Software students and IT start-ups have been given the green light to tap into the N22.9 billion Creative Industry Financing Initiative (CIFI) loan scheme provided by the Central Bank of Nigeria (CBN).
The Central Bank of Nigeria (CBN), in collaboration with the Bankers’ Committee, introduced the CIFI to improve access to long-term low-cost financing for entrepreneurs and investors in the Nigerian creative and information Technology subsectors, as part of the efforts to boost job creation in Nigeria, particularly among the youth class.
The initiative, which will be implemented through all deposit money banks, will see Nigerian software students accessing from an allocated pool of N1 billion with a single Obligor Limit of N3 million repayable within three years at a 9 percent interest rate; while IT start-Ups will access from a pool of N5.5 billion at 9 percent rate repayable in 10 years.
According to a statement from the CBN, the objective of the CIFI is to improve access to low-cost and sustainable financing by entrepreneurs and investors in the Nigerian creative and information technology sub-sectors; and further create jobs, particularly among the youth.
The initiative is also meant to complement other development finance initiatives geared at accelerating financial inclusion.
Whereas the student loan offer does not require equity participation, Start-Ups are expected to have a 20 percent equity contribution.
The CBN further issued modalities for the implementation of the initiative by all Deposit Money Banks (DMBs). According to the Apex Bank, the banks will be used to disburse the loan and shall also bear the credit risk.
According to the memorandum from the CBN, dynamics of the transaction are that:
- The prospective applicant approaches any bank of his/her choice with a business plan or statement detailing how much is needed for his/her business proposal.
- The bank provides the applicant with the documentation requirements for accessing any of the verticals (which includes Information Technology).
- The documentation requirements shall be as acceptable by the respective bank credit requests by the customers.
- The bank carries out due diligence of the application and documentation submitted.
- Successful applicants are issued offer letters, which shall have therewith repayment schedules in accordance with the business dynamics.
- The successful applicants shall accept the offer, as well as, meeting all conditions specified in the offer letter, precedent to draw down.
- The bank forwards successful applications with copies of the letter to the Director, Development Finance Department, Central Bank of Nigeria, for consideration and release of the aggregate facility amount to the bank for on-lending to successful applicants.
- The bank disburses funds to successful applicants within ten (10) days of receipt of funds from the CBN.
- The bank bears the credit risks and shall be responsible for monitoring the performance of the facility.
The total CIFI seed fund of N22.9 billion is funded from the Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS), an initiative of the Bankers’ committee.