To support small-scale businesses in Abia State, the State Government has disclosed plans to establish a Small and Medium Enterprise (SME) microfinance bank. This was disclosed by the state’s Commissioner for SMEs, Gabriel Igboko.
While announcing that the bank will commence operation in October, Igboko said the bank was one of the three agricultural SME programmes of the State Government, which is already approved by Central Bank of Nigeria (CBN).
According to the Commissioner, the government would through the bank disburse to other SME bodies so that they could have soft loans not normally available in commercial banks.
“By October, we would have completed all formalities to have Abia SME microfinance bank established. The governor has since given his approval. We have gone to CBN and we have met all the conditions. We are just trying to tie all the necessary loose ends in terms of documentation. The microfinance bank identifies those businesses that would come for as small as N20,000 loans or N50,000 and even up to N500,000 loans.” – Igboko
Why SMEs banking is essential
To address the multiple complains of business owners over lack of access to credit facilities, there is a need to have a banking system that only finances this business and this cannot be overemphasised.
According to Nairametrics, It is also acknowledged that these SME players in the economy are under-served, especially in terms of financing.
The established microfinance bank will provide credit facilities to the small and medium-sized enterprises (SMEs), and represents a major function of the general business finance market – in which capital for different types of firms would be supplied, acquired, and costed or priced. Capital may be supplied through the business finance market in the form of bank loans and overdrafts; leasing and hire-purchase arrangements; equity/corporate bond issues; venture capital or private equity; asset-based finance such as factoring and invoice discounting, and government funding in the form of grants or loans.