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Sources of funds for SMEs in Nigeria

Getting loans is one of the challenges faced by Small and Medium Enterprises (SMEs) in Nigeria. However, there are some funds available to be accessed by entrepreneurs.

Criteria

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One major criterion for accessing these funds is the business owner’s capability to present a viable business plan. The entrepreneur should also be able to describe the market for his or her products.

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Development Bank of Nigeria (DBN)

As a wholesale bank, the DBN will lend wholesale to Microfinance Banks and deposit money banks who will on-lend medium to long-term loans to micro, small and medium enterprises (MSMEs).

The most basic criteria to benefit from the DBN loan are: you must apply through your bank; the loan sought for must be long term; you should have reasonable book keeping; and your bank (micro finance or commercial banks) must run a due diligence and qualify you.

At the commencement of the disbursement exercise in October 2017 in Abuja, the DBN disbursed N5bn to three micro finance banks (LAPO Microfinance bank, Fortis Microfinance Bank, and NPF Microfinance bank). The PFIs were the first set to have met the criteria to access the loan. However, DBN has signed more PFIs. They are: Wema Bank, Eco bank, Sterling Bank, Diamond Bank, Fidelity Bank these are the commercial banks. For the micro finance bank, the new ones are Microcred Microfinance Bank Nigeria Ltd, AB Microfinance Bank Nigeria Ltd, and Infinity Microfinance Bank Ltd.

In its first full year of operations, the bank targets to lend N5 billion to 20,000 MSMEs on a sustainable basis .

CBN MSMEs fund

MSMEs resident in Abuja can access this fund by applying to the Abuja Enterprise Agency.

According to the Managing Director of the Agency, Mal  Muhammed Tukur Arabi, in an recent interview, there are no stringent requirements for the disbursement of this loans. “All the clients requires is to come with an application, fill a form and return it and bring two guarantors that we can certify. So long as your guarantor says he/she will stand for you in case of any default, that is all. There are no securities attached to it.”

The loan which is disbursed through the FCT Microfinance Bank ranges from N50,000, which is the minimum, to N5 million which can be given to a client depending on the viability of the business and the commitment of the client and his/her capacity to pay back.

Business owners can access the funds and pay back, depending on the sector, in three years minimum i.e for those that are in other businesses.  But for those in agriculture, it is being extended to up to five years. The former has a moratorium of six months before you start paying, while with the latter repayment starts after one year i.e those that are to access the funds for agriculture.

BoI Funds

The BoI has a number of funds that entrepreneurs of all levels can access. First is the Graduate Entrepreneurship Fund (GEF), which is meant for serving members of the National Youth Service Corps (NYSC). Candidates are allowed to submit their business ideas, which are then reviewed by a team of experts. The NYSC members whose ideas are marketable and bankable are then selected, trained for four weeks and then given between N500,000 and N2 million.

There are also the Cottage Agro Processing (CAP) Fund for small and medium agro processors; Nolly Fund for players in the Nollywood industry, as well as Fashion Fund for designers and other players in the value chain.

Tony Elumelu Fund

Tony Elumelu Foundation has $100 million for 10,000 African entrepreneurs. This will continue to be available for another seven to eight years. If you are in agriculture, fashion and design, light manufacturing, ICT, and solid minerals, among others, then apply for the on-going Tony Elumemu fund.  You can be lucky to be one of 1,000 entrepreneurs to be shortlisted.

Lagos State Employment Trust Fund

Lagos State has N25 billion to support SMEs. The fund is divided into two categories; micro and small businesses. Under the micro, businesses can access up to N500, 000 loans with an interest rate of five percent and a tenor of one year. For the small business category, businesses can get up to N5 million for a tenor of three years. The criteria for accessing the funds include: membership of a business organisation, which will recommend the business for the loan; Lagos State tax receipt for at least six months, and Lagos state residency card. This takes three weeks for processing.

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