As part of its developmental role and mandate of fostering a robust financial system, the Central Bank Of Nigeria a while ago launched the Micro, Small and Medium Enterprises Development Fund – CBN MSMEDF Loan.
The objective of the Fund according to the apex bank is to fill the gaps hindering the development of SMEs. This it hopes to achieve be channelling low return funds to the MSMEs sub-sector of the Nigerian economy through Participating Financial Institutions (PFIs) and enhance access by MSMEs to financial services thereby;
- Increase productivity and output of microenterprises;
- Create jobs; and
- Engender inclusive growth.
Who is eligible for the loan?
Eligible Enterprises in line with the provisions of the Revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, enterprises to be funded under the Scheme shall be:
a) Micro Enterprises
b) Small and Medium Enterprises (SMEs)
The following are eligible activities under the Fund: Microenterprises
- Agricultural value chain
- Cottage Industries
- Renewable energy/energy efficient product and technologies
- Trade and general commerce
- Other economic activities as may be prescribed by the CBN
The Fund is split into two components, Commercial and Developmental components.
The Commercial Component shall constitute 90 per cent of the Fund which shall be disbursed in the form of Wholesale Funding to PFIs in the following ratio:
- 60% of the Fund: Women
- 40% of the Fund: Others
Objectives of Wholesale Funding
a) Provide facilities to eligible PFIs for on-financing to MSMEs;
b) Improve the capacity of the PFIs to meet credit needs of MSMEs; and
c) Reduce the rate of financing to the PFIs and the beneficiaries.
The Developmental Component makes up the remaining 10 per cent of the Fund. It shall be earmarked for developmental programmes in form of Grants.
The 10% Grant shall be utilized for the general development of the MSME sub-sector in the following areas:
a) Capacity building
b) Development of appropriate regulatory regime for MSMEs financing
c) Financial literacy and entrepreneurship development
d) Mobilization, training and linkage of MSMEs to financial services
e) Research and Development of MSMEs-friendly financial innovations and products
f) Business Development and Advisory Services
g) Building of financial infrastructure to support the growth of MSMEs It shall also serve as incentive targeted at PFIs that demonstrate good performance under the Fund.
- Only 10% of the Commercial component of the Fund shall be channeled to trade and general commerce.
- Nigerian Agricultural Insurance Corporation (NAIC) Insurance is compulsory for primary agricultural production
PFIs are required to fund start-up projects under the MSMEDF. To encourage NIFIs, some incentives shall apply (see Section 3.0). PFIs are expected to accept charge on fixed and floating assets of the financed projects as collateral for start-ups.
Collateral requirement from start-ups by PFIs (NIFIs) shall be educational certificates;
- National Diploma (ND)
- National Certificate of Education (NCE)
- National Business and Technical Examination Board (NABTEB)
- Higher National Diploma (HND)
- University degree (NYSC Certificate where applicable) and a guarantor.
The owners of the start-ups must also present their Bank Verification Number (BVN) to access the MSMEDF.
How to apply
a) The beneficiaries shall apply to the nominated PFIs for financing.
b) The PFIs shall appraise the applications for economic and financial viability.
c) The PFIs shall forward their applications through the State SPV to the CBN in the prescribed format.
d) CBN shall undertake a pre-disbursement assessment of financing requests presented to it by the SPVs on behalf of the nominated PFIs.
e) CBN shall approve and disburse funds directly to the PFIs’ correspondent bank accounts. -inclusive rate of return of 9% per annum.
The facility shall have a maximum tenor of one (1) year for micro enterprises. Financing tenor for SMEs shall be from one (1) to five (5) years with the option of moratorium as may be deemed necessary. PFIs shall re-access the fund upon full repayment of the outstanding.
Principal and Profit repayment for micro and SME financings shall be annually.
Other frequently asked Questions on MSMEDF
How Can I (Or My Company) Access The MSMEDF?
Prospective borrowers should approach Participating Financial Institutions (PFIs) of their choice and apply for the Fund.
What categories of entrepreneurs can apply for the Fund?
(a) Micro entrepreneurs (i. e. borrowers seeking loans of less than N500,000) are to approach any of the four institutions:
- Microfinance Banks * NGO/Microfinance Institutions
- Financial Cooperatives * Finance Companies
(b) Small and Medium Enterprises (SMEs) (i.e. prospective borrowers seeking between N500, 000 and N50million) are to approach any of these institutions:
- Deposit Money Banks
- Bank of Industry (BOI)
- Bank of Agriculture)
Who are the Participating Financial Institutions?
The PFIs under the Fund are as follows:
1. Micro borrowers (N500,000 to N5,000,000) would approach:
- Microfinance Banks
- NGO-Microfinance Institutions
- Finance Companies
- Financial Cooperatives
2. SME borrowers (N5,000,000 to N50,000,000) would approach:
Deposit Money Banks and Development Finance Institutions (Bank of Agric and Bank of Industry)