Comments on: Making success of new development bank – Punch https://thecitizenng.com/making-success-of-new-development-bank-punch/ Nigeria's leading online newspaper Sun, 19 Mar 2017 16:35:00 +0000 hourly 1 https://wordpress.org/?v=6.9.7 By: TA https://thecitizenng.com/making-success-of-new-development-bank-punch/#comment-846 Sun, 19 Mar 2017 16:35:00 +0000 http://thecitizenng.com/?p=96075#comment-846 A better method is to enable qualified SMEs to obtain loans directly from private banks who would then provide funds to match those provided by the government; that is, the private bank would be required to match government fund and at reduced interest rates. As an example, if bank interest rate is 24% per annum and government wishes to lend to SME at, say, 6% then the average interest rate would be 15% (average of bank and government lending rates). Also, if the SME needs N5 million government would provide half and the bank would provide half (N2.5 million each).

The private banks are much more likely to conduct better due diligence. While not immune to inside loan abuse private banks are at least better than government in managing credit and their shareholders’ funds are at risk so more accountability is expected of banks. If a government development bank fails taxpayers lose money and nobody is blamed; this lack of accountability is sufficient to expose development banks as a bad idea in Nigeria.

The government officials may, indeed, mean well; however, as the article points out, historically Nigeria has proven to use these banks as a means to enrich the politically connected.

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