The Central Bank of Nigeria (CBN), having reviewed and incorporated comments from various stakeholders, has issued guidelines for the regulation and supervision of Credit Guarantee Companies (CGC) in Nigeria.
This, it says, would provide guidance on regulatory expectations from credit guarantee companies in Nigeria.
A CGC is an institution licensed by the CBN with the primary objective of providing guarantees to banks and other lending financial institutions licensed by the CBN, hereinafter referred to as Participating Financial Institutions (PFIs), against the risk of default by borrowers.
These guidelines, according to the apex bank, stipulate the minimum standards for the operations of CGCs in Nigeria.
“The provisions of these guidelines shall apply to CGCs licensed by the CBN, PFIs shall comply with the provisions of these guidelines as it relates to their activities. PFIs may apply for and obtain a guarantee from only CGCs licensed by the CBN, for any loan granted to MSMEs.
“A CGC may guarantee only loans originated by PFIs excluding impaired assets that had been acquired,” the banking sector regulator stated in the guideline obtained from its website.
The application for CGC licence shall be processed in two stages, namely:
Approval-in-Principle (AIP) and final licence.
It clarified that any promoter(s) seeking a licence to operate a CGC in Nigeria shall apply in writing to the governor of the CBN and submit the following documents with the application: “A non-refundable application fee of N100,000 only, or such other amount as the CBN may specify, in bank draft payable to the CBN or CGC application and licensing account;
“Evidence of deposit of the specified minimum paid-up capital requirement of N10 billion or any other amount that may be prescribed by the CBN into FPRD CGC Share Capital Account. Promoters should note that in compliance with the BOFIA 2020, the investment of share capital deposit shall be subject to availability of investment instruments. Upon the grant of licence or otherwise, the CBN shall refund the sum deposited to the promoters, together with the investment income, if any, after deducting administrative expenses and tax on the income.
“Evidence of capital contribution made by each shareholder, evidence of name reservation with the Corporate Affairs Commission (CAC), detailed business plan or feasibility report,” it stated.
The CBN said this is part of its efforts to stimulate lending to Micro, Small and Medium Enterprises (MSMEs).
The guidelines stipulate minimum licensing governance and prudential requirements for prospective Credit Guarantee Companies.
Fees, charges and commission by a CGC shall follow the applicable guide to charges by banks and other financial institutions, or any other directive as may be specified by the CBN from time-to-time, the bank further stated, adding that it reserves the right to revoke a CGC licence where there is evidence of insolvency, misuse of the licence, unauthorised cessation of business for any continuous period of six months or any period aggregating six months during a continuous period of 12 months, or breach of the CGC guidelines.