Banks Rejects Loan Applications To Reduce Bad Debts, Says LCCI

The Lagos Chamber of Commerce and Industry (LCCI) has attributed the mass loan application rejection by commercial banks in the country to the directive by the Central Bank of Nigeria (CBN) to reduce Non-Performing Loans (NPLs) to the barest minimum.

The Chamber in a statement also disclosed that the negative impacts of COVID-19 on many businesses had led to the failure of commercial banks to process CBN’s approved intervention funds for businesses.

The President of LCCI, Mrs. Toki Mabogunje, made this known during a webinar on addressing the funding challenges for your business in Lagos organised by the Financial Services Group (FSG) of the chamber,

She noted that the economic and financial disruption caused by the COVID-19 pandemic was expected to further increase the rejection of MSME loan applications by commercial banks from the present 50 per cent.

This is despite inadequate funding delaying scaling up, competitiveness and sustainability of businesses in Nigeria, especially MSMEs.

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According to Mabogunje, there is still a huge financing gap in the economy despite various intervention measures by CBN between managers of loanable funds and business owners, especially the MSMEs in addressing the funding challenges for businesses in the country.

She highlighted some of CBN intervention funds meant for MSMEs and manufacturers as N1 trillion manufacturing and import substitution facility, the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMED), the 100 billion Health Care and Pharmaceuticals Support Funds and N300 billion Real Sector Support Facility (RSSF).

The LCCI boss stated that many SMEs were still struggling with the risk assessment criteria of commercial banks with massive loan applications rejections trailing them at the moment.

“Many Small and Medium Enterprises continue to struggle with the risk assessment criteria of commercial banks and other lenders poor accounting records, failure to provide required documentations, inadequate collaterals, weak governance structure of the business, cash flow rigidity among others,” Mabogunje stated.

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