IREDD Calls for Establishment of Nat’l MSME Empowerment Fund

The Institute for Research and Democratic Development (IREDD), has called for the establishment of national Micro, Small and Medium Enterprises (MSMEs) to help promote MSME access to capital to stimulate growth and a sustainable business enabling environment in Liberia.

IREDD’s Executive Director, Matthias M. Yeanay, at a policy dialogue held on Wednesday, March 23, 2022 in Monrovia, calls for an introduction of simple interest regime for MSMEs, which he said will help reduce the considerable burdens of complex interest rate regime that is a key factor for nonperforming loans across financial institutions, especially banks.

Accordingly, Mr. Yeanay said there’s a need for a simplified collateral requirements regime for MSME as it will encourage more MSMEs to take loans to grow their businesses, as well as create jobs for Liberian people. 

“We need to establish an MSME capacity building program that will provide basic business management skills to MSMEs to gain a minimum understanding of business operations, including sales, cost of sales, bookkeeping, and tax requirements,” Mr. Yeanay said during his presentation on policy reform options from the findings.

IREDD, with support from United States Agency for International Development (USAID) through the Liberia Economic Dialogue Activity (LEPDA), conducted a research in Nimba, Margibi and Montserrado counties, aimed at assessing binding constraints hindering MSME access to finance to grow and be sustainable businesses in Liberia.

On the findings from the survey, Mr. Yeanay said complex collateral requirements for MSMEs to acquire loans due to associated risks, makes it difficult for them to qualify for loans.

“High interest rate or charges on loans and the short-term repayment period influences or affects MSME business decisions and ability to repay the loans within the specified timeframe. Lack of delegated national funds for MSME financing in Liberia,” Mr. Yeanay said.

According to him, most MSME owners are involved with informal banking activities including saving clubs and “susu clubs”, rather than using commercial banks due to ease of access to funds, and ownership.

He said the survey unearthed the reluctance of banking institutions to finance start-up business ventures due to high risks and difficult business environment, including utilities cost, and contract enforcement.

Mr. Yeanay said limited enforcement of the MSME policy by the government and the dual currency regime creates uncertainties in the market, adding that “interest rates and prices of commodities and services lead to large numbers of non-performing loans that affect banks’ confidence in borrowers.”

The Legal and Regulatory Advisor at USAID-LEPDA, Madam Sue Tatten, said it is important to get the input from all partners involved in providing economic support to MSME which is the heart of economic growth in Liberia.

“It’s important to understand the findings that IREDD has come out with and to examine those findings and for us comments on what actually those findings lead us to and how we can as partners in our respective institution provide the necessary support for these businesses to be able to strive,” Madam Tatten said.

The chairman of Commerce and Trade of the Liberia Business Association (LiBA) and the Patriotic Entrepreneurs of Liberia (PATEL), Dominic Nimely, said Liberian businesses continue to struggle to survive due to lack of access to loans and other opportunities for businesses.

Mr. Nimely said IREDD’s findings, particularly highlighting that Liberian businesses do not want to pay back loans, is false and misleading and pointed to the high interest rate affecting Liberian-owned businesses.

“The banks are not even helping Liberian businesses. There’s a cartel to slaughter Liberian owned businesses. We want the banks to have a special interest rate for Liberian-owned businesses and special interests rate for foreign businesses,” Mr. Nimely added. 

The Deputy Head of Development and Finance Sector at the Central Bank of Liberia (CBL), Dr.  Bonokai G. B. Gould said some of the points raised in IREDD’s findings are in place but some have already been done.

“This is a good idea and a good initiative that CBL supports. Access to finance and credit is one of the key pillars in our national financial inclusion strategy and digital financial services,” Dr. Gould said.