CBN Allows New Businesses Borrow From N220bn MSME Fund

CBN Governor, Mr Godwin Emefiele
The CBN also said that banks and other finance
institutions that lends to business start-ups under the
fund will be allowed to access the fund at zero interest
rate.
This was contained in the Revised Micro, Small and
Medium Enterprises Development Fund (MSMEDF)
Guidelines issued yesterday by the Development Finance
department of the CBN.
Previously, only existing businesses can borrow from the
fund through their banks. The new guidelines however
removed this limitation stating, “Participating Financial
Institutions (PFIs) are required to fund start-up projects
under the MSMEDF. To encourage Deposit Money Banks
(DMBs) and Development Finance Institutions (DFIs), some
incentives shall apply.
“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
(DMBs and DFIs) shall be 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 start-ups to access the MSMEDF must present
their Bank Verification Number (BVN). Venture Capital
Firms (VCFs) that wish to finance start-ups in form of
equity participation shall be eligible to access the
MSMEDF at 2.0 percent for investment in start-up
projects. The collateral for such facility to the VCF
shall be bank guarantee.
“Incentive shall be offered to PFIs that repay loans as at
when due. a) Start-Ups (i) DMBs/DFIs playing in this
space, shall access MSMEDF facility at zero percent
interest for on-lending at 9.0 percent (all-inclusive) to
start-ups. (ii) The PFIs shall qualify for a 50 percent
risk shared on the net outstanding balance in the case
of default. b) Other Incentives Microfinance Banks with
PAR of 10 percent and below shall be exempted from
providing financial assets as collateral to access facility
under the MSMEDF.”
In addition to the above, the CBN also reduced interest
rate it charges PFIs accessing the loan from 3.0
percent to 2.0 percent. It stated, “Interest Rates All
PFIs shall access funds at an interest rate of 2.0
percent per annum and on lend at 9.0 percent per
annum inclusive of all charges. The interest rate
chargeable under the MSMEDF may be reviewed by the
Central Bank of Nigeria from time to time.”
The decision to allow business start-ups borrow from the
fund is aimed at boosting graduate employment by
encouraging banks to lend to graduates intending to set
up businesses.
Recall that the CBN Governor, Mr. Godwin Emefiele while
addressing the just concluded 7th annual Banker
Committee Retreat had announced that the apex bank
would soon introduce measures to generate one million
graduate employments.
He said, “In 2016, the CBN is contemplating a programme
that would support SMEs at concessionary pricing to our
young graduates. We need to get more people to be
employed. The central bank would over the next few
weeks work out the initiative to create employment for
at least one million graduates in Nigeria in 2016. That
would entail the support from Nigerian banks and our
development partners.”