CBN Sets N10bn Minimum Requirement For CGC
The Central Bank of Nigeria (CBN) announced the requirements for registering organizations to operate in the form of a minimum share capital of N10 billion, a non-refundable application fee of N100,000 and a non-refundable license fee of N1 million. Is A Credit Guarantee Company (CGC).
The top bank announced the requirements in new guidelines for the regulation and supervision of credit guarantee companies in Nigeria, which were signed by the Director of CBN, Department of Monetary Policy and Regulation, Mohammed Hamisu Musa.
As part of its efforts to provide loans to micro, small and medium enterprises, CBN has facilitated the development of guidelines for the establishment and operation of credit guarantee companies in Nigeria.
The bank said the guarantee could cover a maximum of 75 percent of the default amount, while the default status would be determined according to existing discriminatory guidelines.
It said micro, small and medium enterprises face difficulties in obtaining formal sector credit in developing countries.
In Nigeria, the credit market for MSMEs includes market gaps, inherent barriers, information inequalities, low profit margins, and more.
MSMEs have limited access to credit because they are considered to be at high risk to these factors and where credit is granted, often on unfavorable terms.
Credit guarantee companies are expected to pass third party credit risk on to lenders by absorbing a portion of the lender’s losses on loans to Nigeria-based MSMEs in the event of default, among other responsibilities.
The guarantee issued by CGC is a legal commitment to release part of the agreed borrower’s obligations in the event of a default.
Under the new guidelines, CBN states that CGC will provide credit guarantees for MSME loans from eligible PFIs; Payment of claims for default on a liability in accordance with the general terms and conditions of the contract; Collaborate with PFI to recover guaranteed amounts from defaulting borrowers after payment of claims; And provide consulting support to PFI on underwriting issues.
The Guidelines also specify the appointment of members of the board of directors, board composition and size, corporate governance requirements, funding sources and committee board procedures.
It states that, subject to CBN’s written approval, CGC will not publish its audited financial statements four months after the end of the fiscal year. On its website and in national daily newspapers published and broadcast in Nigeria; And display concise financial reports in a clear position in each of its offices and branches in Nigeria.
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