Anyone launching a business or maintaining an established one may need to get loans to keep it afloat.
Access to money is pertinent to a company’s success since it helps determine whether the company will thrive or collapse.
Business owners should understand their industry and choose the best financial institution to lend to them.
The Central Bank of Nigeria (CBN) established rules in July 2020 to transfer low-yielding funds to MSMEs via participating financial institutions in order to boost their access to financial services.
These rules are established for new businesses, company development, and the revitalization of failing enterprises, and they are consistent with the terms of the Banks and Other Financial Institutions Act (BOFIA (1991) and the principles of Non-Interest Financial Institutions (NIFIs).
The objective is to boost these micro-enterprises’ productivity and production, generate employment, and promote inclusive development.
Prospective borrowers may contact their preferred Participating Financial Institutions (PFIs) to apply for the Micro, Small, and Medium Enterprise Development Fund (MSMEDF).
Financial Institutions Participating
These financial institutions cater to two groups: micro-entrepreneurs and small and medium-sized enterprises (SMEs).
Micro entrepreneurs
(borrowers seeking loans of less than N500,000) may contact one of the four institutions listed below:
- NGO/Microfinance Institutions
- Microfinance Banks
- Cooperative Financial Institutions
- Finance Corporations
Small and medium-sized businesses (SMEs):
Prospective borrowers wanting between N500,000 and N50 million could contact any of the following institutions:
- Banks that accept deposits
- Bank of Agriculture (BOA)
- Bank of Industry (BOI)
Business types that may be sponsored via the Fund
Agricultural value chain activities, Manufacturing and cottage industries, artisans, services, trade and general commerce, renewable energy or energy-efficient goods and technology, and any other income-generating enterprises that the CBN may prescribe.
Criteria for borrowers to become eligible
- Prospective borrowers must supply the necessary documentation, including collateral for SME loans.
- PFIs will evaluate loan applications, approve and transmit borrowers’ loan requests to the CBN for funding release.
- MSMEDF will only make financing available to borrowers via PFIs.
- The PFIs must credit the accounts of benefiting borrowers within 5 working days of MSMEDF releasing funds to the PFI.
- Loans will be given at a rate of 9.0% per year (all costs included), regardless of the kind of qualified activity sponsored.
- Borrowers must repay all loans when they are due, including any accumulated interest to the PFI; and
- All completely repaid loans transferred to the MSMEDF/CBN will be recycled.
