Microfinance Banks Charging Outrageous Interest Rates on Loans — CBN

• Microfinance Banks Charging Outrageous Interest Rates on Loans — CBN

The Central Bank Governor, Godwin Emefiele, has said that microfinance banks in the country are charging outrageous interest rates, and many small and medium enterprises are unable to access the Federal Government’s loans aimed at stimulating local production and boosting non-oil export.

Emefiele said this during a press briefing in Lagos on Sunday at the end of the annual Bankers’ Committee Retreat with the theme, ‘Export-led transformation of the economy – Engine for sustainable inclusive growth’.

Chief executive officers of banks and other major financial institutions attended the retreat.

The CBN governor said, “Those microfinance banks that we have today are not lending loans at single interest rates today; some of them are even lending money on flat. You borrow N50,000 for 90 days, and they expect you to pay another N50,000 interest to them in another 90 days. That is outrageous and that is too exorbitant.

“We feel that if we have these funds available in the Central Bank of Nigeria, through our own national microfinance, we can make access to funds to these people easy, even if it is not single digit per annum; even at 15 per cent, it is substantially lower than those who are borrowing money at flat arrangement basis. And if you don’t pay the N50,000 interest, they seize your bicycle or your car or machine.”

According to him, there are many funds targeted at smallholder farmers as well as those who were into small business in Nigeria.

“We have disbursed part of the money but we, even in the banking community, are not very happy that not all those funds have been disbursed so far,” he said.

To address some of these challenges, he said it decided to establish the national microfinance bank to create better access to credit.

“Under the central bank, we have the commercial agricultural credit loans scheme; we have N200bn set aside for SMEs. Under the central bank and the bankers’ committee, we currently have close to N60bn available to fund agriculture and small businesses and yet these monies are lying and not been disbursed.”

He added that more people need to access these funds and create jobs in the economy.

The CBN governor also mentioned that the N500bn non-oil export stimulation facility, which was made available to enable non-oil exporters to access funds at concessionary rates, had not made the desire impact on the economy.

According to him, the lending institutions need to ensure that the loans and intervention funds are deployed to those they were designed for.