UNBELIEVABLE! Small business owners get ONLY 0.1% of bank loans
Small business owners have benefited less than 1 percent of loans granted to big corporations in the past five years, CBN figures reveal.
The total loans that have been granted by banks to Micro, Small and Medium Enterprises (MSMEs) in Nigeria amount to just over 0.1 percent of total banks’ credits to the private sector.
The figures show that out of the aggregate loans of N135.9 trillion released to the economy between 2011 and 2015, SMES benefited just N159.75 billion.
CBN Statistical Bulletin 2015 showed that loans to SMEs had been on a consistent decline since 2003.
The obtainable data revealed loan granted to small business owners in 2004 represented 3.6 per cent of the total loans.
See stats that depict the steady decline:
2004 – 3.6 percent
2005 – 2.5 percent
2006 – 1.0 percent
2007 – 0.9 percent
2008 – 0.2 percent
2009 – 0.2 percent
2010 – 0.1 percent
2011 – 0.2 percent
The stats show the plunge in credit to the SME sub-sector after the banking consolidation exercise in 2006.
The decline in loans granted to SMEs pales greatly in comparison to the increase in total loans allocated to the economy.
SMEs had robust access to finance from banks during the period of mandatory credit allocation, pre-consolidation.
The allocation further reduced during the liberalisation period and reduced further post-consolidation period.
Back in October 2006, a law which mandated 20 percent of total bank’s credit to small scale enterprises wholly owned by Nigerians was cancelled.
Banks say there is a higher risk in lending money to SMEs, because of their inability to properly document accounting records.
A staff of Diamond Bank, Njideka Esomeju, told Vanguard that banks are businesses with profit expectations from shareholders, and thus will mainly finance businesses that satisfy that objective.
“If this objective is not met, banks will not lend,” Esomeju said.
She added that “They lack requisite information such as proper accounting records, financial statements, bankable business plans, security and operating in disconnected value chains makes it difficult for banks to assess the credit worthiness of the SMEs.”
A study conducted by KPMG Nigeria further backed the banks’ positions on granting loans to MSMEs, showing that the small business enterprises are mostly guided by weak governance and lack the ability to meet prerequisites for bank loans.
