The Nigeria apex bank Central Bank of Nigeria (CBN) launched the MSME Development Fund on August 15, 2013, with a share capital of N220 billion. The Fund was established in recognition of the significant contributions of the Micro, Small, and Medium Enterprises (MSME) sub-sector to the economy and the existing huge financing gap.
The ten (10) percent of the Fund has been devoted to developmental objectives such as grants, capacity building, and administrative costs while ninety (90) percent commercial component will be released to Participating Financial Institutions(PFIs) at 2% for on-lending to MSMEs at a maximum interest rate of 9% per annum.
The eligible activities to be financed include agricultural value chain, services, cottage industries, artisans, trade and commerce, and any income-generating business as may be prescribed by the CBN from time to time.
THE OBJECTIVES OF THE MSMEDF
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;
- Increase productivity and output of microenterprises;
- Increase employment and create wealth; and
- Engender inclusive growth
THE BENEFITS OF THE MSMEDF TO SOME STAKEHOLDERS
The Developmental Components will be utilized for capacity building of staff of PFIs, research, and provision of other financial services infrastructure
The Long term single-digit loans are at 9% per annum. This has resulted in reduced cost of borrowing which will impact positively the earnings of the MSMEs
3. MICROFINANCE SUB-SECTOR
The Fund will provide liquidity for the sub-sector and result in general improvement of the financial system stability
4. GENERAL PUBLIC
THE ELIGIBLE ACTIVITIES UNDER THE MSMEDF
- In line with the provisions of the Revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, enterprises to be funded under the Scheme include:
a Micro Enterprises
b Small and Medium Enterprises (SMEs)
The following are eligible activities under the Fund:
- Agricultural value chain activities
- Cottage Industries
- Renewable energy/energy-efficient products and technologies
- Trade and general commerce
- Other economic activity as may be prescribed by the CBN
NOTE: Only 10% of the Commercial component of the Fund shall be channeled to trade and commerce.