APPLICATION FOR AGRICULTURAL YOUTH SUMMIT GRANT 2020 / A GUIDE TO ACCESSING CBN NON-INTEREST LOAN FOR MICRO ENTERPRISE AND HOUSEHOLDS.

APPLICATION FOR AGRICULTURAL YOUTH SUMMIT GRANT 2020

A GUIDE TO ACCESSING CBN NON-INTEREST LOAN FOR MICRO ENTERPRISE AND HOUSEHOLDS

A SYNOPSIS OF THE AMENDED GUIDELINES FOR THE IMPLEMENTATION OF THE ₦50BILLION TARGETED CREDIT FACILITY (TCF) FOR NON-INTEREST BUSINESSES AND HOUSEHOLD

Recall that the CBN had released series of Guidelines with respect to accessing intervention funds for different business organisations to cushion the effects of the COVID-19 pandemic in the country. Many of these guidelines aimed at providing the procedures and modalities for accessing as well as benefiting from the approved funds. Of special interest to the CBN and to the economy is the impact of this pandemic to Micro, Small and Medium Enterprise (MSME) in the country. This subsector is characterised by huge financial gap which hinders it’s development and it’s supposed contribution to the GDP of the Nation. In recognition of the MSMEs contribution to the economy and to further improve its potentiality, the CBN as part of its developmental role and mandate of promoting a sound financial system, it launches a new amendment to the earlier Guideline for the implementation of the ₦50Billion Targeted Credit Facility (TCF) for Non-Interest MSMEs and Households. This revised Guidelines is purposely designed to complement other Banks (Non-Interest) in providing concessionary financing for hHouseholds and Enterprises affected by the impact of COVID-19 in the country

WHAT THE GUIDELINES SEEKS TO ACHIEVE
The core objectives of the ₦50Billion TCF as indicated in the Amendment to the Guidelines are:

a. to cushion the adverse effect of COVID-19 on households and MSMEs
b. to support households and MSMEs whose economic activities have been significantly disrupted by the pandemic.
c. to stimulate credit to MSMEs to expand their productivity and capacity through equipment upgrade , research and development. see paragraph 2.0 (TCF Guidelines), 2020.

WHO ARE THE BENEFICIARY
As can be gleaned from from the above objectives, the targeted beneficiaries of the fund are specifically two set of Persons, they are;

1. Households or Employee whose livelihood or business has been affected by the pandemic are are willing to establish a new business enterprise
2. Micro enterprise with a minimum of 5 staff affected by the pandemic. See para. 3.0 (TCF Guidelines)
However, to fully participate in the fund, beneficiary must be able to show either or some of the evidence of layoff from employment, loss of income either by household or employee, submission of viable business proposal (in case of new business) and favourable report from a credit bureau. See para. 4.0 (TCF Guidelines).

TARGETED BUSINESSES

The funds itself is a Targeted Credit Facility (TCF), as such not all businesses are covered as indicated in the Guidelines but for a specified businesses which include;

1. Agricultural related businesses
2. Hospitality (accommodation and food services)
3. Health (pharmacy and supplies)
4. Trading
5. Manufacturing/Value Addition, or
6. Any other income generating activities prescribed by CBN and are Shariah Compliant. See para. 5.0 of (TCF Guidelines)

ACCESSIBILITY AND LIMITATION OF FUNDS

The funds is targeted for Households and Micro Enterprise which limits the amount of funds accessible from the CBN through the PFIs. The funds can only be accessed from Non-Interest Micro Finance Banks and Deposit Money Bank of full Islamic financing or Islamic window. As for Households, the maximum fund obtainable is the sum of ₦3Million and for the repayment period of 3 years depending on the amount borrowed.
As for Micro Enterprises there is an accessible amount of ₦5Million repayable also for a period of 3 years, depending on the amount borrowed. Both HHouseholds and Micro enterprise enjoy a moratorium of 6 months. See para. 8.1 & 8.2 (TCF Guidelines)

THE QUESTION OF COLLATERAL

Generally, nNon-Interest Islamic Financial Institution whether MFB or DMB do not require security for a loan (in the common law term of security), however, there are modalities deployed to ensure the repayment of this loan and which are Shariah Compliant. Some of these modes include;

a. Two Guarantors
b. Family Takaful (Islamic Insurance) policy of the beneficiary
c. Simple deposit of titiel document
d. Takaful over the Asset
e. Domiciliation of proceeds of Sale/Business. See para. 11 (TCF Guidelines)

CONCLUSION

From the foregoing, the TCF through CBN seeks to achieve economic empowerment through support for funds to the Household as well as Micro Enterprise affected by the impact of COVID-19 pandemic. It is a Non-Interest Loan based on the principle of Mudarabah. This is one of the terms used in many of the Non-Interest financing Modes. By Mudarabah, we mean a form of financing system where parties to the transaction agreed on a profit and loss sharing of the business activities based on agreed terms. It is a CBN loan accessible by all Nigerians iirrespective of your creed of beliefs.

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