Commercial Banks Killing SMEs With High Lending Rates—Lawmakers

By Aduragbemi Omiyale

Lawmakers in the lower chamber of the National Assembly have raised an alarm over the high interest rates charged by commercial banks in Nigeria.

They said the high lending rates by lenders will continue to stifle the growth of the Small and Medium-sized Enterprises (SMEs) in the country.

The SMEs sector is one of the most important drivers of the economy but players in the industry have always complained of funding and one of the easiest sources, the bank, has not made things easier for them.

On Tuesday, members of the House of Representatives discussed this issue and they appealed to the Central Bank of Nigeria (CBN) to prevail on commercial banks to set up standing business development units that will nurture and refine business ideas submitted to them by potential lenders to encourage entrepreneurship.

They also mandated the House Committee on Banking and Currency to liaise with the CBN to standardise commercial banks’ lending rates and terms to ensure the growth of SMEs in the country.

While debating on a motion moved by one of them, Mr Uchechuku Nnam–Obi, the parliament expressed concerns that the current lending rate and the unreasonable collateral demands from commercial banks will stifle business development due to the unreasonable terms which may hinder vibrant youths and entrepreneurs with quality business ideas from accessing funds to execute their businesses.

They argued that lenders were making an unfair profit by borrowing from the CBN at 11 per cent and lending to their customers at 20 per cent to 25 per cent.

The lawmakers said if this anomaly is not stopped, especially because of the significant role banks play in the SMEs sector, most small business owners may be forced out of business as they would always struggle to repay the loans.

Mr Nnam-Obi had in his motion sought the review, regulation and monitoring of collateral and interest rates on loans by commercial banks as he noted that most commercial banks were only interested in giving out credit facilities to customers with physical collateral like landed property and in the process, making unconscionable profits from borrowers.