MSMEs need Credit Guarantees to survive – DBN

By Emma Ujah, Abuja Bureau Chief

The Development Bank of Nigeria (DBN) has described Credit Guarantees Schemes (CGS) as  veritable instruments to alleviate the credit constraints faced by micro, small, medium and enterprises, MSMEs.

This was the highlight of presentations   by industry experts at the just concluded DBN Webinar Series with the theme,   “Risk Sharing: A Key Driver for Increased Financial Access and Economic Development for MSMEs”, a virtual knowledge sharing series via Zoom.

The experts 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 the Managing Director,   JNC International, Mrs. Claire Omatseye.

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The experts  noted, however, that in Nigeria, there exist some challenges with risk sharing in the local market, as most MSMEs do not fully grasp the concepts of risk-sharing and credit guarantees.

While discussing, they also stressed the need for key industry stakeholders, MSMEs, banks, and regulators to openly discuss alternative means of financing and the existence of risk-sharing.

Group Head Emerging Business, Access bank Plc, Mrs. Ayodele Olojode, explained that MSMEs had no regular and sustained access to finance because of limitations like high interest rates, lack of tangible collateral and economic conditions.

She said, “Risk sharing facilities will help increase access to finance which helps MSMEs grow, increase employment and output in the economy.

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 MSMEs remain low compared to peers in other economies. 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.”

In her own remarks, MD, JNC International, Mrs. Claire Omatseye stressed the importance of risk sharing among all stakeholders.

“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 said.

On economic growth challenges and the impact of COVID-19 in Nigeria, Senior Financial Sector Specialist, World Bank, Mr. Ahmed Rostom, shared data from surveys carried out by the World Bank between March and April 2020.

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