MSMEs, the CBN Fund & the Winning Factor

17 Apr MSMEs, the CBN Fund & the Winning Factor

The COVID-19 outbreak has fundamentally changed everything from livelihoods to individual lifestyles. With the rapid spread of the novel virus in Nigeria, business activities have slowed down and, in some cases, come to a halt as people are forced to stay indoors to limit the spread. Considering the current internal and external economic realities, the Federal Government, through the CBN, has taken measures to reduce the impact on Nigerians.  Notable amongst the measures is the N50 billion Targeted Credit Facility (TCF) for hard-hit households and Micro, Small and Medium Enterprises (MSMEs) with the objectives of cushioning the adverse effects of the pandemic and stimulate credit to MSMEs for the expansion of their productive capacity through equipment upgrade, research and development.

Eligibility

For your business to qualify for the fund, you must be an MSME that operates in:

• Agriculture
• Hospitality-accommodation and food services
• Health- pharmaceuticals and medical supplies
• Airline service providers
• Manufacturing/value addition
• Trading
• Any other income generating activity as may be prescribed by the CBN

MSMEs with bankable plans to take advantage of opportunities arising from the pandemic and verifiable evidence of business activities negatively affected by the pandemic are also eligible to apply.

How to access the fund

1. MSMEs are required to submit applications directly to NIRSAL Microfinance Bank (NMFB).  Information required in the application include:
2. BVN
3. Business registration (where applicable)
4. Business plan

The business plan must be clear on the opportunity to be explored or adverse impact of the COVID-19 pandemic.

• The NMFB will assess and conduct due diligence on the applications
• Upon satisfactory appraisal, NMFB will forward the application to CBN
• CBN will review the application and give final approval for disbursement to NMFB.

A way to boost your chances of approval is to have a tailored business plan that is realistic, specific, and fits the business need. With a realistic business plan, potential weaknesses and opportunities will be easy to spot and informed decisions will be easier. Your business plan should include tasks, milestones, forecasts, budgets, and metrics to measure performance. This projects your company’s financial return and anticipates future resource needs – details that are especially helpful when trying to secure funding. A pre and post COVID-19 impact analysis on your financials will be a good way to present your case to the government when applying for the fund.

Terms and Conditions

There are some conditions to be understood before applying for funding. Some of them are:

1. The amount given to beneficiaries varies and is based on the nature of the business, cash flow and market size. The maximum amount an MSME can receive is N25 million.
2. The loan has a tenure of three years with at least one-year moratorium.
3. Interest rates will be charged at 5% per annum for the first year and 9% thereafter.
4. For a period of one year, working capital will be a maximum of 25% of the average annual turnover for the three previous years (in cases where the business has not operated for up to three years, 25% of the previous year’s turnover will suffice) with no option for rollover.
5. NMFB is the participating financial institution for the scheme, so loan repayment will be in installments to it.
6. Loan repayments will be made according to the nature of the business and the repayment schedule provided.
7. Collateral requirements will be at least one of the following:
   • Moveable asset(s) like production machines, vehicles, etc. duly registered on the National Collateral Registry (NCR)
   • Simple deposit of title documents in good condition
   • Deed of debenture (for stocks) in good condition
   • Irrevocable domiciliation of proceeds
   • Two acceptable guarantors
   • Personal guarantee by the business’ promoter
   • Life insurance of the key man, with NMFB noted as the First Loss Payee
   • Comprehensive insurance over the asset

MSMEs in the nation are hoping for a share of this N50 billion. The primary concern, however, is how accessible the fund will be to the average MSME.  How transparent will the review process? How will the funds be allocated? Will it be an even distribution across geopolitical zones or simply based on merit? How many MSMEs will benefit from this fund?

All these are pertinent questions that only time can answer.