News Column

CBN Unveils Revised Guidelines for Msmedf

August 14, 2014

Chijioke Nelson

THE Central Bank of Nigeria (CBN) has released a revised version of the operational guidelines for Micro, Small and Medium Enterprises Development Fund (MSMEDF).

The development, which came in realization of the significant contributions of the Micro, Small and Medium Enterprises (MSME) sub-sector to the economy, was also necessary to bridge accessed gaps.

According to the apex bank, the sub-sector is characterized by huge financing gap, which hinders the development of MSMEs.

Stating that the development was anomalous, the bank cited Section 6.10 of the revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, which stipulated that 'a Microfinance Development Fund shall be set up, primarily to provide for the wholesale funding requirements of microfinance banks/microfinance institutions.

According to the bank, the policy stipulated that women's access to financial services should increase by at least 15 per cent yearly to eliminate gender disparity.

Already, the drive to achieve the target informed the decision of CBN to establish MSMEDF, which has now earmarked 60 per cent of the fund for providing financial services to women.

The Fund prescribes 50:50 ratio for on-lending to micro enterprises and SMEs respectively, while only new SMEs shall be allowed to be financed by deposit money banks under the MSMEDF.

However, special consideration shall be given to Participating Financial Institutions (PFIs) that have signed Memorandum of Understanding with the Central Bank of Nigeria's Entrepreneurship Development Centers (EDCs) to provide financial services to its graduates.

Additionally, two per cent of the wholesale component of the Fund shall go to the economically active persons with disabilities (mental disabilities not inclusive).

The Fund, which would take-off with seed capital of N220 billion is aimed at channelling low interest funds to the MSME sub-sector of the Nigerian economy through PFIs.

This would in turn, help to enhance access by MSMEs to financial services; increase productivity and output of microenterprises; increase employment and create wealth; and engender inclusive growth

The commercial component of the fund would be disbursed in the form of wholesale funding to PFIs in the ratio of 60 per cent for women and 40 per cent for others objectives.

Also, there is 9.75 per cent grant component of the Fund, which would be used to support the general development of the MSME sub-sector.

It would serve as incentives targeted at institutions that demonstrate good loan repayment culture to enable them attain more capacity for expanded outreach.

PFIs shall qualify for the grant component based on their performance rating in poverty reduction, job creation and financial inclusion. For institutions to benefit, they shall submit clearly defined projects and provide counterpart funding, which shall be matched by the Funds grant support.

An institution shall also enjoy the grant once in three years up to a maximum of 25 per cent of the project cost and subject to the discretion of the CBN.

The Fund would support activities aimed at building capacity of staffers of PFIs and their apex bodies; development of appropriate regulatory regime for MSME

Lending; financial literacy and entrepreneurship development; mobilization, training and linking of MSMEs to financial services; research and development of MSME-friendly financial innovations and products; business development and advisory services; and building of financial infrastructure in support of MSMEs.

Other areas of technical assistance include support in the areas of internship, secondment, mentoring and registration with Mix Market, sponsorship of ratings, credit bureau and movable asset registry.

The Fund shall review all proposals taking into account the capacity, organization and the proposed programs of all applicants before they are considered for the Grant. Priority shall be accorded to PFIs based in the rural areas to promote financial inclusion.

Management and Administration of the Fund would be by the CBN, under the terms and conditions defined in the guidelines, while the office that is responsible for the administration of the women component of the Fund shall be headed by a woman.

There would also be a Steering Committee constituted in line with the approved shareholding structure and chaired by the Governor of CBN.

Other members of the committee include the Deputy Governor, Financial Systems Stability; representatives of Federal Ministry of Finance Incorporated; Federal Ministry of Agriculture and Rural Development; Nigeria Deposit Insurance Corporation; National Association of Microfinance Banks; Association of Non-Bank Microfinance Institutions of Nigeria; Small and Medium Enterprises Development Agency of Nigeria and the the Banker's Committee

Still others are Ministry of Women Affairs and Social Development; Director, Development Finance Department of CBN; Head, MSME Development Fund Office, Development Finance Department, CBN (Secretary); and eligible enterprises.

In line with the provisions of the revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, enterprises to be funded under the scheme are Micro Enterprises and Small and Medium Enterprises, which are involved in microenterprises; agricultural value chain activities; cottage industries; artisans; services to hotels, schools, restaurants, laundry, among others.

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Source: AllAfrica

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