Loans for small businesses, not free money – SMEDAN DG

In a recent interview with TheCable, Charles Odii, the director-general of the Small and Medium Enterprises Development Agency (SMEDAN), emphasized that loans provided to small businesses are intended for the enhancement of production and not considered “free money.”

Odii highlighted the agency’s collaboration with commercial banks to ensure efficient disbursement and recovery of loans.

His remarks underscored growing concerns over loan defaults, echoing apprehensions expressed by various financial institutions, including the Central Bank of Nigeria (CBN). In response to rising default rates, the CBN introduced the anchor borrowers’ scheme in 2015 to stimulate agricultural production.

However, in September 2022, the apex bank announced the deployment of the global standing instruction (GSI) to address defaults under the scheme, aiming to directly debit defaulters’ bank accounts.

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Further measures were taken by the CBN on December 13, 2023, when it suspended the processing of new loans under existing intervention programs and charged banks with the task of recovering previously disbursed loans.

Odii reiterated the loan’s purpose, emphasizing its importance for business development and investments rather than frivolous expenses like purchasing alcohol. He clarified SMEDAN’s collaboration with commercial banks for loan disbursement, highlighting the necessity for borrowers to settle pre-existing loans before accessing additional funds.

Odii also emphasized the rigorous risk assessment processes employed by banks to determine loan eligibility, contributing to lower disbursement rates due to perceived repayment uncertainties among applicants.

Acknowledging challenges faced by applicants, Odii affirmed SMEDAN’s commitment to providing advisory services and capacity-building initiatives to facilitate better access to funds and enhance loan repayment capabilities for small businesses.