This guide will help you get a loan for your small business. The Central Bank of Nigeria (CBN) has guidelines to help you. These guidelines cover the types of institutions offering loans and the important criteria for loan approval. Let’s see how you can grow your business with these loans.
Access to Funding: The Key to Business Success
Starting a business or running one often needs loans.
Loans help keep the business growing.
Access to different financial opportunities is important for the success and growth of a business.
Identifying the Right Financial Institution
Business owners need to know what their business needs.
Then, they can find the right financial institution that offers the best loan options for them.
Guidelines by the Central Bank of Nigeria
In July 2020, the Central Bank of Nigeria (CBN) introduced new rules.
These rules were for Participating Financial Institutions (PFIs).
The aim was to help Micro, Small, and Medium Enterprises (MSMEs) get more financial services.
Improving MSME Productivity and Inclusion
The guidelines help start new businesses, grow existing ones, and support struggling companies.
These guidelines follow the Banks and Other Financial Institutions Act (BOFIA 1991) and Non-Interest Financial Institutions (NIFIs) principles.
The goal is to make MSMEs more efficient, create jobs, and support inclusive growth.
Applying for the Micro Small and Medium Enterprise Development Fund (MSMEDF)
To apply for the MSMEDF, you need to go to a Participating Financial Institution (PFI) of your choice.
Serving Micro-entrepreneurs and SMEs
PFIs serve two groups: Micro-entrepreneurs and SMEs.
- Micro-entrepreneurs: If you need a loan less than ₦500,000, you can go to Microfinance Banks, NGO/Microfinance Institutions, Financial Cooperatives, or Finance Companies.
- SMEs: If you need a loan between ₦500,000 and ₦50 million, you can go to Deposit Money Banks, Bank of Industry (BOI), or Bank of Agriculture.
Eligible Business Types
The following types of businesses can get financing under the MSMEDF:
- Agricultural value chain activities
- Manufacturing and cottage industries
- Artisans
- Services
- Trade and general commerce
- Renewable energy or energy-efficient products and technologies
- Any other income-generating projects as prescribed by the CBN
Essential Information for Borrowers
Prospective borrowers must provide the necessary documents, including collateral for SME loans. PFIs will evaluate loan applications, approve and forward loan requests to the CBN for fund release.
The MSMEDF will release funds to borrowers through PFIs. The borrower’s account will be credited within 5 working days of the release of funds by MSMEDF to the PFI.
Loans will have a 9.0% interest rate per year (all charges inclusive) regardless of the financed activity. Borrowers must repay all loans, including any accrued interest, to the PFI as and when due. The MSMEDF/CBN will recycle fully repaid loans transferred to it by the PFIs.
Summary of CBN Loan Guidelines
| Topic | Details |
|---|---|
| Access to Funding | Helps start and grow businesses |
| Identifying Financial Institution | Find the right institution for your business needs |
| CBN Guidelines | New rules to help MSMEs get more financial services |
| MSME Productivity | Support new businesses, grow existing ones, create jobs |
| Applying for MSMEDF | Approach a Participating Financial Institution (PFI) |
| Micro-entrepreneurs Loans | Loans less than ₦500,000 from Microfinance Banks, NGO/Microfinance Institutions, Financial Cooperatives, Finance Companies |
| SME Loans | Loans between ₦500,000 and ₦50 million from Deposit Money Banks, BOI, Bank of Agriculture |
| Eligible Businesses | Agricultural activities, manufacturing, artisans, services, trade, renewable energy, other income-generating projects |
| Borrower Information | Provide necessary documents, collateral, loans at 9.0% interest rate, repay on time, funds recycled by CBN |
By following these guidelines, you can get the funding you need to start, grow, or support your business