- -Why the interest rate was jerked up -CBN
Crisis is brewing between the Central Bank of Nigeria (CBN) and small-holder farmers who applied for the apex bank’s facilitated agric loan for small scale farmers.
Daily Trust learnt that the interest on the loan, which the bank initially pegged at five percent, has now risen to nine percent and the development is not going down well with the farmers, who applied for the loan long ago.
Besides, several farmers who said they applied for the loan long ago and have been interviewed by the apex bank, are yet to access the facility several months after.
Our Agric Editor reports that the loan package is an initiative of the Bankers’ Committee in a bid to support and complement the Federal Governments’ efforts at promoting Agri-businesses/Small and Medium Enterprises as a vehicle for sustainable economic development and employment generation.
The package, christened Agric-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS), was initially domiciled at the CBN and is to attract five percent interest payable within seven years.
To qualify for the loan, applicants will have to be trained by an Enterprise Development Institution (EDI) of which the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is one. On that basis, the trained applicants would write their business plan, get their business name and certificate, which will now be submitted with the application.
This is the process many farmers said they have undergone but were yet to access the loan, several months after.
Alhaji Sanni B. Tanko, Chairman, Economic Empowerment of Jasawa Development Association in Jos, Plateau State, said about 55 members of the association applied for the loan some time ago, after undergoing training with SMEDAN in February, but that none of them has accessed the loan.
Tanko, who spoke on behalf of other members, said they were asked to develop a business plan after attending a training by SMEDAN, before they could apply.
“That was what we did but as I am speaking with you now, nothing has been done yet. We spent close to N40,000 each to complete the process but nothing to show for it up till now,’’ he said.
He said many farmers lost their initial start-up investments on their farms waiting for the loan but did not get it till that the farming window closed.
Alhaji Sanni, who is a retired banker, said farmers were further disappointed when it was announced that the initial five percent interest on the loan had been jerked up to nine percent by the operators.
“It was learnt recently that the CBN directed the disbursement of the funds to farmers through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Micro-Finance Bank, which the operators said was the reason for the hike in the interest rate,’’ he explained.
He said there was fear among the farmers that the NIRSAL Micro-Finance Bank may not have the facilities to reach the small holder farmers across the country.
Alhaji Sanni said he had already petitioned the branch controller of the apex bank in Plateau State on behalf of his members over the delay in the treatment of their applications for the loan.
In the petition dated November 25, the group frowned at the delay in the loan disbursement, the increase in the interest rate among others.
The farmers also alleged that CBN Governor Godwin Emefiele had failed to authorise the disbursement of the loan despite several applications by the farmers.
Another farmer, who said he had since January applied for the loan after attending a compulsory training with another Enterprise Development Institution, explained that after his application, he was called for interview but since then nothing has been heard from the apex bank.
“The only information we got after that was that the interest rate has been hiked from five percent to nine percent,’’ he added.
He said even the interview process was faulty, alleging some sharp practices by some of the officials.
But the Central Bank of Nigeria, has however dismissed claims by the farmers that many applicants were yet to receive the loan.
The apex bank’s Director, Corporate Communications, Mr. Isaac Okorafor, said a total of N5,214,583,723.16 has been disbursed to 2,124 beneficiaries.
Out of these, a total of N2,661,431,060.86 (51.04%) went to 1,119 agriculture/farmers, and the balance to other sectors – manufacturing, fashion and textiles, ICT etc, insisting that farmers have benefited the most from the intervention.
On the delay in contacting the applicants, Okorafor reminded the farmers that the loan administration is a process, with a number of activities from application to the end, which is disbursement.
“When prospective beneficiaries apply, they should allow some time for processing. It is important to bear in mind that due to the reduced interest rate and relaxed collateral requirement, many applications are received daily, and these all have to be processed,’’ he said.
On increase in interest rate, he said the intention was to make the loans as affordable to small businesses as possible, adding that at the inception, the interest rate was pegged at 5 percent per annum, accruable to the fund.
“However, during the course of administration, considerations were made for operating costs for the participating financial institution (NIRSAL MFB) and the secretariat.
“Consequently, the rate was increased to 9 percent, which is still within the single digit interest rate band,’’ he said.
On why NIRSAL Microfinance Bank was appointed to handle the disbursement, Okorafor said it was aimed at deepening financial inclusion and that it is in collaboration with NIRSAL, Bankers Committee and the Nigerian Postal Service (NIPOST).
“The MFB has the mandate of administering AGSMEIS, leveraging an existing NIPOST infrastructure in all the 774 local councils in the country. Thus, the MFB is well positioned to serve as a channel for small businesses to access it,’’ he said.
Also, SMEDAN, one of the Enterprise Development Institutions involved in training the applicants, confirmed that a lot of people that came through the agency have been given adequate capacity building and that having written their business plan, it would be evaluated for viability as a business.
SMEDAN’s Deputy Director, Enterprise Development and Promotion, Ibrahim T. Abdulmalik, said the agency would usually look at the cash flow analysis of the plan – what is coming into the business and how it is being utilized; what is expected as profit and how to repay the loan.
“I think the process is going to be faster now with the coming up of the NIRSAL Microfinance Bank, unlike when the disbursement was under the CBN. You know CBN is not a retail bank, but with NIRSAL now, it is going to be faster,’’ he said.