Welcome to mitrobenetwork, in today’s guide, I will be sharing all necessary information regarding Steps on How to Access CBN MSMEDF Loan – Micro, Small and Medium Enterprises Development Fund.

Overview of the CBN MSMEDF Loan

The central bank of Nigeria for long, have been tasked with the responsibility of ensuring stability in the financial system within the country. As a result of this, after identifying the huge financing gap which hinders the development of MSMEs, as part of CBN developmental functions and mandate of promoting a sound financial system in Nigeria, the Central Bank of Nigeria 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 (MSME) sub-sector to the economy.

The Fund prescribes 50:50 ratio for on-lending to micro enterprises and SMEs respectively. Only new SMEs shall
be allowed to be financed by DMBs under the MSMEDF.

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

In addition, 2% of the wholesale component of the Fund shall go to economically active persons with disabilities (excluding mental disabilities).

Seed Capital-The Fund shall have a take-off seed capital of N220billion.

Objective

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
  • Create more jobs for Nigerian youths
  • Create more self employed youths
  • Increase productivity and output of micro enterprises
  • Increase employment and create wealth
  • Engender inclusive growth

 Components of the Fund

The Fund shall have Commercial and Developmental components-Commercial Component-The Commercial Component shall constitute 90 per cent of the Fund which shall be disbursed in the form of Wholesale Funding
to PFIs in the following ratio:

• 60% of the Fund: Women
• 40% of the Fund: Others

Objectives of Wholesale Funding are to:

a) Provide facilities to qualified and eligible PFIs for onlending to MSMEs
b) Improve the capacity of the PFIs to meet credit needs of
MSMEs
c) Reduce the cost of funds of the PFIs and ensure that this translates into reduced borrowing costs for the
borrowers.

a. Commercial Component

The Commercial Component shall constitute 90 per cent of the Fund which shall be disbursed in the form of Wholesale Funding to PFIs in the following ratio:

• 60% of the Fund: Women
• 40% of the Fund: Men

Others Objectives of Wholesale Funding are to:
a) Provide facilities to eligible PFIs for on-financing to MSMEs;
b) Improve the capacity of the PFIs to meet credit needs of MSMEs; and
c) Reduce the rate of financing to the PFIs and the beneficiaries

b.Developmental Component

The Developmental Component makes up the remaining 10 per cent of the Fund. It shall be earmarked for developmental programmes in the following categories:

• Grant (9.75%)
• Operational Expenses (0.25%) at take-off

ELIGIBILITY;

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 shall be:

a) Micro Enterprises
b) Small and Medium Enterprises (SMEs)

The following are eligible activities under the Fund: Microenterprises
● Agricultural value chain
● Cottage Industries
● Artisans
● Services
● Renewable energy/energy efficient product and technologies
● Trade and general commerce
● Other economic activities as may be prescribed by the CBN

Selection Criteria

a) PFIs shall submit request to the Fund in a format which shall be prescribed by the CBN from time to time..
b) Applications shall be processed on receipt of complete documentation.
c) The CBN shall communicate the terms and conditions for the approved Grant within one month of submission

START-UPS

PFIs are required to fund start-up projects under the MSMEDF. To encourage NIFIs, some incentives shall apply (see Section 3.0). 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 (NIFIs) shall be educational certificates
i. SSCE
ii. National Diploma (ND)
iii. National Certificate of Education (NCE)
iv. National Business and Technical Examination Board (NABTEB)
v. Higher National Diploma (HND)
vi. University degree (NYSC Certificate where applicable) and a guarantor.

The start-ups to access the MSMEDF must present their Bank Verification Number (BVN).

MODE OF APPLICATION
a) The beneficiaries shall apply to the nominated PFIs for financing.
b) The PFIs shall appraise the applications for economic and financial viability.
c) The PFIs shall forward their applications through the State SPV to the CBN in the prescribed format.
d) CBN shall undertake a pre-disbursement assessment of financing requests presented to it by the SPVs on behalf of the nominated PFIs.
e) CBN shall approve and disburse funds directly to the PFIs’ correspondent bank accounts. -inclusive rate of return of 9% per annum.

