Small and medium scale enterprises (SMEs) operators have kicked against the compulsory N5,000 registration fee they have to pay to commercial banks before they can access the Central Bank of Nigeria (CBN)’s N220 billion loan and other Federal Government’s intervention funds for start-up businesses.
A reliable source in one of the SMEs groups and Coordinator of a non-governmental organisation (NGO) disclosed this on the condition of anonymity. She said her members were finding it difficult to secure some of the intervention funds.
The source said many of her members were in the bottom of the pyramid scheme and were willing to secure these loans. However, lack of proper business structure and procedures, coupled with the stringent conditions of the financial institutions were making it cumbersome for the SMEs to get these loans.
Specifically, she said that Diamond Bank demanded N5,000 as registration fee from members before commencing the process. She said: “I operate an NGO in Lagos with about 5,000 members. We are mostly SMEs operators. We have been finding it difficult to secure Federal Government’s intervention fund for our members all this while so that their businesses can grow.
“Last time, we went to one of the Diamond Bank branches in Lagos to make enquiries about the CBN’s N220 billion for my members who want to boost their trade and businesses. On getting there, we were told that for us to apply and get our application forms treated, we would need to pay N5,000 registration fee.
“We don’t understand the reason for this since we already had bank accounts with other banks”
She explained that one of the major challenges of financing MSMEs in Nigeria is that most financial institutions such as deposit money banks (DMBs) and microfinance banks (MFBs), among others, regard most MSMEs as high risk borrowers with no credit worthiness.
The woman entrepreneur lamented that the conditions for accessing loans is still stringent, adding that most financial institutions are unwilling to give out loans. She stated that the financial support in terms of loans given to MSMEs by financial institutions had been declining over the years.
But spokesman for Diamond Bank, Mr. Mike Omeife, said the N5,000 is actually for opening an account with the bank. He said: “You must have an account with a bank before you can apply to access the intervention fund through that bank.
It is normal practice that before you open an account with a bank you must deposit some amount. Apart from the N5,000 for opening the account, the customer is not asked to make any other deposit. In fact, the N5,000 also qualifies the customer for the Diamond Bank Salary4life promo.”
Also, Acting Director, Communications, CBN, Isaac Okorafor, also said that the bank’s intervention fund does not attract any form of payments by any SMEs or groups of SMEs to secure the loan but each SME owner or co-operative organisations must open a bank account and also give biometric verification number (BVN) details with the commercial banks.
Okorafor said that the CBN intervention fund to the real sector of the economy serves as financial inclusion to attract economically-active SMEs operators in the informal sector to the formal sector. He explained that no charges come with the N220 billion MSME loan, adding that it only attract nine per cent single digit.
He, however, noted any SME owner or group should not hesitate to inform the apex bank where any money is imposed for application forms and registration fees, saying that the bank will take decisive action against the erring bank or banks.
“Part of the entire package of our intervention in the real sector of the economy also serves to include financial inclusion. And you know that financial inclusion means moving people who are economically active from the informal sector into the formal sector of the economy so that they can enjoy a wide range of financial services. So one of the requirements is to own a bank account because the money will not be given to you in cash but paid into your bank account.
So you must own a bank account and also have a BVN registration number. This serves to recognise you in the financial system. In that case, we know your identity when there is a default on the loan.
So you don’t just go around and take up cash from any bank without bank account opening. President, Manufacturers Association of Nigeria (MAN), Chief Frank Udemba Jacobs, also lamented that banks had been frustrating the success of the bailout funds given to the SMEs because of their high interest rate.