CBN INTERVENTION FUND: DISMANTLING ROAD BLOCKS FOR SMES

As at February this year, only 40.3 Billion naira out of the 220Billion Naira intervention funds of the Micro,Small and Medium Enterprises Development Fund( MSMED) launched by President Goodluck Jonathan in 2014 has been disbursed. What is worse is that only 814 million had been released to the commercial banks to fund only 21 Projects, while 2 billion Naira had been released to Microfinance Banks( MFBs) and 100 million to Finance institutions. According to CBN, they were hoping that by the end of this year, they would have released up to half of the fund. But evidence on the ground shows that not much has improved since February when the above information was released. And before the MSMED there was the Real Sector Fund of about 500 billion Naira, more than half of which is still not disbursed and from which very few SMEs have benefitted.
STATUS OF THE ECONOMY
  The year started rather slowly because of the pending elections which eventually were concluded in April. Then we entered into the transition period as we waited for the new government to take over. Meanwhile, the precipitous decline in the price of crude petroleum persisted with National income declining by almost half . By the time the new government assumed office end of May, many States were in crisis as they could not pay workers salaries and emoluments .
  Many Nigerians who had expected President Muhammadu Buhari( PMB) to hit the ground running, were utterly disappointed. Five months into the new administration, the Nation is yet to have a working Federal cabinet. Following the oil price shock from about $115 per barrel in June 2014 to about  $50 dollars in June 2015, the Foreign reserves began to decline rapidly. In an effort to halt this decline, the CBN devalued the Naira twice, the second by about 20%. When that did not seem to be an effective remedy, the CBN crossed the line from Monetary Policy management to Fiscal regime by imposing what is to all intents and purposes a ban on the importation of 41 products which included food, food products, metallic products equipment and accessories. In addition to restricting these products from access to foreign exchange, CBN introduced other restrictive foreign exchange policies which effectively narrowed the market for SMEs.
   With policy prevarication or rather policy uncertainty of the Buhari admnistration and the adhoc restrictive policies undertaken by the CBN, in the face of severe national income shortages, the economy has been on the decline. For two consecutive quarters, the growth of the economy showed worrisome slowing down. At end of Q2, GDP growth had declined to 2.34% as against 6.45% at the same period last year. Truly worrisome was that the Manufacturing GDP went into negative ( - 3.45%) and Minning also declined steeply. All over the economy the signs of a distressed economy is evident, high unsold inventory due to sluggish consumer off take ,job losses, high inflation, high interest rates and overall increased misery index. It therefore becomes extremely important that the economy requires a strong stimulus for it to return to growth. And the quickest opportunity to achieve this is to make the already approved MSMED funds readily and easily accessible to business organizations.
HOW TO DEBOTTLE THE BOTTLE NECKS
To dismantle, the Road blocks on the way of SMEs to the intervention fund, will involve the following actions
1. The CBN will have to simplify the process and make it simple for all desirous SMEs to understand and follow. To help achieve this objective, then the CBN must come out of their offices and go to where the SMEs are to interact with them directly. Research indicates that there is very poor understanding of how to access the funds and the commercial banks are not doing enough to create the required awareness.
2. The requirement for collaterals must be made easy for borrowers. As suggested by the CBN themselves, the required collateral should cover maximum of 50% of the value of the loan. In addition, there should be flexibility as to the kind of items that will constitute the collateral. Indeed it should be specific to each borrower. It could be landed property, machinery, furniture, goodwill or discounted sales. What should be of optimum importance is the viability of the business and the assurance of the management integrity. In this wise the CBN may opt to have an oversight over the cash flow management to assure repayment.
3. Related to this, the CBN will need to partner with the borrowing SMEs and offer managerial assistance. This they may do directly or through third parties to prepare and assist SMEs produce bankable Business plans in the first place and then support the building of management competence. The model that the Bank of
Industry has adopted is in line with this suggestion to some degree.
4. The need for repayment moratorium especially for start ups must be considered by the CBN, so that the business is not cash strained. Repayment of capital must be from cash flow that will allow the business continue to meet other obligations, especially that to procure inputs and to effectively market the finished product or service
5. If it were possible, commercial banks should be excused from intervening in this fund, because of their well known penchant to short change SMEs: too high premiums over CBN rate, spurious fees and charges and short term focus and orientation. If they must of necessity intermediate, then they must acquire the capacity and attitude to support SMEs.They must find a way to realize that these intervention funds are not their own and do not belong to their depositors, as that is always their excuse for high charges and short term focus. As a matter of fact, it has become so important for commercial banks and MFBs to develop and man SME departments or desks with men and women who have the proper orientation to support SMEs. Currently this capacity is scarce in many of our banking institutions.
6. Additionally, it may be suggested that the CBN through the commercial banks can deal with SME member groups like MAN, NASME, NASSI,NACC and other sectoral groups like Shoe makers, furniture makers, paint manufacturers or service provider groups. In which case the CBN can treat these groups as cooperatives, charging them with providing guarantees for their members. This will reduce the road block of collaterals and through peer pressure improve repayment.
7. Overal, we must get the government to establish an equivalent of the Small Business Administration(SBA)agency as we have in the USA. This advocate government agency will be the answer for advocating better relationship with MSMEs and funding agencies like the CBN. They will have the critical manpower that truly understand  the challenges of MSMEs and can better negotiate on their behalf with CBN and other agencies, dismantling many of the road blocks. The Small and Medium Scale Enterprises Development Agency of Nigeria( SMEDAN) as currently structured, manned and funded is a mockery.
WISDOM FOR SUCCESSFUL UTILIZATION OF THE  FUND
 We can not conclude this discussion without reflecting on the internal challenges within the SME sector that so often make it hold the short end of the stick. Often lenders see the SME sector as being very risky. Yes it is true, but the risks can be better managed if we learn to keep our houses in order and adopt the best global business management principles. This will de-risk many of our businesses and make them more attractive for funding. Some of the wisdom nuggets I suggest are as follows
. Ensure Proper Project conception and viability
. Always do a proper business plan and stick to it
. Establish leak proof financial recording systems
. Work within a budget framework and measure achievement.
. Separate Business from self
. Employ competent managers
. Define jobs properly
. Train,Equip and motivate your staff
. Implement controls and minimize surprises
. Have a marketing orientation in your business
. Focus on the customer and work around him
. Deliver consistent quality and value
. Benchmark competition
. Enthrone corporate governance, separating it from corporate management.
. Develop good corporate image
. Adopt Good Business Ethics
It has become imperative that the Federal Government must do something urgently to stimulate the economy and prevent us from sliding  into recession as is being predicted by several analysts and organizations including the CBN. While the States are receiving bail out, the SME sector can be easily bailed out if the CBN can adopt a more liberal attitude to disbursing the 220 billion Naira Micro, Small ,and medium Enterprises Development Fund( MSMED). The bottlenecks and road blacks can be removed by simplifying the processes for accessing the funds by SMES as enumerated above. However, none of these will happen except we intensify our level of advocacy. Through MAN and other private sector organizations like the NESG,NECA, NASME and NASSI, we must be resolute in pushing the barriers. We must remain visible and audible. If the Private Sector ever needed to stand together, this is the time for it to engage this government, more so now that the long awaited ministers are finally coming on board, to adopt the right economic policies and do the right things. They must improve on what the last Government did for SMEs and indeed for the economy. That is the minimum expectation.
Mazi Sam Ohuabunwa 

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