S/No.                           Financial Institution             Facility Limit
1                              Unit Microfinance Bank             N10 million
2                               State Microfinance Bank           N50 million
3                          National Microfinance Bank         N500 million
4                              NGO-MFIs                                    N10 million
5                              Financial Cooperatives                 N10 Million
6                            Finance Companies                  N10 Million

Loan Tenor

The facility shall have a maximum tenor of one (1) year for micro enterprises and up to five (5) years for SMEs with option of moratorium. PFIs shall access the fund as many times as possible upon full repayment.

Interest Rates

The Fund shall be administered at an interest rate of 3% per annum under the wholesale funding to the PFIs with a spread of 6% bringing the lending rate to borrowers at a maximum of 9 % per annum inclusive of all charges.

The interest charges shall be subject to review by the Steering Committee of the Fund from time to time.

FINANCING REPAYMENT

Principal and Profit repayment for micro and SME financings shall be annually.

Monitoring and Evaluation (M&E)

To achieve the objectives of the Fund, a robust M&E framework has been developed to monitor the operations and utilization of the Fund.

The following shall apply:

a) On-site verification and monitoring of projects under the Fund by the CBN and PFIs during the loan period.
b) Off-site ICT based reporting system to provide up-to-date information on the Fund’s activities.
c) Reports of the monitoring exercise shall be shared with the concerned PFIs.
d) CBN shall leverage Apex Associations’ capacities and information in monitoring and evaluation
e) CBN shall periodically evaluate the activities of the PFIs to ensure achievement of the objectives of the Fund.

For Detailed guidelines, click here

Small and medium scale enterprises in Nigeria-How startups can leverage SMEs to Scale

Small and Medium Scale Enterprises, otherwise known as SMEs are the major backbone of every developing and developed economy, and the case is so true for Nigeria. According to the Nigeria SME Survey, conducted and published by Pricewaterhousecoopers, SMEs account for a staggering 96% of all businesses in Nigeria and contributes 48% of the nation’s Gross Domestic Product. The report also states that 84% of Nigerians in employment are working for one SME or the other.

It does not even take a survey by a multinational consulting firm to realize the above facts about SMEs in Nigeria. Trek few meters away from your home anywhere in Nigeria, and you will discover vibrant battallions of enterprises, conducting businesses in the way they know best. These range from foodstuff vendors to food hawkers, wandering shoe shiners to static barbing saloons, provision shops, airtime sellers, phone battery charging spots, and car washs.

Beside this booming small business economy in Nigeria stands a booming tech startup ecosystem that has severally been recognized as one of the most vibrant in the continent. Young people, with big ideas, are busy working on disrupting entire industries or creating new ones in different sectors ranging from finance to healthcare.

A senior Cisco executive recently averred that “SMEs need technology support for growth”, and I agree with him. Partnership (or you can call it a collaboration) between SMEs and startups could prove to be the proverbial match made in Heaven, unfortunately, this is something that is rarely even discussed talk more of being implemented. It is not late, however. Tech startups can build products that can enable SMEs sell more of their goods. The end result is that startups get to solve the nagging problem they are always on about, and SMEs make more money and have the best experience selling their goods and services.

The following discusses the different ways startups can grow by solving the plentiful needs of the huge number of SMEs in Nigeria.

Build products that enable SMEs cut down costs

Startups should build products that enable SMEs cut down their cost of operation in the way of rent, generator maintenance cost, and internet data cost.

A second hand cloth dealer going into business in an expensive city like Abuja might not be able to pay millions upfront to rent a shop in their choice location. This kind of situation is not one that is too difficult for startup founders to handle. An ecommerce platform where Abuja residents can search and order their choice second-hand clothings could be an ultimate solution. Renting out a single shopping space to a number of second-hand clothing dealers could be another wonderful idea of a startup founder that could drastically reduce the cost the dealers individually incur at the end of the end.

Startups can also provide cheaper and more reliable power source to SMEs, boosting their productivity and sales while also moving their own ministries.

Build products that enable SMEs reach their customers easily

Small services providers, like shoe makers, lead a hazardous, everly-mobile lifestyle, with most wandering from one street to another in search of customers for a significant part of their working hours. Startup founders can change this, and change their own story while changing the lives of these small services providers for good. A SaaS product that enables people within an area call the service of a nearby cobbler by pushing a button on their smartphone is not impossible and could be commercially viable. Such a product would mean that the cobbler won’t need to wander around in search of a client he might never see. He just has to stay at a select location and wait to be called to deliver his service.

