Cbn Waves Collateral Requirement For Accessing N220 Msmdef For Mfbs

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BEVERLY HILLS, December 22, (THEWILL) – The Central Bank of Nigeria (CBN) has waived the collateral requirement for accessing the N220 Micro Small and Medium Enterprise Development Fund (MSMEDF) for microfinance banks (MfBs) with PAR of 10 percent and below as indicated in their latest CBN/Nigeria Deposit Insurance Corporation (NDIC) examination report.

This development is contained in the revised guidelines for the MSMED fund released Monday by the CBN. The collateral requirement for Participating Finance Institutions (PFIs) under the Fund shall be a minimum of 30 percent of the loan amount requested.

However, Financial Assets including Treasury Bills, Placements, Bonds, and Third Party Guarantee backed by financial assets are acceptable as collateral.

The revised guidelines state that the collateral requirement for deposit money banks is to sign MoU with CBN and undertake to bear all credit risks for projects presented.

According to the guidelines, all PFIs shall access funds at an interest rate of 2 percent per annum and on-lend at 9 percent per annum, inclusive of all charges.

As part of its developmental role and mandate of promoting a sound financial system, the CBN launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF) on August 15, 2013. This was in recognition of the significant contributions of the Micro, Small and Medium Enterprises (MSMEs) sub-sector to the economy.

The sub-sector is characterised by huge financing gap, which hinders the development of MSMEs. 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; create jobs, and engender inclusive growth.

The guidelines state that sanctions shall apply to DMBs/Development Finance Institutions DFIs that contravene the guidelines under the Fund. Such sanctions as established cases of collusion with other PFIs to either divert monies into private accounts or unduly withhold any part or outright conversion of the purpose of the released funds by DMBs under the MSMEDF shall attract a penalty at MPR+300 basis points at the time of infraction. The CBN shall recover the diverted fund by debiting the DMBs'/DFIs' account.

In addition, such DMBs/DFIs shall be barred from further participation under the Fund.