FG slashes collateral, interest rate on MSMEs fund

In a bid to simplify access to the N220 billion Micro Small and Medium Enterprises (MSMEs) fund, the Federal Government has slashed the collateral requirement from 75 percent to 50 percent and also dropped the interest percentage to banks from 3 percent to 2 percent.

The reduction in collateral requirement is expected to progressively reduce from a period of six to nine months. This is even as two percent of the lump sum of the fund which is N4.5 billion has been set aside to be accessed by entrepreneurs with disabilities.

Already, about 18 states of the federation are said to have accessed the fund, however, no concrete figure has been given of how much has been accessed so far. While briefing journalists after the second meeting of the National Council on Small and Medium Enterprises (MSMEs) chaired by Vice President Namadi Sambo, the minister of industry, trade and investment, Olusegun Aganga, said the Central Bank of Nigeria (CBN) has also maintained that the all inclusive interest rate must not exceed nine percent and had decided to reduce its rate to banks and financial institutions.

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The National Council on MSMEs was constituted by President Goodluck Jonathan last year to workout modalities that will drive access to the fund as well as other funds to be accessed by entrepreneurs in the country. After its first meeting, the council had set up a sub-committee to look at the funds as well as the conditions that are required or the criteria one has to meet to access the fund.

Entrepreneurs have continuously decried the cumbersome process involved in accessing the fund which has been made available by government. Aganga told journalists that the report of the committee which was chaired by the minister of National Planning called for the reduction of the access to collateral requirement and the CBN rate to financial institutions.

Also the council said henceforth 60 percent of the fund will be reserved for women entrepreneurs and priority will also be given to men and women with disability. In addition to the collateral requirements approved by council, the minister of National Planning, Abubakar Suleiman, told journalists that council also approved that the collateral requirements of 50 percent of microfinance banks “be progressively reduced by a period of six to nine months based on the ratings of the microfinance banks (MFBs).” Council also approved that special focus be given to the banks with the strongest infrastructure and capacity for lending to the MSME sub- sector in the CBN strategy. It approved that the loan tenure for micro loans across agriculture value chain be determined on a case by case basis based on the gestation period.