Chimara Bygold…Issues Guidelines, Says No Tangible Securities, Feasibility Reports Needed
The Central Bank of Nigeria (CBN) has said that banks are not expected to demand tangible securities and feasibility reports for loans of N100,000.00 (One hundred thousand naira) and below, under the Agricultural Credit Guarantee Scheme (ACGS) Fund.
It made this revelation in new guidelines for ACGS, released on Monday.
The purpose of the Fund is to provide guarantee in respect of loans granted by lending banks for agricultural purposes under the scheme with the aim of increasing the level of bank credit to the agricultural sector. “Loan” under the amended act includes advances, overdrafts and any credit facility and should be taken as such wherever it is used in these guidelines and other circulars.
The scheme was established by the Federal Military Government under the Agricultural Credit Guarantee Scheme Fund Decree 1977 (Decree No. 20) and as amended on 13th June 1988, and 26th June 2019.
According to the bank, the Act originally provided for a Fund of N100 million subscribed to by the Federal Military Government (60 per cent) and the Central Bank of Nigeria (40 per cent) abd the share capital of the Fund has been increased to N50.0 billion while the paid-up capital is N3.0billion.
According to the apex bank, the Fund is under the management of the Agricultural Credit Guarantee Scheme Fund Board while the Central Bank of Nigeria is the Managing Agent for the administration of the Scheme.
It said that Eligible Participating Financial Institutions under the scheme are Deposit Money Banks;
Microfinance banks under the regulatory and supervisory role of the Central Bank of Nigeria (CBN).
“For loans of N100,000.00 (One hundred thousand naira) and below, banks are not expected to demand tangible securities and feasibility reports; however, there should be cross guarantee among members in a group or cooperative, and any other guarantee that may be acceptable to the bank,” it read in part.
But for other loans, the security which may be offered to a bank for the purpose of any loan under the scheme may be one or more of the following: a charge on land in which the borrower holds a legal interest or a right to farm, or a charge on assets on the land including fixed assets, crops or livestock; a charge on the movable property of the borrower; a life assurance policy, a promissory note or other negotiable security; stocks and shares; a personal guarantee.
Others are: any other security acceptable to the bank, which must be adequate and realizable;All assets registered on the National Collateral Registry (NCR);Warehouse Receipts ; Letter of indemnity from employer for those in paid employment signed by authorized signatories
It further stipulated that all applications to lending banks for loans under the Scheme shall be made on the form prescribed for the purpose.
“Individual accounts must be opened for each beneficiary under the scheme by the lending bank.
“For co-operative or group loan, accounts must be opened for purpose of lending under the scheme
“The ACGSF application form should be completed by the beneficiary; Application forms shall be signed and stamped by the lending bank concerned and forwarded to the nearest office of the Central Bank in the State in which the bank is situated or as may be otherwise directed.
” Banks should remind prospective borrowers under the Scheme that it is an offence for which one may be imprisoned for five years to apply the loan for purposes other than those for which they are given,” it further stipulated.
It warned that Revised Regulatory and Supervisory Guidelines of Microfinance Banks (MFBs) must be strictly adhered to as it stipulates that the maximum principal amount for a microloan shall not exceed N500,000.00 or 1 per cent of the shareholders’ fund unimpaired by losses and or as may be reviewed from time to time by the CBN.
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