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Interest rate anxiety heightens as DMBs agree to drive N26bn support for SMEs

Though Nigerian Deposit Money Banks (DMBs), had announced setting up of business review committee to oversee the disbursement of N26 billion equity funds for the Small and Medium Enterprises (SMEs), business development analysts are divided on the true colour of interest rates to charge applying budding businesses.

The SMEs Projects Review  Committee include the Managing Directors  of Zenith, GTB, First Bank, UBA, Access Bank, FCMB, Unity Bank,  CBN Director of Banking Supervision and his counterpart in Development Finance Department. Chairman of the committee is to be decided in coming days according to a source from the committee.

The fear of analysts on the real interest rates to be charged on SMEs wishing to access the loans stemmed from previous experiences of SMEs which showed that upon all the beautiful face value of credits on offers by Nigerian banks, there are more to it when the chips are down especially on the borrowers.

According to Biodun Ashafa, a small business operator in Festac Town, Lagos, he said “My experience in taking loans from the bank is very bad and I don’t think anybody can convince me again to dabble into it because what you see at the preliminary stages are not what actually obtains when you sign the understanding”.

“For example, I signed a loan of five million in 2015 with one of the noisy banks (name with held) on some so called flexible conditions only to be accosted with uncountable number of taxes which were not explained to me in the first instance.

“Today, I would have been a slave of the bank, if I did not rush to get money from a brother to pay them and angrily exit the business relationship. It is wrong to say it, but I want to warn any small business operator to be very careful in whatever trick these banks are coming with because midway, all these sweet talks will change and you will begin to blame yourself while your business begin to face shocks and eventual collapse. The banks are not concerned if you business which they claim to assist is collapsing or hanging. That is the irony of borrowing money from any Nigerian bank as an SME operator,” Ashafa warned.

The preliminary hint to the new development was dropped by the Managing Director of Union Bank Plc, Mr. Emeka Emuwa, in Abuja at the 334 meetings of the Bankers’ Committee.

In his explanations, Emuwa said, “one of the things we discussed at the Bankers’ Committee to support the growth in the economy was inaugurating the board of Agric and SMEs fund (N26 billion). All the banks are supposed to set aside a portion of their profits, which would be made available for equity investment in agriculture and SMEs”.

“So the board of the Project Review Committee of the Fund was inaugurated today. Basically, the fund is ready for implementation. In the next few weeks, there will be more communication as to how to access those funds. For entrepreneurs, small businesses and agriculture, the opportunity is there for equity funding for their businesses,” the Union Bank CEO said.

Corroborating Emuwa’s stance, the Managing Director of FSDH Merchant Bank, Mrs. Hamda Ambah, advised entrepreneurs desirous of looking for fund to finance their businesses to approach their banks for detailed clarification.

She said “Those who are interested in equity to support their agricultural ventures or SMEs should approach their banks now and apply so that the bank will do a sort of preliminary review and pass these requests to the Project Review Committee of this organization”.

Details gathered by our correspondent showed that the new lifeline for SMES, an initiative of banks, was conceived last year to support SMEs and the agriculture sector. Banks agreed to set aside 5 per cent of their Profit After Tax (PAT) solely as investment on joint equity partnership with entrepreneurs of SMEs. This SMEs fund is aside of the CBN dedicated N220 billion SMEs fund.

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