News

Ex-LCCI chair: Banks must keep lending to MSMEs

Following PricewaterHouse Coopers’ (PwC) survey on age-long challenge of obtaining funding faced by Small and Medium Enterprises (SMEs) in Nigeria, a former Chairman, Lagos Chamber of Commerce and Industry (LCCI) Small and Medium scale Enterprise Group (SMEG), John Kachikwu, has insisted that banks must continue to give credit to SMEs despite the financial challenges posed by COVID-19. In a chat with New Telegraph in Lagos, Kachikwu explained that normally when recession starts, banks cut back on credit to SMEs, adding that these companies reacted by cutting costs and jobs in an attempt to shore up their finances.

In addition, he said households run down savings and deposits as they struggle to survive while governments run deficits to smooth the adjustment. The past LCCISMEG President, however, pointed out that with COVID-19 recession; the chain of events was very different, adding that economists were struggling to work out what it all means. He said the good news MSMEs were yearning for post-COVID-19 was that banks should not cut credit to the bottom of the pyramid, rather it was time for them to extend lending scheme. Speaking further, Kachikwu emphasised that in euro area, bank lending to non-financial corporations grew by €75 billion in April after €122 billion in March, according to a recent report by Jeffries titled; ‘Why Banks Matter So Much Right Now.’

“How many of these loans end up as non-performing remains a moot point, but the important thing is that there is a flow of credit supporting economies right now,” he said, adding that; “Ultimately, some of these may end up as a contingent liability on governments’ balance sheets, but this is helping to keep businesses afloat as economies gradually re-open.” The LCCI stalwart alluded to the fact that never before in history had governments pushed their economies into recession deliberately and the result would be budget deficits of between 10 per cent and 15 per cent over this year and next, noting that bank lending was vital as economies adjust post-COVID-19. Kachikwu said: “There is one positive sign on the corporate front as businesses struggle to stay afloat, the freezing of dividends.

Usually, companies are reluctant to do this as it sends out a message of panic. But in the COVID-19 recession, a dividend cut is being seen by the market as a sign a company is taking swift action and has a viable future. “Finally, there is the household sector. Usually, in a recession, there would be a rise in loan defaults and a running down of savings. So far in this recession, lending for house purchases has been maintained while consumer credit has slowed. In the UK, banks have given mortgage holidays to 1.9 million homeowners during lockdown. Household bank deposits in the euro area rose by €100.9 billion in April as more affluent households saved rather than spent.

SHOCKING LIFE STORY!!!

Abuja Man reveals (FREE) secret Fruits that Increased his Manhood size and Lasting Power in 5days…

CLICK HERE TO GET IT!!!

%d bloggers like this: