DBN Highlights Benefits of Credit Guarantee to MSMEs


By Oluchi Chibuzor

Current realities in Nigeria including the Covid-19 has brought to fore the urgent need for additional support in alleviating the financial constraints faced by MSMEs.

This was the main thrust of the discussion 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 which held recently via zoom.

The panelists included the 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 MD, JNC International, Mrs. Claire Omatseye. They all alluded to the fact there was need to increase awareness in ensuring that the much-needed stimulus and alternative means of facilitating financing are discovered to stem the shock to Nigeria’s economic and financial system.

The panelists highlighted that Credit Guarantees Schemes (CGS) are popular instruments that were created to help alleviate the credit constraints faced by MSMEs.

In Nigeria, however, 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.

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 do not have regular and sustained access to finance because of limitations such as high interest rates, lack of tangible collateral and economic conditions.

She emphasised that, “risk sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy.”

She further explained that, “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 SMEs 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.”

Speaking on the economic challenges and the impact of COVID-19 in Nigeria, the Senior Financial Sector Specialist, World Bank, Mr. Ahmed Rostom, shared data from surveys carried out by the Bank recently.

The survey highlighted the impact the pandemic has had on the Nigerian economy, stating that 42 per cent of individuals who were working before March 2020, especially those working in the hospitality and service industry lost their jobs.

On her part, 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 realisation of its economic objectives and stabilisation policies,” she said.