As part of efforts to support the funding and access to finance by operators in primary agricultural and Small and Medium Enterprises (SMEs) sectors, the Central Bank of Nigeria (CBN) and the banks are to establish an Agriculture/ SME fund (AGSME Fund). The funding will come from contributions of a portion of Deposit Money Banks’ (DMBs) Profit After Tax (PAT).
The AGSME Fund, which will take off from January 2017, would operate as an equity fund with contributions from DMBs’ 2016 full year results. CBN Governor, Mr. Godwin Emefiele, who disclosed this at the end of the 8th Bankers’ Committee annual retreat in Lagos, at the weekend, stated that the total amount that banks will contribute to the Fund “will not be less than N30 billion initially.”
He added that modalities of the Fund will be worked upon by the Bankers’ Committee and released in the next few days. Emefiele emphasised that the AGSME Fund was different from the Small and Medium Enterprises Equity Investment Scheme (SMEEIS), which was also an equity fund, established by the Bankers’ Committee in 2000 to boost SMEs, but was abandoned in 2008 after failing to meet the industry’s expectations.
According to him, “Under SMEEIS, banks build a provisioned account in their balance sheets and, based on that, they would then identify the projects. So the funds were with the banks.
But with the AGSME Fund, the funds will be warehoused with the CBN and after the banks have identified the projects, they will be drawn only if agreements have been reached between the investor and investee companies.”
He said the Bankers’ Committee agreed that it was necessary to establish the AGSME Fund in order to help speed up the nation’s economic diversification, pointing out that strong governance framework will be built around it and adequate measures will be put in place to ascertain that projects are viable before funds are released.
He, however, stated that in addition to the AGSME Fund, the CBN would continue through intervention funds and DMBs to provide single digit interest rates to key sectors of the economy.
He rejected claims in some quarters that the CBN’s intervention funds had recorded a low level of access by the public, stressing that in the process of granting of loans, checks have to be made to ensure that projects are viable. Emefiele said the 2016 Bankers’ Committee retreat, which had as its the theme, “Economic Recovery:
The Role of the Banking Sector,” focused on how banks can play a leading role in helping the country quickly surmount its cur-rent economic challenges.
He said: “The Bankers’ Committee recognizes the potential of agriculture and manufacturing SMEs as catalysts for rapid growth, job creation and poverty reaction to drive inclusive growth and development”, adding that the Committee associates with President Muhammadu Buhari’s economic goals.
It will be recalled that under the SMEEIS, banks were required to set aside 10 per cent of their PAT for equity investment and promotion of SMEs.