As part of the stimulus package announced by the Central Bank of Nigeria (CBN) to help mitigate the impact of the coronavirus pandemic on the economy and businesses, the apex bank introduced an N50 billion Targeted Credit Facility (TCF) in March 2020, to support households and micro, small and medium enterprises (MSMEs) that have been affected by the pandemic.
The facility from CBN, which is to be disbursed through the NIRSAL Microfinance Bank Ltd (NMBL), had recorded about 80,000 applications as at April.
However, this program has not been without some hiccups with many applicants complaining about difficulties in assessing the facility.
During an interview with ChannelsTV, the Managing Director of NIRSAL Microfinance Bank Plc, Abubakar Kure, explained why there were difficulties in disbursing the facility to the applicants.
He disclosed that the nationwide lockdown and restrictions had been a major challenge to the smooth processing of the facility. This was also compounded by the inability of some of the applicants to secure guarantors.
According to Kure, “You are all aware of the lockdown across the country and major cities. We have lockdown around Kano, Lagos, Port Harcourt, and incidentally Kaduna. So all these major cities constitute a significant part of the applicants who applied for COVID [loans]. We are actually thinking outside the box to see how we can reach them so that they can come and have the loans.
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“Currently what we do is that we are using digitalization in the form of emails. We send emails to those who have email accounts, we print their offer letters, send back to them, do the documentations and they are able to drawdown.
‘’The most important thing is about the lockdown and that’s why the credit facility was created. It also constitutes a challenge.”
Going further he said, ‘’We are improving our processes, systems, people to be able to meet up with the expectations. You are fully aware that this loan is for a short term. It’s a short term seamless package by Central Bank intended to cushion the effect on businesses and people. However, because of the lockdown and the restriction of people, there have been delays. We have also noticed the issue around guarantors.”
The NMFB boss, while explaining, also encouraged qualified individuals to come forward and guarantee the approved applicants because they had viable businesses. He said that the ones that had been evaluated were very successful SMEs with the capacity to pay back.
On why the difficulty in disbursing the credit facility considering that it was supposed to be a short term facility to cater for businesses and households during the period of pandemic and lockdown, Mr Kure said, “This is a loan and not a grant, you are required to sign offer letters in terms of documentation that need to be signed so that it requires physical interaction between the bank i.e. NIRSAL Microfinance bank as well as the customers. So customers are unable to even come to sign the documentations and customers are even unable to get guarantors.”
However, as part of the solution to this challenge, Kure said the bank was trying to enlighten the customers about other channels of payment like mobile applications and the USSD. He said that those that we’re able to finish their documentation and sign offer letters, a fundamental aspect of the loan, could drawdown.
On the number of applicants that had benefitted so far from the facility, the NMFB MD said, “If you go to our website, we have over 1000 applicants that are enjoying the facilities. The buildup is expected in a few days to come.”
This disbursement from the apex bank was collaborated by CBN’s Director for Development Finance, Yusuf Yila, who said that they had disbursed N5 billion for 5,000 applicants through the NMFB.
On the kind of collateral needed for small businesses, Kure said they were usually soft collaterals that ranged from guarantors to movable assets like cars, equipment, and so on, unlike large volume ticket collaterals for big businesses. He said the most important thing to consider in the approval was the cash flow and the ability to pay back the facility.
He also disclosed that the households constituted about 65% of the applications that were received.