and the banks, 75 per cent, as guarantee in case it goes bad.”
Longui explained that the ACGSF was just one of the programmes they have, pointing out that they equally have so many others.
“We have the anchors borrowers programme, in which we are targeting over 20, 000 farmers for rice farming alone in Enugu State, we have commercial agricultural credit scheme which is over N4 billion, that’s our exposure for Enugu State, we have the micro and medium enterprise development fund and already we have a good number of entrepreneurs keying into it. This is just one of them,” he said.
He said that the 2012 annual report which saw Enugu State as one of the states with the least distribution of number of loans guaranteed has improved greatly since then.
“We are in 2017, so we have gone a long way though there is room for improvement, we have closed that gap a lot, but there is still room for improvement,” he said.
Speaking at the event, the Head, Other Financial Institutions Supervision Department (OFISD), Mr Anthony Ofulue, thanked the DFO of the bank for coming up with the novel initiative.
He urged the microfinance banks to take advantage of the scheme which gives them money at two per cent interest while they give out at nine per cent interest rate.
Going down memory lane on how the scheme was established, he said: “The Central Bank of Nigeria (CBN) in an attempt to increase the flow of credit to the agricultural sector established the Agricultural Credit Guarantee Scheme Fund (ACGSF) in 1977.
“The initiative was also to induce banks to increase lending to the sector. The scheme seeks to reduce the challenges faced by farmers in accessing credit for production by reducing the risk exposure of commercial banks. It was to encourage banks to shore up lending to the sector through the provision of a guarantee cover to loans given by banks for agricultural purposes. The scheme is to date is considered to be the oldest/long operated credit guarantee scheme in Africa.
“In spite of the guarantee offerings of 75 per cent to the lending financial institutions as an incentive and interest drawback of 40 per cent to the farmer, bank lending to the agricultural sector has remained below 10 per cent of total lending in the country.
“A closer examination of the statistics on the operations of the scheme revealed a worrisome decline in the participation of deposit money banks under the scheme and non-participation by some microfinance banks,” he said.
Ofulue, therefore, said that the essence of the event was to enhance participation in the ACGS and encourage banks doing well on the scheme to redouble their efforts.
“I implore you to use this event to further understand the dynamics of the scheme with the aim of increasing your participation so as to enable Nigeria increase food production and GDP in general,” he said.
Also, the Assistant Manager, CBN Enugu, Mr Gbolahan Olumide, told the participants that the ACGSF was like a partial substitute to banks’ collateral requirement for agricultural lending.
He said that the scheme encourages the microfinance banks to lend to agricultural business by providing them with a guarantee cover.
Olumide mentioned some of the activities covered under the scheme to include crop and livestock production, processing and marketing.
He said that as part of incentives derivable from the scheme, the farmers have been given 40 per cent rebate to reduce their borrowing cost through high interest rate, as well as to reduce and forestall the loan default.
Looking at the modalities for the Interest Drawback Programme (IDP), Olumide said that “farmers borrow from the banks at market determined rates,” while the banks provide interest rebates to the farmers under the scheme to lessen the cost of borrowing and high interest rate.
According to him, the CBN has so far paid a total of N2.152 billion as rebates to 265,983 farmers under the scheme.
“As part of the development functions of the CBN, the Micro Small and Medium Enterprise Development Fund (MSMEDF) was launched in 2013 to recognize the contributions of the MSME sub-sector of the economy.
“This sub-sector is recognized by huge financial gap which hinders its development,” he said, adding that the MSMEDF has a capital outlay of N220 billion.
Olumide disclosed that over five banks have accessed the fund in Enugu State just as the CBN has more applications that are being processed.
Responding on behalf of the three microfinance banks that won awards, the Chairman, Board Credit Committee of Umuchinemere Microfinance, Chief Gilbert Obu thanked the CBN for instituting the award.
He dedicated the first prize award of the Umuchinemere Microfinance to the hard working management and staff of the bank, promising that the microfinance banks in the state would continue to work hard to sustain the scheme.
Some of the microfinance banks that attended the event are: Umuchinemere, LAPO, Ifeanyichukwu, Green, Kenechukwu, Isi-Uzo, and Ogui Urban.