BRIEFS ON SCHEMES AND PROGRAMMES OF THE DEVELOPMENT FINANCE DEPARTMENT OF THE CENTRAL BANK OF NIGERIA Central Bank of Nigeria
Central Bank of Nigeria
Introduction
The CBN’s involvement in development financing dates back to the early sixties. The Bank collaborates with the government, development partners, companies and other private institutions to:
Improve banks’ lending to the real sector; Empower small scale entrepreneurs; Create employment opportunities; Alleviate poverty; and Ensure food security
Responsibility for development financing activities of the CBN lies with the Development Finance Department.
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Current Focus Of Development Finance Activities Of The CBN
Agricultural financing
Promotion of Small and medium Enterprises
Micro finance
Agricultural Credit Support Scheme (ACSS)
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Schemes & Programmes of DFD
Agricultural (ACGS)
Credit
Guarantee
Scheme
Small and Medium Enterprises Equity Investment Scheme (SMEEIS)
Microfinance policy
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BRIEFS ON THE DEPARTMENT’S PRODUCTS A.C. G.S.F.
It was established under the ACGSF Decree 20 of 1977.
It had an initial share capital of N100 million but is now enhanced to N3 billion. The Scheme is own by the Federal Government and the Central Bank of Nigeria in the ratio of 60:40.
It guarantee loans to the agricultural sector granted by Deposit Money Banks and microfinance banks up to 75% of the amount in default net of what is realised from collaterals where possible.
The CBN is the Managing Agent.
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Agricultural Credit Guarantee Scheme Contd. (i) Enterprises eligible for the guarantee cover ♣
Plantation Agriculture
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Production of cereals & tubers
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Aqua Culture: fish farming & fishery.
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Animal husbandry: poultry, piggery, snailery, cattle fattening etc. Forestry Agro-processing where it is integrated with at least 50% of farm input.
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Agricultural Credit Guarantee Scheme Contd. (ii)The Guarantee Cover ♣
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Loans granted to the agricultural sector by banks (universal and community banks). Pays 75 percent of the net balance in the account of the clients in the event of default. Target clientele - farmers: individuals, co-operative societies and corporate entities. Limits of lending are: Individuals (a) N20,000.00 without tangible security (b) N1,000,000 with tangible securities Co-operative Societies and Limited Liability Companies N10.0million (with collateral)
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BREIFS ON THE DEPARTMENT’S PRODUCTS Innovations Under the ACGSF TFM
SHGS
ACGSF
MFBs
IDP
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Innovations Under the ACGSF Trust Fund Model (TFM) Conceived to reduce the risk which banks are exposed to in their lending to uncollateralized agricultural borrowers.
Involves the intermediation of willing parties that would want to pledge funds in the banks as cash security for loans to certain clients.
The parties include federal & state governments, churches, NGOs, companies etc and lending are normally done to saving Self-Help Groups (SHGs).
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Trust Fund Model (TFM) Cont’d Modalities of the TFM.
Provision of evidence that the state government/any other organization have deposited 25 percent of the proposed client loan exposure in the intermediary bank and that the prospective clients have been formed into non-politicized small holder groups, linked to the bank and saved additional 25 percent of the intended loan amount.
Application for loan to the intermediary bank by the groups.
Inspection of the projects, approval of the loan (usually two times the sum of the government deposit and farmers savings) and application to the ACGSF for guarantee.
Guarantees of 75% of the 50 percent unsecured part of the loan package by the ACGSF.
Disbursement of loan to farmers
Central Bank of Nigeria
Performance under the Trust Fund Model (TFM) As At 30th June, 2007 S/No.
Name Of Stakeholder
Amount Placed (N' m)
Partnering Bank
1
SPDC MISCARD (Niger Delta States)
5
FBN/FIB
2
Jigawa
50
FBN, PHB, Unity Bank
3
Agip Green card (Niger Delta States)
5
UBA
4
Kogi
180
FBN
5
Nasarawa
10
FBN
6
Katsina
500
FBN, Unity Bank, PHB, First Inland Bank
7
Ondo
100
Spring Bank
8
Total card (Niger Delta States)
20
UBA
9
Benue
15
PHB.
10
Kaduna
100
UBA Plc
11
Kwara
63
UBA Plc
12
Kebbi
100
UBN
13
Ogun
50
FBN
14
Cross River
100
Fidelity/Zenith Banks
15
CASPAN
4
FBN/FIB
Osun
40
UBA
16
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Innovations Under the ACGSF (Cont’d) Interest Drawback Programme (IDP)
Introduced with effect from 2003 lending season.
Capital of N2.0 billion, separate from the ACGSF.
Funded jointly by the Federal Government of Nigeria and the Central Bank of Nigeria in 60:40 shareholding ratio.
Assist borrowers under the ACGSF reduce their effective borrowing rates.
Farmers borrow from lending banks at market-determined rates but are given interest rebate of 40% if they repay their loans as and at when due.
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BREIFS ON THE DEPARTMENT’S PRODUCTS (Cont’d) S.M.E.E.I.S.
Initiated by the Bankers’ Committee in 2001.
In it, banks set aside 10% of their profit after tax (PAT) for equity investment in projects (except commerce & trading).
Definition of SME: For the purpose of the scheme, a Small & Medium Enterprise is defined as any business activity with a maximum asset base of N1.5billion excluding land and working capital; and employing any number of staff.
The Scheme has created a window for small and micro enterprises by setting aside 10% of the 10% for them to access.
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BREIFS ON THE DEPARTMENT’S PRODUCTS (Cont’d)
Objectives of the Scheme: To stimulate economic growth, develop local resources/technologies and generate employment through the facilitation of the flow of funds for the establishment of new SME projects, reactivation of moribund ventures, expansion and modernization of on-going projects.
Activities Covered: Agric. agro-allied enterprises, information technology/ telecommunication, manufacturing, educational establishments, services and service-related, tourism and leisure, solid minerals exploration and exploitations, construction, etc. Except commerce
Guidelines have been reviewed to the effect that 10 percent of the SMEEIS Funds would be apportioned to micro entrepreneurs.
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BREIFS ON THE DEPARTMENT’S PRODUCTS (Cont’d) Microfinance Policy The Bank launched ‘’the Microfinance Policy, Regulatory and Supervisory Framework for Nigeria’’ on the 15th of December, 2005. Presently the Department has the mandate to monitor and ensure full implementation of the policy framework.
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The Microfinance Policy
Main objectives:
To make financial services accessible to a large segment of the potentially productive Nigerian population which otherwise would have little or no access to financial services;
Promote synergy and mainstreaming of the informal sub-sector into the national financial system;
Enhance service delivery by microfinance institutions to micro, small and medium entrepreneurs;
Contribute to rural transformation; and
Promote linkage programs between universal/development banks, specialized institutions and microfinance banks.
Central Bank of Nigeria
FRAMEWORK FOR MICROFINANCE BANKS Provides for the setting up of private sector driven microfinance banks to provide financial services for poor and low income groups Two categories of MFBs are recognized: 1.
MFBS licensed to operate as a unit bank with a minimum capital requirement of N20 million; and
2.
MFBs licensed to operate in a state with a minimum capital requirement of N1 billion. the two categories can aspire to have national coverage provided they grow organically.
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CONCLUSION
The Development Finance Department is actively promoting development financing in Nigeria.
It has been achieving this objective through the management of ACGSF, implementation of SMEEIS and the design of complementary products that enhance sustainability.
It looks to the future with optimism for enhance performance.
Central Bank of Nigeria
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