Before the introduction of microfinance institutions in Nigeria, the financial industry had a weak representation of many small and medium-sized enterprises. They are unable to easily obtain finances, which has had an impact on their business and means of subsistence. However, microfinance institutions in Nigeria do offer loan options.
The Central Bank of Nigeria established a microfinance development fund with a seed capital of N220 billion in an effort to address the funding needs of SMEs. The Central Bank of Nigeria will oversee the fund’s administration, and authorized microfinance organizations will oversee its management.
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What Are Microfinance Banks?
Microfinance Banks (MFBs) are organizations that have been properly approved by the CBN to conduct the business of offering microloans and other services relating to money.
Microfinance services, such as those provided by banks like Nirsal and others, include loans, deposits, fund transfers, and any other financial products aimed at low-income customers.
In Nigeria, there are about 1000 microfinance banks (MFBs), including unit, state, and national MFBs. In comparison to other banks, MFBs have a much smaller overall lending portfolio, which can reach N53 billion. All MFBs must lend at least 80% of their loan portfolio to micro-enterprises, according to the Central Bank of Nigeria (CBN).
How To Get Loan from Microfinance Banks in Nigeria
In Nigeria, microfinance institutions are essential to the fight against poverty, to the expansion of small companies, and other fields.
The majority of microfinance banks in Nigeria accept the following payment methods for loans:
1. Have A Genuine Plan or Project for the loan
Make sure you have a strategy and a business plan to back up your proposal before approaching any MFB. This enhances the likelihood that the microlending institution will respond favorably to your request. Remember that the primary reason these microfinance organizations existed was to support the economy. They only provide loans to SMEs as a result of this.
The majority of microfinance banks offer loans for a variety of uses, including starting a business, buying assets, starting a farm, going to school, etc.
Make sure you have a strategy and a business plan to back up your proposal before approaching any MFB. This enhances the likelihood that the microlending institution will respond favorably to your request. Remember that the primary reason these microfinance organizations existed was to support the economy.
For this reason, they exclusively approve loans for SMEs.
The majority of microfinance banks offer loans for paying off debt, buying assets for businesses, financing education, lending to people making a living wage, etc.
2. Proof of Your Business Entity
You may be able to obtain the money you require from a microfinance bank by providing the lenders with proof of your business entity or business plan. For instance, if you are a trader, the papers for your business registration may demand proof of business ownership. You could also require bank statements or transaction receipts to prove that you are running a business.
3. An Account with The Bank
The next step is to open an account with the microfinance bank if all the paperwork is in order. The first step in applying for a loan at a microfinance bank is to open an account with the institution. This is done to demonstrate commitment to the bank and to collect data.
4. The Bank Account Must Have Been Maintained For Some Time
Before you can be approved for a loan, certain microfinance banks can need you to keep an account with them for a certain amount of time. It is not typical practice, though. Opening an account with the bank is just the beginning; before you are eligible to apply for a loan, the account must be active, which entails regularly making deposits and withdrawals from it.
5. Present A Collateral
When requesting a secured loan from a microfinance bank, you can additionally be required to provide collateral. It could not be applicable to small business loans for sole proprietors and other private individuals, though. A few microfinance institutions don’t require collateral. However, it will be important for business loans for things like buying assets, funding agriculture, and applying for loans with larger amounts.
Conclusion
When selecting a microfinance bank, you must be cautious. Some of these banks frequently treat consumers poorly and are not licensed financial service companies. This raises the question of whether SME microfinance banks are indeed necessary.
To get the best offers, make sure you comprehend the terms and circumstances and compare interest rates at other microfinance institutions.
