KUNLE OLUTAYO
To balance identified uneven disbursement of funds allotted to development institutions in the country, the Federal Government will review criteria for assessing and granting of credit facilities.
Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed, made this disclosure while appearing before an investigative panel by an ad- hoc committee of the Senate on alleged uneven disbursement of the N500bn Federal Government loans already given out the MSMEs by development banks.
She said the Federal Government would review the criteria currently being used by development banks in the country to disburse loans to the Medium and Small Scale Enterprises in the country to ensure geographical spread.
The Senate President, following a motion by Senator Ali Ndume, had set up the adhoc panel chaired by Senator Sani Musa to investigate the matter.
Ndume had claimed that the South-West geopolitical zone in the country, especially Lagos State, had the largest number of the loans’ beneficiaries.
The chief executive officers of the affected banks like the Development Bank of Nigeria and the Bank of Industry among others had told the panel that they adhere strictly to the criteria set up by their regulators and not geopolitical considerations in given out loans.
Members of the committee, especially those from the northern part of the country, disagreed with the Banks’ CEOs submissions and insisted on the review of the criteria because the development banks were established to ensure even distribution of wealth across the country.
They demanded that the loans disbursement criteria must be less cumbersome and complex so that MSMEs from all part of the country should be able to access it.
They therefore decided to summon the Finance Minister to address their concerns.
Appearing before the panel on Thursday, the Minister 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, cautioned that such review would not be too flexible to ensure the sustainability of the development banks.
The Minister 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 supervising 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 to make 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. We will provide to the Committee, the criteria for disbursing loans, the schedule of shareholding of the federal government in each of the development banks and the list of other shareholders. We will also provide how much intervention we had had put in to the banks as a government over a period of time.”
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 disbusrse 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.
“The Bank of Industry for instance, was set up to industrialise Nigeria. It means every part of the country must be considered.
“The Nigerian economy is being run by the MSMEs because we have about 39 million of them across the country. We need to ensure their survival.”
Also, Senator Ibrahim Hadejia said “there is the need for us to know the criteria used in the disbursement of the loans. We need to know the core objective of establishing the BoI. Is it for it to generate profit alone? It is a development bank not necessarily means that it had to generate income. Income generation could be a secondary objective, it shouldn’t be the primary purpose.
“What is important is that we should have the criteria. The bulk of the money is from the Federal Government it has to be spread across the country. It is meant to intervene and provide support for the micro enterprises. Only 16 per cent of the funds to manufacturing and six per cent to agriculture. It is meant to breach the gap between a state that is above the poverty line and those that a wallowing in poverty”.
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.”
