Former Executive Director of Standard Chartered Bank, Alex Mould is urging government to discontinue the decision to use National Board for Small Scale Industries (NBSSI) to disbursed the ₵600 million soft loan stimulus package for Small Medium Enterprises (SMEs).

The soft loans which is under the Coronavirus Alleviation Programme (CAP) is intended to mitigate the effects of Covid-19 on the operations SMEs.

Government this week, announced NBSSI will have access to the fund this month and begin with the disbursement to SMEs in the country.

But the Energy and Finance Expert, Mr Mould believes NBSSI is not qualified to disburse the loans.

According to him, unlike financial institutions that are regulated, have credit underwriting standards and credit approval procedures, "the NBSSI is a bureaucratic institution controlled by politicians.

"Financial institutions should be the channel for disbursing the GHS600m earmarked for the SMEs under the CAP, or it could become a political slush fund otherwise" the immediate past Chief Executive of Ghana National Petroleum Corporation stressed.

Read full statement below

NBSSI not qualified to disburse SMEs fund under CAP

Government should be crystal clear on the terms of GHS600m loan fund allocated to SMEs under Coronavirus Alleviation Programme.

The National Board for Small Scale Industries (NBSSI) will, from this month, have access to government’s GHS 600 million soft loan stimulus package for SMEs.

The loan, which comes with a one-year moratorium and a two-year repayment period is intended to mitigate the effects of COVID-19 on the operations of micro, small and medium-sized businesses.

I want to highlight some of the potential challenges with this model.

Firstly, I can emphatically state the NBSSI is not qualified to disburse loans. Unlike Financial institutions that are regulated,  have credit underwriting standards and credit approval procedures, the NBSSI is a bureaucratic institution controlled by politicians.  

What safeguards has the NBSSI put in place to ensure that  the funds disbursed are used for the approved purpose?

Other questions that require immediate clarity are:

1. What exactly is the qualifying criteria the NBSSI will outline for funds eligibility; in addition to the  basic guidelines outlined by the Ministry of Finance? 

2. What precisely can these funds be used for?: for example, are these eligible:

- workers salaries and statutory expenses 

-  interest repayments on loans to banks 

- rent payments 

- utility payments 

- other working capital needs

Financial institutions should be the channel for disbursing the GHS600m earmarked for the SMEs under CAP, or it could become a political slush fund otherwise. 

Clear risk sharing allocation protocols must be agreed between Government and Financial institutions.

Additionally, stakeholder engagement e.g. trade associations, Association of small scale induatries (ASSI) etc is necessary to help determine the needs of SMEs amid the COVID-19 pandemic. 

We should all remember this is NOT free money and approval criteria needs to be obvious and transparent.

Signed

Alex Mould