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CBN Poised To End Prohibitive Interest Rate – Emefiele

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CBN Governor, Godwin Emefiele

The need to increase access to credit for the unbanked people of Nigeria was reiterated yesterday when Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele stated that the central bank is determined not just to aid access to credit for MSMEs but, put an end to the prohibitive interest rate charges by the existing Microfinance banks in the country.

The CBN Governor said the aim will be achieved when the ongoing process of establishment of a national Microcredit bank named: NIRSAL Microfinance Bank in each of the 774 Local Government Areas of the country is completed. He made the remarks yesterday while inspecting one out of the first seven branches of the bank in Gwagwalada area of Abuja.

Mr. Emefiele said the apex bank, in corroboration with the Bankers’ Committee will make bank fintech driven one to create some form of competitive landscape so that sharp practices where the current “microfinance banks charge very prohibitive interest rate will no longer arise.” A N5 billion initial capital base has been set aside to commence operation of the banks. The CBN and Bankers’ Committee are scale up to 50 more branches in the next phase.

Small businesses in Nigeria face a major challenge of access to credit, a problem that has been a stumbling block to achievement of a set target of 80 per cent financial inclusion rate by 2020. Nigeria’s financial inclusion was put at 48 per cent a year and a half ago, according to official figures.

“I am happy that with the establishment of this microfinance bank which would be in at least one local government and we are talking about the 774 locations in all the country, we would be able to have a financial institution that will help deepen financial inclusion to make it easy for people to access credit particularly the small and unbanked people because we have always said that these are the very weak,” Emefiele stated.

Meanwhile, Mr. Emefiele has said establishment of the NIRSAL bank is not an attempt to crowd out existing microfinance banks, but to complement their services and see to it that whatever services is being provided by these microfinance banks should be seen to be fair to their customers.

The loan is going to be disbursed from joint Agri-Business/Small and Medium Enterprises Investment (AGMEIS) scheme which is five per cent of profit after tax that is being set aside by the various commercial banks to support the small and medium enterprises that will be in agriculture or those that are into different type of small businesses that really very badly need to raise finance to be able to set up an earn livelihood. Interest rate for this will be at five per cent and the loan will be for tenure of seven years with two years moratorium, Emefiele added.

One of the beneficiaries of the loans from the NIRSAL Microfinance Bank in Gwagwalada, veterinary Doctor Chiamaka Daniel applauded CBN for introducing what she called an initiative to help finance her business. 

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