The Central Bank of Nigeria (CBN) recently presented guidelines to state governments on how they may access the monies held by its Microcredit Fund. Established in 2008, the Microcredit Fund, a national government fund which was originally funded with contributions from state governments, holds NGN 50 billion (USD 333.94 million) and is ready to be operationalized. The Microcredit Fund represents the national government’s effort to securely distribute state monies in order to develop the microfinance sector. The general scheme implements several layers of bureaucracy in order to ensure a secure channel by which microenterprises may ultimately access monies from the Microcredit Fund and perhaps is a reflection of the recent turmoil in the nation’s microfinance sector.[2] State governments must first set up a separate account with a commercial bank which is intended to hold the monies received from the Microcredit Fund. The account is then used by state governments in partnership with local banks to disburse loans to microenterprises that fit within the parameters of the Microcredit Fund’s objectives. Once disbursed, it is the responsibility of state governments to establish a mechanism to monitor and supervise the repayment of the loans and, out of the repaid proceeds, pay back to the Microcredit Fund a percentage of the returns. These guidelines are meant to responsibly develop the microfinance sector and ensure compliance by state governments and commercial banks with existing microfinance regulations.
About Central Bank of Nigeria (CBN):
Established in 1958, the Central Bank of Nigeria (CBN) is Nigeria’s central banking authority. CBN’s regulatory objectives are as follows: to issue legal tender, to maintain the external reserves of the country, to promote monetary stability and a sound financial environment, and to act as a banker of last resort and financial adviser to the federal government. Mr. Lamindo Sanusi is the current govenor. CBN website: http://www.cenbank.org/supervision/framework.asp
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[1] Original article: http://www.compassnews.net/Ng/index.php?option=com_content&view=article&id=35275:cbn-presents-guidelines-on-micro-credit-fund&catid=50:business-news&Itemid=708; Related article: http://povertynewsblog.blogspot.com/2008/03/bankers-committee-to-establish-micro.html
[2] MICROCAPITAL STORY: PS Microfinance Bank in Nigeria Exposed as Unlicensed and Fake, Bank Closes Operations Abruptly, Several Depositors Lose Huge Amounts of Money, written by Bharathi Ram, published by Microcapital.org on July 14, 2009, located at: https://www.microcapital.org/story-ps-microfinance-bank-in-nigeria-exposed-as-unlicensed-and-fake-bank-closes-operations-abruptly-several-depositors-lose-huge-amounts-of-money/; see also, MICROCAPITAL STORY: Nigerian MFI, Integrated Micro Finance Bank PLC (IMBFB), Temporarily Closes Doors Due to Lack of Liquidity, written by Stephanie Rubin, published by Microcapital.org on September 23, 2009, located at: https://www.microcapital.org/microcapitalorg-story-nigerian-mfi-integrated-micro-finance-bank-plc-imfb-temporarily-closes-doors-due-to-lack-of-liquidity/
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