It’s no news that the Covid-19 (coronavirus) pandemic has resulted in significant disruptions to global economy and trade. Including significant stretch to health facilities and supplies.
Government all over the world are however taking steps to limit its impact on micro and macro economies by providing reliefs to households and micro, small and medium enterprises (MSMEs) most of which are most prone to the negative effect the pandemic.
Purpose of the Facility: In Nigeria, the Central Bank of Nigeria (CBN), as part of the Federal Government’s intervention policy during COVID-19, released Guidelines for the Implementation of the N50 billion credit facility aimed at (1) providing succour to households and MSMEs that have been adversely affected by COVID-19 and (2)
Stimulate credit to MSMEs to expand their productive capacity through equipment upgrade, and research and development.
What activities are covered under the Scheme?
Eligibility: Eligible participants under the Scheme include households (with verifiable evidence of livelihood adversely impacted by COVID-19), existing enterprises (with verifiable evidence of business activities adversely affected as a result of COVID-19) and enterprises with bankable plans to take advantage of opportunities arising from COVID-19.
Application will.only be through The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank.
Loan Limits: For households, the loan limit for each borrower is NGN3 million. For SMEs, the loan limit is NGN25 million determined based on the activity, cashflow and industry/segment size of the beneficiary.
Working Capital/Overdraft Limit: Where the purpose of obtaining the loan is working capital, the limit is a maximum of 25% of the average of the previous 3 years’ annual turnover of the enterprise or business applying. Where the enterprise or business is not up to 3 years in operation, 25% of the previous years’ turnover will suffice.
Interest Rates: The applicable interest rate is 5.0% p.a (all inclusive) up to 28th February 2021. Interest shall thereafter revert back to 9% p.a (all inclusive) as from 1st March 2021.
Tenor: Working Capital shall be for a maximum period of one year, with no option of rollover while the Term Loan shall have a maximum tenor of not more than 3 years with at most, one-year moratorium.
Collateral: The collateral to be pledged by borrowers/beneficiaries under the Scheme shall be as may be acceptable by NIRSAL Microfinance Bank and may include one or more of the following:
(1) Moveable asset(s) duly registered on the National Collateral Registry (NCR); Simple deposit of title documents, in perfectible state;
(2)Irrevocable domiciliation of proceeds;
(3) Acceptable guarantors; Personal guarantee of the promoter of the business; (4) Life insurance of the key-man, with NIRSAL Microfinance Bank noted as First Loss Payee; and
Comprehensive Insurance over the asset.
Repayment: The interest and principal repayment shall be made on instalment by the borrowers to NIRSAL Microfinance Bank according to the nature of the enterprise and the repayment schedule/work plan provided at the application stage.
How to apply for the loan:
- Eligible households, MSMEs and corporate entities are to submit applications directly to NIRSAL Microfinance Bank.
- The application must, amongst others contain BVN Number, business registration (where applicable) and a business plan with clear plan of the opportunity or adverse impact as a result of COVID-19.
- NIRSAL Microfinance Bank will appraise the application, conduct due diligence and forward the application to CBN upon satisfactory appraisal of the application.
- CBN will review the application and give final approval for disbursement to NIRSAL Microfinance Bank and onward disbursement to the applicant.
Monitoring: Periodic monitoring of projects financed under the Scheme will be conducted by NIRSAL Microfinance Bank.
Responsibility of CBN: CBN shall provide the seed fund for the Scheme; release funds to NIRSAL Microfinance Bank for disbursement to successful applicants; review the Guidelines of the Facility as may be necessary; receive and process periodic returns from NIRSAL Microfinance Bank and monitor and evaluate the implementation of the Scheme by NIRSAL Microfinance Bank.
Responsibility of NIRSAL: NIRSAL Microfinance Bank is mandated to validate the status and BVN of the applicants; process and disburse the funds to approved beneficiaries; maintain records of all beneficiaries and disbursements; forward periodic returns on the prescribed format on the Scheme to CBN; comply with the Guidelines and carry out any duties as the CBN may prescribe from time to time.