Author Topic: Affordable Credit For Grassroots Businesses  (Read 453 times)

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Affordable Credit For Grassroots Businesses
« on: March 22, 2017, 07:11:31 AM »
Over 37 million Micro, Small and Medium Enterprises(MSMEs) contribute N38.7 trillion to the Gross Domestic Product (GDP) and employ a significant number of people. But the sector has difficulties in accessing affordable credit, which remains the biggest hurdle against keeping businesses going. But the MarketMoni scheme ? the Government Enterprise and Empowerment Programme (GEEP), a social intervention programme introduced by the Federal Government and implemented by the Bank of Industry (BoI) ? is helping MSMEs bridge funding gaps in their operations, writes COLLINS NWEZE.

Credit is at the centre of every thriving business.
And for Micro, Small and Medium Enterprises (MSMEs), it is one of the biggest challenges confronting their operations. The 37 million MSMEs form a significant part of the informal sector, including market women, traders, artisans, enterprising youths and agricultural workers.

The segment contributed N38.7 trillion to Nigeria?s Gross Domestic Product (GDP) of N94.1 trillion in 2015. However, the sector is still hampered by difficulties in accessing affordable credit.

According to reports, 85 per cent of MSMEs in the country cite access to affordable credit as a major challenge. Most affected by this uphill battle are women-owned businesses, which account for 60 per cent of MSMEs in the country.

To address the poor credit access challenge head-on, the President Muhammadu Buhari-led administration established MarketMoni ? the Government Enterprise and Empowerment Programme (GEEP), a social intervention programme aimed at reinvigorating the economy at the base of the pyramid, the hotbed of Nigeria?s financially vulnerable.

Empowering the vulnerable

MarketMoni grants interest-free credit facilities to microenterprises of market women and traders, artisans, enterprising youth and agricultural workers.

A scheme of the National Social Investment Office, it is targeted at expanding the scope and scale of economic opportunity for the financially vulnerable. The Federal Government is executing MarketMoni  through the Bank of Industry (BoI), a parastatal of the Federal Ministry of Industry, Trade and Investment.

BoI Managing Director, Waheed Olagunju, at an Abuja stakeholders discussion on the scheme, reiterated MarketMoni as a demonstration of the government?s resolve to accelerate development of Nigeria?s microenterprises.

?This Federal Government programme aligns with BOI?s goal of inclusive growth and expanding economic opportunity. Access to affordable funds is a primary challenge of MSMEs, and even more so microenterprises, as this segment is least understood. MarketMoni is a direct response to this challenge ? granting loans at unprecedented rates that cannot be accessed anywhere else?

?The government identifies with Nigerians working hard to keep their businesses afloat, and will continue to extend its assistance through initiatives of this nature,? Olagunju said.

The ?no-interest? loan scheme is accessible to beneficiaries through their  accredited market associations and cooperatives. After confirmed membership of accredited market associations, provision of Bank Verification Numbers (BVNs), and assignment of a MarketMoni agent, beneficiaries qualify to obtain loans ranging between N10,000 and N100,000 repayable over six months, with a one-time five per cent administrative fee to cushion costs.

The implementation of the zero-interest MarketMoni has begun to have a ripple effect on financial inclusion in the nation?s financial sector. Early results of the credit facility show a significant increase in bank accounts opening and BVN enrolment among beneficiaries, especially in rural areas partaking in the scheme.

Explaining why MarketMoni is a true intervention and rare opportunity for this critical segment of the Nigerian economy, BoI Executive Director ? Microenterprises, Toyin Adeniji, said that MarketMoni  does not carry the usual interest tag that other such facilities would carry. Instead, beneficiaries only pay a one-time five percent administrative charge which is also spread over six months.

?So, if you are taking a loan of N50,000 for example, you would only pay N52,500 and it spreads over six months. If you took a N20,000 loan, you would be paying back N21,000. The beauty is there is no other cost or hidden charges as the case is with most credit available to this segment and which run up interests as high as 48 per cent annualised. MarketMoni  is a true intervention.?

She said further that the MarketMoni?s six-month repayment tenure eases the burden on the beneficiary. The entrepreneur is better able to focus their energies on growing their business rather than meeting aggressive targets.

