About half of the jobs lost in the global recession was due to the ongoing coronavirus pandemic according to Ahmed Rostom, Senior Financial Sector Specialist at the World bank who stated this during a Development Bank of Nigeria (DBN) virtual conference on risk sharing.

Tony Okpanachi: CEO, Development Bank of Nigeria

Panelists at the virtual conference agreed that credit risk guarantee will provide a safety net for Micro, Small and Medium Enterprises (MSMEs) to access credit after COVID-19.

Speaking on the impact of the pandemic on the local economy, Rostom says the hospitality and services industry has been most affected, describing the situation as disturbing. He stated: “42% of individuals who were working before March 2020, especially those working in hospitality and service industry are no longer working.”

MSME’s according to him are the largest employers of labour as they account for about 84 per cent of jobs in the country.

“They are important industrialisation agents, and a driving force in the attainment of industrial growth because of their value chain diversification and expansion of industrial production. They contribute nearly half of the country’s GDP at 48 per cent yet less than 5 per cent of MSME’s have access to finance,” they said.

On her part, the Managing Director of JNC International and a Director at DBN Mrs. Claire Omatseye called for risk sharing among all stakeholders because “risk sharing helps eliminate financial oppression and predatory lending, while also ensuring prosperity is shared equitably. For the government, risk sharing contributes to the realisation of its economic objectives and stabilisation policies”

Mrs. Omatseye noted that credit guarantees (CGs) will enhances access and improves the quality of Credit to close a gap in the existing market.

For MSMEs, she explained that credit guarantees “can play a catalytic role to your businesses, reduces 100%-150% collateral cover for loans (in addition using the Movable asset register).”

With CGs into traditional financing, Mrs. Omatseye said: “It will provide the necessary comfort to financial institutions with the assurance that some portion of the risk is shared (partial risk guaranty).

This is a viable alternative solution to help creditworthy firms navigate their liquidity challenges brought on by the pandemic induced economic contraction and stabilize their cash flows.

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