Post by Trade facilitator on May 11, 2022 21:20:50 GMT 1
The Central Bank Of Nigeria (CBN) Issues Guidelines For Credit Guarantee Scheme (CGS)
The Central Bank of Nigeria (CBN) has recently released the guidelines of Credit Guarantee Scheme (CGS) in the country.
The essence is to solve the challenges posed by limited access to funds and credit by MSMEs.
This information was disclosed in a recent circular released by the Apex bank to all banks and other financial institutions titled "GUIDELINES FOR REGULATION AND SUPERVISION OF CREDIT GUARANTEE COMPANIES IN NIGERIA."
What is a credit guarantee company?
A Credit Guarantee Company (CGC) is an institution licensed by the CBN with the primary objective of providing guarantees to banks and other lending financial institutions against the risk of default to by obligors.
Who is an Obligor?
An Obligor is someone who owes or undertakes an obligation to another by contract or other legal procedures.
From the foregoing, we have a good grasp of what a Credit Guarantee Company does.
Finance Guarantee schemes have been around for quite some time and have been known as one method of resolving the problem of access to credit by MSMEs.
This is based on the reasoning that using a credit guarantee scheme removes the bottleneck of physical collateral with its numerous limitations such as depreciation, verification perfection, obsolescence and even foreclosure.
Major issues in the scheme:
As part of efforts to boost lending to Micro, Small and Medium Enterprises (MSMEs); the guidelines provide for minimum licensing requirements for credit guarantee companies.
- The essence of CBN licensing the companies is primarily to provide guarantees to banks and other lending financial institutions licensed by the CBN also known as participating financial institutions PFIs against the risk of Obligor default.
- Credit Guarantee Companies (CGC) are expected to provide third-party credit risk mitigation to lenders through the absorption of a portion of the lender's losses on the loans made available to Nigeria-based MSMEs in case of default. A guarantee issued by a CGC represents a legal document committing the CGC to discharge and an agreed portion of the liability of a borrower in case of default by the obligor.
- Credit Guarantee Companies in Nigeria cannot provide guarantees to entities outside Nigeria even for holding companies’ members outside the Country.
- Without prior written authorization from the CBN, credit guarantee companies cannot purchase, sell dispose of, acquire or lease any real estate for any reason.
- Promoters who are seeking licence as CGC must pay a non-refundable application fee of N100,000 (One Hundred Thousand) Naira only and show proof of deposit into the FPRD CGC share capital account of the specified minimum paid-up capital of N10 billion (Ten Billion) Naira only or any amount prescribed by the CBN.
A credit guarantee scheme provides third parties with credit risk mitigation through the absorption of a portion of the lender's losses on loans made to MSMEs in case of default usually in return for a fee.
The following are the parties to a guarantee:
1. The lender to whom the guarantee is given.
2. The guarantor that provides the guarantee (that is the CGC) and
3. The borrower on whose behalf the guarantee is given.
We have seen most of what the Credit Guarantee Companies do; it is now left for us to know some of the companies that carryout these finance jobs. We are going to bring to you in the next article the full list of the Credit Guarantee Companies in Nigeria and also the steps you need to take in order to benefit from the scheme.
Don’t just sit somewhere criticizing every action of the government, stand up and start participating in government instituted schemes like this.
Our company is one of the best companies in Export and Importation businesses in Nigeria today, we train individuals and corporate organizations on how to do Export, Major and Mini Import business the right way; if you are interested, please contact the admin of this forum now.
Stay with us.
The Central Bank of Nigeria (CBN) has recently released the guidelines of Credit Guarantee Scheme (CGS) in the country.
The essence is to solve the challenges posed by limited access to funds and credit by MSMEs.
This information was disclosed in a recent circular released by the Apex bank to all banks and other financial institutions titled "GUIDELINES FOR REGULATION AND SUPERVISION OF CREDIT GUARANTEE COMPANIES IN NIGERIA."
What is a credit guarantee company?
A Credit Guarantee Company (CGC) is an institution licensed by the CBN with the primary objective of providing guarantees to banks and other lending financial institutions against the risk of default to by obligors.
Who is an Obligor?
An Obligor is someone who owes or undertakes an obligation to another by contract or other legal procedures.
From the foregoing, we have a good grasp of what a Credit Guarantee Company does.
Finance Guarantee schemes have been around for quite some time and have been known as one method of resolving the problem of access to credit by MSMEs.
This is based on the reasoning that using a credit guarantee scheme removes the bottleneck of physical collateral with its numerous limitations such as depreciation, verification perfection, obsolescence and even foreclosure.
Major issues in the scheme:
As part of efforts to boost lending to Micro, Small and Medium Enterprises (MSMEs); the guidelines provide for minimum licensing requirements for credit guarantee companies.
- The essence of CBN licensing the companies is primarily to provide guarantees to banks and other lending financial institutions licensed by the CBN also known as participating financial institutions PFIs against the risk of Obligor default.
- Credit Guarantee Companies (CGC) are expected to provide third-party credit risk mitigation to lenders through the absorption of a portion of the lender's losses on the loans made available to Nigeria-based MSMEs in case of default. A guarantee issued by a CGC represents a legal document committing the CGC to discharge and an agreed portion of the liability of a borrower in case of default by the obligor.
- Credit Guarantee Companies in Nigeria cannot provide guarantees to entities outside Nigeria even for holding companies’ members outside the Country.
- Without prior written authorization from the CBN, credit guarantee companies cannot purchase, sell dispose of, acquire or lease any real estate for any reason.
- Promoters who are seeking licence as CGC must pay a non-refundable application fee of N100,000 (One Hundred Thousand) Naira only and show proof of deposit into the FPRD CGC share capital account of the specified minimum paid-up capital of N10 billion (Ten Billion) Naira only or any amount prescribed by the CBN.
A credit guarantee scheme provides third parties with credit risk mitigation through the absorption of a portion of the lender's losses on loans made to MSMEs in case of default usually in return for a fee.
The following are the parties to a guarantee:
1. The lender to whom the guarantee is given.
2. The guarantor that provides the guarantee (that is the CGC) and
3. The borrower on whose behalf the guarantee is given.
We have seen most of what the Credit Guarantee Companies do; it is now left for us to know some of the companies that carryout these finance jobs. We are going to bring to you in the next article the full list of the Credit Guarantee Companies in Nigeria and also the steps you need to take in order to benefit from the scheme.
Don’t just sit somewhere criticizing every action of the government, stand up and start participating in government instituted schemes like this.
Our company is one of the best companies in Export and Importation businesses in Nigeria today, we train individuals and corporate organizations on how to do Export, Major and Mini Import business the right way; if you are interested, please contact the admin of this forum now.
Stay with us.