?The loan also comes with a two-week moratorium prior to commencement of weekly repayments starting on the third week of the life of the loan. For example, a N20,000 loan beneficiary would pay back N875 weekly. A beneficiary who makes a daily contribution therefore pays less than N200 per day, an amount that can easily be set aside while reaping the benefits of significant injection of capital into their business. There is no other loan facility this affordable for the Nigerian at the base of the pyramid, she stated.

Women and gender advantage

From the N500 billion budget voted to social intervention programmes for 2016, MarketMoni  accounts for N140 billion ? subject to funding ? to target about 1.6 million market women and traders, artisans, enterprising youth and agricultural workers over the one-year period. BoI targets women-owned businesses for 60 per cent of MarketMoni.

According to BoI, this gender advantage emanates from researched knowledge that difficulty accessing finance is more prevalent among women, and has been a persistent barrier to the comparative participation of women in the micro-economy.

It said giving an edge to women has become imperative in the light of the multiplicity of roles of women micro-entrepreneurs as breadwinners and home-makers, and more likely participants in microenter-prise than big business. A specific targeting of women accelerates the programme?s direct impact on job opportunities at the base of the pyramid, and a consequent reduction in poverty.

At a recent interactive session, Adeniji stressed BoI?s strategic position as a development financial institution with national spread, listing a wide network and structural capacity as core strengths of the bank, which informed its choice by the government as the implementer of the scheme.

?When MarketMoni was conceptualised, we wanted the most efficient way to connect with the beneficiaries. BoI was sort of the first choice that the government could work with because it is already an established development financial institution. BoI already had structures that could enable it go to market quickly,? she said.

MfBs key into the scheme

Adeniji explained that MarketMoni recognises that microfinance banks and other grassroots lending institutions are also closer to our beneficiaries.

?They have more distribution at the local government level, the ward level and the state level. In addition to aggregators, we also work with MFBs among others. We partner with them. Through them, we are able to extend our reach.?

The MarketMoni target of 1.6 million beneficiaries was for 2016 but funding slowed down the roll-out. Adeniji assured that the Federal Government was keen on achieving both its 2016 and 2017 targets.

?Last year, we were funded towards the end of the year. Now, we are working on that initial funding that we received ? and you can see the impact so far ? even with just a pilot component of funds of that to kick off the programme. In 2017, the budget as we know has been put forward and this time it is moving much faster.

?There is an allocation again for the social intervention programme, the total package, with a specific component also for MarketMoni. So, 2017 is going to roll out quickly. We are already disbursing actively in 18 states. The plan of 1.6 million beneficiaries is our baseline. We plan to reach 1.6 million as a minimum because the demand is there. 1.6 million is just what we?ve been charged to do. Our plan is to do more than that with the backing of the government,? Adeniji said.

Already, MarketMoni awareness is gaining ground across the 36 states and Federal Capital Territory Abuja. It has received entries from 22,421 market associations worth over three million potential beneficiaries across the country, seeking to be vetted and accredited for the programme and expecting to benefit this year. Disbursements have commenced for vetted beneficiaries.

Vice President Yemi Osinbajo, Minister for Industry, Trade and Investment, Dr. Okechukwu Enelamah, and the Minister of Women Affairs and Social Development, Senator Aisha Alhassan have been touring the country to see to programme implementation as well as sensitise beneficiaries about the programme.

According to Adeniji, at the end of January, this year, beneficiaries have come from 18 states even as the programme will spread to all states by the end of this month. ?You have to appreciate the fact that when we released these disbursements figures, it doesn?t mean there is no activity in other states. We want a situation where if you pick an association known to us and call them even without us being there, you must get feedback from excited beneficiaries with loans disbursed,? she said.

She expressed government readiness to see beyond the challenges even as BoI has made it clear to beneficiaries that the loans have to repaid, as it is not a national cake. Such repayment makes it possible for more people to benefit from the scheme. ?An interesting challenge we are facing is the standardisation of our access to credit across the different regions and cultures. For instance, we learnt about some women cooperatives in the north that are not publicly accessible but are in dire need of credit.

?So you have to access them without being intrusive as they carry out their trade from home. At the end of the day, everybody is entitled to MarketMoni regardless of their makeup? she said.


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Affordable Credit For Grassroots Businesses
« on: March 22, 2017, 07:11:31 AM »


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