- Nigeria's minister of mines and steel has advocated for gold jewellery to become collateral for loan application
- Nigerian small and medium entrepreneurs have been struggling to access credit due to unaffordable collateral
- Despite contributing the highest employment in the Nigerian economy, MSME still have financing issue when compared to corporations
The minister of mines and steel development, Olamilekan Adegbite, said the government plans to make access to credit easier for small and medium businesses by making deposit money bank collect gold jewellery as collateral.
Adegbite said plans are being made to effect the exchange of loan for gold. He stated that Nigerian banks and his ministry have started discussions on the initiative which will boost the sector.
Following an agreement between the ministry and the financial sector, the lenders will offer small and medium enterprises certificate after receiving the gold jewellery. This certificate will be used by the business owner to apply for a loan.
He said the entrepreneurs will be allowed to apply for a loan with the certificate either at the bank where their gold jewellery is kept in a vault or approach another bank for the credit facility.
This means the certificate will be valid at any participating credit institution within the country. The initiative is meant to help smaller ventures scale in their various market.
Lack of fund has been a problem for MSMEs in Nigeria even though they account for 49.78% gross domestic product. In Nigeria, there are over 41,54 million MSMEs, all of which have about 59,64 million employees.
This accounts for 76.5% of Nigeria's workforce. However, despite their impact on Nigeria's economy, PwC data showed there's 32.1% financing gap for MSME. The challenge has been collateral requirements which many small businesses are unable to afford.
To simplify loan applications, the minister for mines and steel, on Sunday, March 28, 2020, said he has advocated the use of gold jewellery as collateral option in a Nairametrics report.
“We are discussing with some financial institutions to create products to accept the gold jewellery from Nigerians and give them credit that is within the worth of the commodity.”
Meanwhile, Legit.ng had previously reported that Nigerian millionaire, co-founder, Iyinoluwa Aboyeji, said he's in search of small businesses owned by businesswomen.
Aboyeji said he is willing to help raise funds for startups that provide credit for female entrepreneurs within Nigeria, and other financiers can contribute to the fund.
Fakoyejo Olalekan is a Business and Financial Journalist with over three years of experience in covering finance and business activities within Nigeria and offshore. Prior to joining Legit.ng, he worked at Nairametrics where he wrote financial and investment analysis articles. Olalekan is a resourceful and result-driven journalist with a track record for conducting extensive research and interviews to produce articles that provide different perspectives to market activities.