The Nigerian unit of Lomé-based Ecobank Transnational Incorporated (ETI) hopes to support Micro, Small and Medium Scale Enterprises (MSMEs) in the country and small corporates with a newly sourced subordinated debt in the sum of N50 billion.
Such facilities permit borrowers to prioritise repayment of older loans in the case of default, and carry higher interest rates because they are often uncollateralised.
“The bilateral funding provides stable medium-term liquidity to the balance sheet of Ecobank Nigeria and positively improved its balance sheet ratios, especially the capital adequacy ratio by circa 300 basis points,” the bank’s management said in a note to the Nigerian Stock Exchange (NSE) on Monday.
Itwill supply the capital Ecobank Nigeria needs to tap deeper into the cash-starved informal sector of Africa’s biggest economy which, much as it accounts for half of its gross domestic product and 96 per cent of the total number of businesses, is direly deficient of the credit needed to sustain and bolster growth.
PricewaterhouseCoopers estimated “the financing gap for Nigerian MSMEs to be about N617.3 billion annually (pre-COVID-19 pandemic)” in a last year survey.
“Based on analysis of data from the CBN annual statistical bulletin, small businesses accounted for less than 1% of total commercial banking credit in 2018,” it added.
Ecobank Nigeria rose to join the list of top five SME banks by customer experience in 2019, a strength likely to be leveraged by the lender in deepening its presence in the market.
The N50 billion credit will run for ten years, Ecobank said.
Shares in ETI were up by 0.77% at N6.55 per unit on the NSE on Monday.