The Central Bank of Nigeria (CBN) has consistently promoted funding for Micro, Small and Medium Enterprises Development Fund (MSMEs) to promote sustainable economic development.
The launch of the N200 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF), and other interventions programs like the Youth Entrepreneurship Development Programme (YEDP), Agri-business/Small and Medium Enterprises Investment Scheme (AGSMEIS) among others are meant to ensure that adequate funding gets to MSMEs to stimulate the economy and promote sustainable economic growth.
The Micro, Small and Medium Scale Enterprises (MSMEs) play significant role in most economies, particularly in developing countries. They account for the majority of businesses worldwide and are important contributors to job creation and global economic development.
In Nigeria, most formal jobs are generated by MSMEs, which create seven out of 10 jobs. However, access to finance is a key constraint to MSME growth, it is the second most cited obstacle facing MSMEs to grow their businesses in emerging markets and developing countries.
The bridge the funding gaps for MSMEs, the Central Bank of Nigeria (CBN) came up with diverse intervention programmes.
For instance, the CBN launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF), on August 15, 2013 with a share capital of N220 billion.
The Fund was established in recognition of the significant contributions of the MSME sub-sector to the economy and the existing huge financing gap.
Ten 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 two per cent for on-lending to MSMEs at a maximum interest rate of nine per cent per annum.
More than half of the fund targeted at micro and small businesses is yet to be accessed according to the CBN Governor, Godwin Emefiele. The CBN has since addressed the issue of interest rate and collateral.
Speaking recently, Emefiele stressed the need for banks to look at ways of de-risking the sector as well as getting funding across to young graduates who venture into small businesses.
The CBN recently published a revised guideline on the disbursement of the N220 billion MSMEDF which will allow young graduates to access the fund with only their educational certificates.
The revised guideline realised by the apex bank stated that for loans granted to start-up businesses by deposit money banks and development finance institutions will have as collateral “educational certificates such as SSCE, 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 guideline also states that for the start-ups to access the MSMEDF they must present their Bank Verification Number (BVN) while “Venture Capital Firms (VCFs) that wish to finance start-ups in form of equity participation shall be eligible to access the MSMEDF at two per cent for investment in start-up projects. The collateral for such a facility to the VCF shall be bank guarantee.”
The N220 billion MSMEDF was initiated by the CBN in order to address the financing gap in the Micro Small and Medium Enterprises sector and provide funding at a single digit interest rate in an environment where interest rate has been at around 25 per cent.
The fund was aimed at improving MSMEs’ access to finance, shoring up their potentials for job creation, and enabling them reduce poverty within the country, in addition to the CBN’s endeavour at establishing Entrepreneurship Development Centres (EDCs) in each geopolitical zone to support the mandate of the 23 Industrial Development Centres (IDCs) under the purview of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
According to the CBN, the micro-loans will be administered through private or state- owned microfinance institutions, Finance Houses, and Cooperative Finance Agencies, the SME loans will be disbursed through commercial banks.
Emefiele had at the signing of Memorandum of Understanding with participating states noted that the “fund is directly in conformity with my resolve to create a professional and people-centred Central Bank that will act as a financial catalyst for job creation and inclusive economic growth.
The fund is to be disbursed at an interest rate of no more than nine per cent per annum to microfinance banks for on-lending to the micro and small businesses to improve access to affordable and sustainable sources of finance by microfinance institutions and microfinance banks.
Also, to improve access to credit amongst women entrepreneurs, the CBN had dedicated 60 percent of the fund to women.
Although the CBN target is at nine per cent interest rate, SME accessing the fund may be required to pay 15 percent maximum interest rate.
However, prompt repayment would fetch the SME a 40 percent refund on interest rate which would see the total interest drop back to nine percent. This is to encourage small businesses to borrow money from the fund, use it to improve their businesses and repay on time for onward lending to others.
The fund is made accessible through Participating Financial Institutions (PFIS) which include Microfinance Banks (MFBs), Non-Governmental Organization – Microfinance Institutions (NGO-MFIs), Financial Cooperatives and Finance Companies that qualify.
Entrepreneurs in various fields such as Agriculture (farming, agro-processing, etc.); Trading/Commerce; Cottage Industries (local industries); Artisans (hairdressers, mechanics, vulcanizers, welders, etc.); Services (hotels, schools, restaurants, salons, eatery, laundry, etc.) and any other income-generating activities as prescribed by the guidelines are eligible to access the fund through the PFIs
Since then so much has been roll out by the CBN to support the sector to stimulate economic activities. Recently, the CBN disclosed that it has disbursed the sum of N253 billion under targeted credit facility (TCF) to 548,345 beneficiaries.The funds, which were given out in the first phase of the N150 billion Targeted Credit Facility (TCF), were disbursed through the NIRSAL Microfinance Bank after the beneficiaries met set guidelines for the intervention fund.
CBN Governor Godwin Emefiele, said the resounding success of the scheme and its positive impact on output growth, has prompted the apex bank to double the fund to N300 billion.
