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LCCI: NPL order, COVID-19 fueling MSME loan rejections by banks

The Lagos Chamber of Commerce and Industry (LCCI) has fingered the directive by the Central Bank of Nigeria (CBN) to Nigerian banks to reduce Non-Performing Loans (NPLs) to the barest minimum and the negative impacts of COVID-19 on many businesses, for the rising mass loan applications rejection from commercial banks on CBN’s approved intervention funds meant to boost their businesses.

LCCI observed that the economic and financial disruption occasioned by the COVID-19 pandemic is expected to further jerk up the rejection of MSME loan applications by commercial banks from the present 50 per cent amid inadequate funding inhibiting scaling up, competitiveness and sustainability of businesses in Nigeria, especially MSMEs. The chamber further stated that there is still huge financing gap existing in the economy despite various intervention measures by CBN between managers of loanable funds and business owners, especially the MSMEs in addressing the funding challenges for businesses in the country.

The CBN intervention funds meant for MSMEs and manufacturers include N1 trillion manufacturing and import substitution facility, the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMED), the 100 billion Health Care and Pharmaceuticals Support Funds and N300 billion Real Sector Support Facility (RSSF), President of the Lagos Chamber of Commerce and Industry, Mrs. Toki Mabogunje, made this known during the Financial Services Group (FSG) of the LCCI webinar on addressing the funding challenges for your business in Lagos, that many SMEs are still grappling with the risk assessment criteria of commercial banks with gamut of loan applications rejections trailing them at the moments.

The LCCI president explained that a 2018 study done by Enterprise Development Center of PAN Atlantic University for Development Bank of Nigeria Plc captioned accessing the financing gap for Nigeria’s MSMEs and emerging corporate in the last two years of the rejection rate of MSME loans applications by commercial banks to be 50 per cent. “Many Small and Enterprises continue to struggle with the risk assessment criteria of commercial banks and other lenders poor accounting records, failure to provide required documentations, inadequate collaterals, weak governance structure of the business, cash flow rigidity among others,” Mabogunje stated.

 

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