CBN approves use of movable collateral for credit for small business

The Central Bank of Nigeria (CBN) has approved the use ofmovable
collaterals to secure credits from financial institutions for Micro
Small and Medium Enterprises (MSMEs) in the country from next year.
CBN's Director, Development Finance, Paul Eluhaiwe, said at the end of
the MSME financing conference and D-8 workshop in Abuja that the CBN
was working at the moment with the International Finance
Corporation(IFC) on this development.
"If this (new collateral system) is done, operators will be able to do
business, because there would be funds, and capacities would be built
to create sustainability in the sector. The entrepreneurs themselves
who are supposed to benefit, with movable collateral will have access
to more financial services," Mr. Eluhaiwe said.
Currently, most banks hardly support SMEs with facilities, for the
lack of collaterals and banks wholly depend only on fixed collaterals
in this country.
Mr. Eluhaiwe said the CBN was focusing on starting the implementation
of the N220 billion MSME development fund come next year.
He said the CBN was concentrating on resolving before December all
issues that would make the implementation of the fund work for the
country, pointing out that this was required to move the system
forward, particularly withcurrent regulatory framework.
The CBN's Deputy Governor, Economic Policy, Sarah Alade, said the
issue of collateral for entrepreneurs to access Microfinance services,
particularly loans, was a topic of intense debate at the conference,
adding that the guidelines being prepared for the new collateral
regime would be closely monitored.
"The CBN has done interventions in the past in agriculture,but once
these things start being disbursed, we will monitor them seriously to
make sure that they are given to the right people and that the money
also comes back," Mrs Alade said.
She said the various components of the fund included grants, which the
Microfinance banks need so much; the credit component, the guarantee
component and the refinancing component for the sector to work.
Other issues that were also deliberated upon at the conference, she
said, included that of rating Microfinance banks, adding that the CBN
has expressed the desire to see that rated institutions in Nigeria
increased substantially from the current number.
The Rural Finance Institution Building Programme (RUFIN), an
organisation of IFAD in collaboration with CBN, has been providing
rating for Microfinance banks. About 32 of the Microfinance banks in
Nigeria have so far been rated through the programme.