SMEDAN DG to SMEs: FG loans not free money — you will pay back

Charles Odii, director-general of the Small and Medium Enterprises Development Agency (SMEDAN), says loans given to small businesses are strictly for upscaling of production and not “free money”.

Odii, who spoke in an interview with TheCable recently, said the agency works with commercial banks to ensure disbursements and recovery of loans.

Odii’s statement signals his concern about bad loans — a subject that has become a source of worry for many financial institutions, including the Central Bank of Nigeria (CBN).

In 2015, the CBN introduced the anchor borrowers’ scheme to make cash available for increased agricultural production in Nigeria.

The regulator, in September 2022, said it would deploy the global standing instruction (GSI) against loan defaulters under the scheme. The aim was to initiate direct debits on the bank accounts of loan holders to settle defaults.

On December 13, 2023, the apex bank suspended the application of new loans for processing under any of its existing intervention programmes and schemes.

The CBN also charged banks with the responsibility of recovering previously granted loans under the scheme.

Speaking on the incessant defaults, the SMEDAN boss, said the loans are not for “beer” and should be returned as and when due.

“First and foremost, the information surrounding the disbursement is very clear. It’s a loan and not a grant,” Odii said.

“It’s not free money, it’s not money you use to buy beer. This is the money you need to build your business and get huge investments.

‘For us as an agency, we are disbursing with commercial banks.

“What had happened in the past is if you have pre-existing loans and you come to us, we might not know then we fall the risk of giving the money.

“So if you already have an existing loan, you have to repay before you are given another loan sum.

“The commercial bank is not going to be chasing you from pillar to post to pay back. The bank will deploy all the risk assessments before you get the funds.

“To a large extent, this is the reason why disbursement has been low and this is the reason why a lot of people have not gotten the funds. They do not think that they will pay back and do not know how they will pay.

“Since we are using the bank’s system, they are asking those necessary questions such as what their balance sheets look like, operations and day-to-day spending.

“When they look at that, they can now advise us on the kind of sum they can get.

“Many people are applying for N2.5 million or more but their balance sheet, that is where we step in to offer advisory services for those who cannot match the sum they are asking for.”

Odii also said the agency would make sure that there is capacity-building for small businesses to access the funds and be able to repay.