How Farmers, small businesses can apply for CBN Interest free loan – The guidelines for Non-Interest Financial Institutions (NIFIs) under its Agri-Business, Small and Medium Enterprise Investment Scheme (AGSMEIS) and Micro, Small and Medium Enterprises Development Fund (MSMEDF) were unveiled by the apex bank on Tuesday.
CBN seeks exclusive right to bank licensing, revocation CBN, AGF appear before Reps over N81.5bn NDDC expenditure in 5 months Financing under the scheme will also be for start-ups, business expansion or revival of ailing companies and shall be in compliance with provisions of BOFIA (1991) as amended and the principles underpinning operations of NIFIs.
Experts say the development will pave the way for people who don’t like interest based facilities to have access to funds, including those without collateral to present. The 10 guidelines included the Accelerated Agricultural Development Scheme (AADS) and seven other intervention schemes in its bouquet.
They followed the CBN’s June, 2020 meeting where it announced plans to integrate non-interest windows in its intervention programmes to support businesses and households negatively impacted by COVID-19. Based on the guidelines for the operations of NIFIs, the CBN would create a Fund to be known as ‘AGSMEIS Non-Interest Fund’ to be domiciled in a dedicated account with the apex bank.
The guidelines stipulated that each non-interest deposit bank (full-fledged or window) was to set aside five percent of its Profit After Tax (PAT) annually as contribution to the Fund.
It added that each non-interest deposit bank was also to transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting (AGM) of the participating bank. Eligible activities under the scheme, according to the CBN, are businesses across the agricultural value chain, covering production, inputs supply, storage, processing, logistics and marketing.
Others are MSMEs in the real sector including manufacturing, mining and petrochemicals. It disclosed that others were MSMEs in the service sector including information and communication technology (ICT) and the creative industry as well as other activities as the CBN may determine from time to time.
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:
Micro borrowers (N500,000 to N5,000,000) would approach:
- Microfinance Banks
- NGO-Microfinance Institutions
- Finance Companies
- Financial Cooperatives
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)
- What are the activities that can be financed under the Fund?
- Agricultural value chain activities,
- Manufacturing & Cottage Industries,
- Trade and general commerce,
- Renewable energy or energy efficient products and technologies, and
- Any other income generating projects as may be prescribed by the CBN.
- Prospective borrowers shall provide the requisite documents including collateral for SME loans;
- PFIs will appraise loan applications, approve and forward loan requests of borrowers to the CBN for the release of funds;
- MSMEDF will only release funds to borrowers through the PFIs;
- The account of benefitting borrower’s shall be credited by the PFIs within 5 working days upon the release of Funds by MSMEDF to the PFI;
- Loans shall be granted at an interest rate of 9.0% per annum (all charges inclusive) irrespective of the type of eligible activity financed;
- Borrowers shall be expected to payback all loans as and when due inclusive of any accrued interest to the PFI; and
- The MSMEDF/CBN will recycle all fully repaid loans transferred to it by the PFIs.