Nigeria central bank amends agric credit scheme guidelines to include non-interest financial institutions

The Central bank of Nigeria (CBN) has announced amendments to guidelines on its commercial agriculture credit scheme (CACS) to include the participation of non-interest financial institutions.

The regulator in a circular to all banks and financial institutions dated February 16, 2018, said the revised guidelines are part of efforts to deepen access to finance and reduce exclusion rate.

The CBN also indicated that a review of the guidelines for other intervention funds would follow in due course.

The CACS was established by the CBN in collaboration with the Federal Government, represented by the ministry of agriculture and rural development as part of its developmental role to promote commercial agricultural enterprises in Nigeria, which is a sub-component of the Federal Government of Nigeria Commercial Agriculture Development Programme (CADP).

Under the CACS interest rate on agricultural credit from participating banks shall not exceed 9.0 percent inclusive of all charges to be shared between the participating banks and the CBN: 7 percent and 2 percent respectively.

On collateral, the guidelines stipulate that the security which may be offered to a participating 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 the land including fixed assets, crops or livestock; a charge on movable property of the borrower; a life insurance policy, a promissory note or other negotiable security; stocks and shares; and any other collateral acceptable to the participating bank(s).

By the revision, the participation of non-interest financial institutions would reduce the burden of interest repayment on borrowers who access credit through the non-interest institutions.