Any Micro Small and Medium Enterprises (MSMEs) interested in the scheme can obtain loans ranging from N3 million to N25 million.
According to the CBN’s circular issued on March 23, 2020, there are two modalities to consider. They apply to either Households/MSMEs or Corporate entities.
For Households/MSMEs, The first step is for an eligible household to submit an application to NIRSAL MFB, which must, among others, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.
Similarly, the sum of N111 billion has been disbursed under AGSMEIS to 29,023 beneficiaries as at May 28, 2021.
The Agri-Business/Small and Medium Enterprise Investment Scheme is a Federal Government initiative aimed at supporting efforts and policy measures for the promotion of agricultural businesses and small/medium enterprises (SMEs) in Nigeria, with the long-run goal of achieving sustainable economic development and employment generation.
With the CBN AGSMEIS Loan, one can access up to N10m at 5% per year without collateral.
The Central Bank of Nigeria (CBN), in collaboration with the Bankers’ Committee, developed a Creative Industry Financing Initiative (CIFI) as part of efforts to boost job creation in Nigeria, particularly among youths in the country. The initiative has four pillars which include Fashion, Information Technology, Movie and Music.
Although the creative industry boosts all segments of the population, youths constitute major players in the sector. Therefore, to further boost the creative sector’s contribution to the Gross Domestic Product (GDP), the Central Bank of Nigeria (CBN) unveiled plans for development of creative industry parks across three major cities with the youths as main target.
Emefiele, stated at the Creative Nigeria Summit in Lagos that with the support of the Federal and Lagos State Governments, the National Theatre Iganmu in Lagos would serve as the initial pilot for the Creative Industry Park, adding that efforts will be focused on discovering the most innovative young entrepreneurs across the music, movie, fashion and Information Technology (IT) industries.
The bank plans to set up similar parks in Kano, Port Harcourt or Enugu following the deployment of the pilot scheme in Lagos.
“Our goal through the establishment of these parks is to create an environment where start-ups and existing businesses can be incubated and rewarded for their creativity.
“In each of these parks, efforts will be focused on discovering the most innovative young entrepreneurs across the music, movie, fashion and IT industries.
“Each park will be able to support skills acquisition for over 200,000 Nigerians.
“These individuals will be empowered with funds at single digit interest rate, state-of-the-art tools, high level training and networks that will enable them to turn their ideas into a reality.”
The CBN and Bankers Committee believe that the little they can do is to create opportunities for these youths to access credit and bank loans to grow their businesses.
“We cannot afford to let the talents of our youthful population go to waste, as it would portend great dangers for the progress of our nation,” he stated.
According to him, efforts must therefore be made to harness the innovative and creative energy of the youths, towards enabling them to create productive ventures that will support improved wealth and job creation in Nigeria.
“We intend to support the development of over 50 additional cinemas from our current capacity of 48 cinemas nationwide,” he stressed.
Both parties recently outlined how to get the creative sector loans, which was to enable businesses to obtain loans up to the tune of N500 million.
Part of the steps in applying for the loan is to prepare a business plan or statement on how much is needed for the business.
Applicants can get N3 million for a Software Engineering Student, N30 million for a Movie Production business, N500 million for a Movie Distribution business. Cover your rental/service fees for Fashion and Information Technology businesses
So far, the sum of N3.2 billion has been disbursed under CIFI to 341 beneficiaries as at May 28, 2021.
Real sector facility
Emefiele also explained that the N300 billion Real Sector Support Facility (RSSF) was part of the CBN’s efforts to unlock the potential of the real sector for output growth, value added productivity and job creation. According to him, the facility would support large enterprises for start-ups and expansion of the financing needs of N500 million up to a maximum of N10 billion.
He said: “The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors. The facility is expected to improve access to finance by Nigerian Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors.”
Another N213 billion Nigerian Electricity Market Stabilisation Facility is aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). The facility covers legacy gas debts and the shortfall in revenue during the Interim Rule period (IRP).
It is expected that this will guarantee the take-off of the Transitional Electricity Market (TEM). Already, over N56.68 billion disbursed to five generating companies and five distribution companies.
The observed challenges in the power sector, Emefiele said, are interconnected with the unexpectedly huge revenue shortfalls in the industry, which needed to be fixed.
He said the Agricultural Credit Guarantee Scheme Fund (ACGSF) was established to provide credit guarantees on facilities extended to farmers by banks up to 75 per cent of the amount in default net of any security realised.
The bank chief explained that the period under review witnessed an increase of loan limits for unsecured lending from N20,000 to N50,000 and that the loan limits for secured lending to corporate bodies under the ACGS rose from N10 million to N50 million.
To boost agriculture financing, the ACSS was inaugurated to develop the agricultural sector of the economy by providing credit facilities to farmers at single digit interest rate to enable large scale farmers exploit the untapped potentials of the sector.
Statistics from the CBN showed that since June 2014, 60 per cent of the Commercial Agricultural Credit Scheme (CACS) funds have been dedicated to six focal commodities (rice, wheat, cotton, sugar, dairy products and fish), which have been utilising huge resources from the dwindling foreign reserves.
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