Wednesday, 13 January 2016

How to access CBN N220billion Small and Medium Enterprises (MSME) Development Fund

The CBN launched the MSME Development Fund on August 15, 2013 with a share capital of N220 billion. The Fund was established in recognition of the significant contributions of the Micro, Small and Medium Enterprises (MSME) sub-sector to the economy and the existing huge financing gap.
Ten (10) percent of the Fund has been devoted to developmental objectives such a grants, capacity building and administrative costs while ninety (90) percent commercial component will be released to Participating Financial Institutions(PFIs) at 2% for on-lending to MSMEs at a maximum interest rate of 9% per annum.

Eligible activities to be financed include agricultural value chain, services, cottage industries, artisans, trade and commerce and any income generating business as may be prescribed by the CBN from time to time.

Objectives of the MSMEDF

The broad objective of the Fund is to channel low interest funds to the MSME sub-sector of the Nigerian economy through PFIs to:
  • Enhance access by MSMEs to financial services;
  • Increase productivity and output of microenterprises;
  • Increase employment and create wealth; and
  • Engender inclusive growth

Benefits of the MSMEDF to Some Stakeholders

a) PFIs

The Developmental Components will be utilized for capacity building of staff of PFIs, research and provision of other financial services infrastructure

b) MSMEs

Long term single digit loans at 9% p.a. This has resulted in reduced cost of borrowing which will impact positively on the earnings of the MSMEs

c) Microfinance Sub-sector

The Fund will provide liquidity for the sub-sector and result in general improvement of the financial system stability

d) General Public

Job creation

Eligible Activities under the MSMEDF

In line with the provisions of the Revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, enterprises to be funded under the Scheme include:
a) Micro Enterprises
b) Small and Medium Enterprises (SMEs)
The following are eligible activities under the Fund:
Microenterprises
  • Agricultural value chain activities
  • Cottage Industries
  • Artisans
  • Services
  • Renewable energy/energy efficient product and technologies
  • Trade and general commerce
  • Other economic activity as may be prescribed by the CBN
Note: Only 10% of the Commercial component of the Fund shall be channeled to trade and commerce.

Frequently Asked Questions on MSMEDF

  1. How Can I (Or My Company) Access The MSMEDF?
  2. Prospective borrowers should approach Participating Financial Institutions (PFIs) of their choice and apply for the Fund.
  3. What categories of entrepreneurs can apply for the Fund?
  4. (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)
  5. Who are the Participating Financial Institutions?
  6. 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)
  7. What are the activities that can be financed under the Fund?
    • Agricultural value chain activities,
    • Manufacturing & Cottage Industries,
    • Artisans,
    •  Services,
    • 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.

Further Information:

  • 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.

- Visit http://www.cenbank.org/MSME/ for more information 

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