FG Moves To Review Criteria For Disbursement Of N500bn SME Loans: 

The federal government says it would review the conditions used by the relevant banks to disburse loans to the Medium and Small Scale Enterprises in the country to ensure geographical spread.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this on Thursday when she appeared before the Senate ad-hoc committee set up to investigate the alleged uneven disbursement of the disbursed to MSMEs by development banks.

The Senate had setup an adhoc panel chaired by Senator Sani Musa to investigate a motion by Senator Ali Ndume, alleging irregularities in the handling of the federal government’s credit facility.

Ndume, in his motion alleged that the South-West geopolitical zone in the country, especially Lagos State, had the largest number of the loan beneficiaries.

Ahmed,who appeared before the panel on Thursday,pledged to meet with the development banks management and their regulators, the Central Bank of Nigeria, to carry out the review of the criteria for loans disbursement.

Ahmed however, warned that such review would not be too flexible to ensure the sustainability of the development banks.

She said: “I have been given copies of reports already submitted to the committee by the development bank. The criteria to access funds from the development banks are set by the supersing ministry. The last one was targeted at the technology sustainability plan.

“The Development Bank of Nigeria was set up to enhance the development of the MSMEs across the country but it doesn’t lend directly to the beneficiary businesses. Instead it lend to them through microfinance banks. The MFBs also provide criteria for the lendee and do credit analysis. They send their reports to the DBN which would collate the report and approve for disbursement.

“The criteria set by the DBN was reviewed by the regulator and approved by CBN. The Bank of Industry was set up to also stay healthy as a bank. It has done very well in terms of loans repayment. it is the only financial development institution that is giving dividends to the federal government.

“The BoI has also been able, on its own, using it’s balance sheet, to raise resources from the domestic capital market as well as from the international capital markets. It is doing quite well in terms of its performance but we hope it could more and use it’s exposure to do more.

“Right now we are struggling to reinvigorate the Bank of Agriculture which was also subjected to regulations and criteria, in areas that would make it stay afloat and make some certain level of returns because that is what would provide efficiency in the bank.

“If government continue to provide intervention funds without adherence to criteria to sustain existence of the banks, it will threaten their existence. I agree that we have to strike a balance between the survival of the banks, their profitability and the development objective of setting them up.

“Our ministry, the regulator which is the CBN to review the criteria so that we could strike a balance that would enable the banks to do more where development is much more needed. I have also seen reports of the development banks and noticed the uneven disbursement of their loans.

“We also have to be careful so that the banks would not use the review of the criteria as an excuse. For instance, before the current management of the Bank of Agriculture took over, the CBN just released funds and gave lists of those to give money to without giving us opportunity to scrutinise the beneficiaries.

“At the end of the 90 per cent of the facilities failed. We would also involve the National Assembly so that we would strike a balance between the objective of setting up the development banks and the need toake sure that they stay afloat and have a healthy balance sheet to be able to continue to do their work.

“Our intervention as a government is limited to our ability to continue to fund them so we make sure that they are healthy enough to also raise funds whether from local or international sources. Whatever we lend to them is not enough to make them carry out their objective.

Earlier, Senator Sani Musa said the federal government supported the development banks so that they would not be using the same considerations that commercial banks are using.

He said:”We want to know the conditionalities that are making it very difficult for the MSMEs to access funds from the development banks, there is the need to look at it critically.

“We want to know the criteria being used by the development banks to disburse funds because we know that the standards were set by the Central Bank of Nigeria.The criteria should be such that the weak MSMEs would be able to access it”

Besides,Senator Ibrahim Hadejia emphasized the need to know the criteria used in the disbursement of the loans.

Senator Yusuf Yusuf also said, “If the loans being disbursed by development banks were guaranteed by the Federal Government, they are sovereign loans which must be guided by the principles of even distribution. The DBN said the PFIs which are primarily commercial banks and micro finance banks use their own criteria to give out loans not by geographical consideration. The PFIs and Commercial banks are basically for profit and not for development.”