The app could charge the users a small percentage of the transaction, thus earning money to sustain itself while solving society’s problem that the founders are out to solve.

Offer loan facilities to SMEs

Fintech startups in particular can leverage the huge number of small and medium scale enterprises in Nigeria to grow.

You are wondering how?

They can offer loan facilities to these business that often cannot tick all the boxes required by traditional lenders, like banks, so cannot get loans they need to grow their businesses. SMEs are as hungry for growth as big businesses. And going by the fact that SMEs account for a whooping 96% of businesses in Nigeria, you realize that this is a whole lot of untapped market and an opportunity to scale a startup. Engineering a product for this hugely underserved section of the economy means startups stand a better chance of even upstaging their traditional counterparts in a very short period.

I know, lending to small, majorly undocumented and unbanked businesses come with very high risks, but this is not a problem that startups cannot find their way around.

Away from providing loan facilities, startups can also build accounting products for SMEs, come up with products to help perishable foodstuff sellers preserve their products, and build a more efficient and cost-effective SME supply chain.

5 WAYS SMALL AND MEDIUM-SCALE BUSINESSES CAN SURVIVE DURING THIS COVID-19 PANDEMIC

There’s no need stressing that the ongoing coronavirus pandemic has crippled hundreds and thousands of businesses across the globe. Many businesses, without the exception of small and medium-scale businesses, are experiencing profit decline and some business owners are already giving up on their businesses.

Despite the accompanying disaster of COVID-19 and the resulting effect on business growth, you can always keep your business on a survival lane. Therefore, we have taken ample time to thoroughly consider 5 ways your small or medium-scale business can survive during this pandemic.

Working out a Business Format for Cutting Costs

Doing this may require you to set up a short-term financial plan incorporating only the essential provisions to keep your business going. Indispensable provisions such as utility charges, office rent and staff salaries usually make up the lifeblood of small and medium-sized businesses. So, ensure the business format you’re creating considers necessary expenses so that your decision to cut costs doesn’t backfire.

If you think your business building is spacious enough, you may consider sharing it with another small business owner. This way, you’re sure to free yourself the burden of paying the entire office rent.

Remaining Calm and Taking Care of Yourself

To you, this might not seem to have a direct influence on your business survival. But again, you have to realize that taking care of yourself and always remaining calm have the benefit of inspiring you to develop fresh ideas for business survival. Panicking or cowering over how your business will survive might affect you psychologically as it is considered unsuitable for your health.

Making Advantageous Use of Enhanced Staff Training

The disastrous wave of COVID-19 is undeniably compelling some businesses to lay off their staff. Due to dwindling business gains, you could be tempted to relieve your staff of their roles. However, that might not be the solution to business downturn as there are effective ways of “upskilling” your staff.

You should be ready to inspire extra skills into the staff in crucial departments such as production, marketing and distribution. Helpfully, online courses are available on how you could reinforce your business team with additional skills during this COVID-19 pandemic.

Exploring Alternative Modes of Operation

The virulent spread of COVID-19 is imposing compulsory lockdown on businesses including medium and small-scale entities. While this appears unfavourable, it’s yet an opportunity for you to consider changing your mode of business operation.

Can my business operate online? Would it be great to list my products/services online?

Above are some of the questions that should come to your mind. And of course, you might consider the idea of online operation an effective way of keeping current customers and capturing potential customers.

Keeping Tabs on Support Initiatives Provided by Government or External Organizations

In the course of this COVID-19 pandemic, governments and certain organizations (including financial institutions) are coming up with initiatives intended to keep small and medium-scale businesses running. By keeping yourself abreast of online updates from your local support groups, you’re likely to know if there’s a stimulus package for your sort of business. Also, you should always keep yourself in touch with all the market groups you belong to as some of them might have support packages such as loans and grants to offer.

Conclusion

We strongly believe that the information in this post is enough reason for you to accept that your small or medium-scale business can still survive the catastrophic wave of the COVID-19 pandemic as well as apply successfully for the CBN MSMEDF Loan . Therefore, you should make good use of the helpful tips provided and hope that your business will remain a going concern.