Background
Over the past 40 years, banks credit lending to the private sector
has increasingly declined. By 2004, outstanding private sector credit
as a share of GDP was only about 14 percent, far below comparison
countries. The most neglected are mortgage finance, small and medium
enterprise, and agriculture. The agriculture sector has been ignored
and neglected by traditional credit markets for a variety of reasons,
not withstanding the various government efforts to facilitate affordable
financial access. Provision of strategic lending into targeted agriculture,
agribusiness and supporting industries will help develop rural value-added
industries, boosting the confidence of financial institutions to invest
and support these sectors.
Problem Statement
Low access to financial services for mortgages and SMES are caused
by lack of availability of long-term funds, lack of a credit bureau,
lack of capacity, infrastructure, inefficiency, high costs of construction,
and legal issues. The specific SME issues in Nigeria include lack
of access to business development services, poor infrastructure
services and macroeconomic policies, constraints in the investment
climate including legal, regulatory, and institutional barriers.
Approach
Demonstrate the viability of the neglected sector by providing partial
guarantee to selected banks, thereby stimulating interest in lending,
improving financial access, build capacity of the borrower and lender
through targeted technical assistance and training. Highlight constraints
and work with other partners to address them
Anticipated Results
Leveraged $26million of private sector funds to address the problem
of low access to financial services and products in mortgage finance
for middle income Nigerians, increase access of SME finance in Lagos,
Niger-Delta and the North; and stimulate lending to agricultural
enterprises along the commodity value chain (from Farm to Market).
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