The Chief Executive Officer of Ecobank Transnational Incorporated, Mr. Ade Ayeyemi, has called on the Nigerian government to introduce Credit Guarantee Schemes for Micro, Small and Medium Enterprises (MSME) as a measure to hedge their risk.
Noting that MSMEs are a fundamental part of the economic fabric in Nigeria and the wider continent and therefore play a crucial role in furthering growth, innovation and prosperity, Ayeyemi suggested that shouldering some of the risk would encourage greater confidence amongst banks to lend to the sector.
“Currently, many banks would rather invest in treasury bills than give credits to individuals which may later result in non-performing loans,” said Mr. Ayeyemi.
According to him, “If the government were to take out part of the risk by saying, ‘we will guarantee’, then I would become indifferent whether I put the moment in a treasury bill or an MSME.”
He stated that such a guarantee would only work if entrepreneurs repaid the show of faith by paying it back on time.
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“If the MSME’s don’t pay, they are reducing the abilities of the banks to be able to fulfill their role in society in being able to lend,” he said.
Ayeyemi who was on a panel discussion on the ‘Access to Capital’ at the 23rd Nigeria Economic Summit, drew attention to why new businesses fail so quickly.
“Part of that failure is not due to the person but also due to the circumstances in the environment.
“If you don’t have power, if there is no water and you need $5,000 to set up a barbing salon today; if you are in Nigeria you spend more than half of that money on a generator, diesel and water,” he stated.
He suggested that a key component of the bank achieving its dual objectives of commercial viability and socio-economic development, would be driven by combined activities with strategic partners such as the International Finance Corporation (IFC), the Bank of Industry (BOI) in Nigeria, the Africa Development Bank (AfDB) and Afreximbank.