This situation has led invariably to many of them closing shop, resulting in the loss of thousands of unskilled, semi and skilled jobs across the country.
This was why in 2005/2006, the National Micro Finance Policy launched by the then President Olusegun Obasanjo, with the Central Bank of Nigeria (CBN) as its implementing agency.
It marked the beginning of the guidelines for setting up Micro Finance Banks (MFBs the regulation of MFBs and so on.
Part of the component of that policy was the establishment of a fund to strengthen the link between entrepreneurship and access to financial services for MSMEs in the country.
Last Thursday in Abuja, N220 billion fund was formally launched at the seventh annual MSMEs finance conference and D-8 workshop on micro-finance for SMEs by Governor of the Central Bank of Nigeria (CBN) Sanusi Lamido Sanusi.
The objectives of the new fund is to enhance the ability of the micro finance institutions to shape themselves into low interest, long term funding organisations that would provide financing window that would improve the capacity of the PFI to meet the credit need of the micro small and medium enterprise.
The ultimate responsibility for the successful intermediation of the financial sector, Sanusi said, lies in the financial market to integrate the micro entrepreneurs, with low income earners, farmers, artisans into the financial system to improve the effectiveness of the polity.
The conference, is focused on financing of the SMEs because they are generally acknowledged to contribute meaningfully to growth, income and employment generation and innovation.
"In 2012 Nigeria had about 8million MSME employing about 42.4million people and contributing about 46.5 per cent of nominal GDP."
A recent survey, projects that 80 per cent of Nigerian MSMEs are excluded from the financial market, while their condition and capacity to add more value to the nation's economy, underscores the importance of the conference.
Sanusi lamented that "in 2012 commercial bank loans to SMEs dropped at an exponential rate. Analysis of the annual trend in the share of commercial bank credit to small scale industries indicates a decline of about 7.5 per cent in 2003 to less than 1 per cent in 2006 and a further decline in 2012 to 0.14 per cent."
The CBN reiterated that a number of reasons have been identified for the poor funding of MSMEs by commercial banks. These include the lack of managerial capacity, inadequate collateral and poor record keeping among others.
He said there also exists issues such as high transaction costs and lack of understanding by the banks of the nature and operation of MSMEs as well as other constraints leaving MSMEs vulnerable.
Sanusi then called on policy makers in all tiers of government to formulate and implement policies "to strengthen the MSME sub sector.
The CBN he said has been working towards improved access to finance for the sub-sector vis-a-vis micro-finance policies, regulatory and supervisory framework, the fortification programme of micro finance banks, designated financial businesses and professionals, consistent framework. Others include the payment system transformation, development of unmovable collateral registry, the financial ombudsman board currently with the National Assembly and the encouragement of lending.
Sanusi also announced an interest rebate component for women in the fund so women businesses who borrow from MFBs are able to access these funds for interest rate subsidy to ensure they do not pay above nine per cent interest on their loans.
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