Here is a step-by-step guide on how to get a loan from Microfinance Banks in Nigeria in 2024. Numerous small and medium-sized enterprises were underrepresented in the banking sector prior to the advent of microfinance organizations in Nigeria. Their business and means of subsistence have suffered as a result of their inability to easily obtain capital. Nonetheless, loans can be obtained from Nigerian microfinance institutions.
With a starting capital of N220 billion, the Central Bank of Nigeria established a microfinance development fund in a bid to meet the funding needs of SMEs. The Central Bank of Nigeria will oversee the fund, which will be managed by accredited microfinance institutions.
What Is A Microfinance Bank?
An organization that holds a valid license from the CBN to conduct the business of offering microfinance and other financial services is known as a Microfinance Bank (MFB).
Loans, deposits, cash transfers, and any other financial products aimed at low-income clients are all considered microfinance services; these services are provided by banks such as Nirsal, among others.
In Nigeria, there are more than one thousand microfinance banks (MFBs), comprising unit, state, and national MFBs. MFBs as a group have a substantially smaller total lending portfolio than other banks—up to N53 billion. All MFBs are required by the Central Bank of Nigeria (CBN) to lend to microenterprises for at least 80% of their total loan portfolio.
5 Steps on How to Get A Loan from Microfinance Banks in Nigeria in 2024
In Nigeria, microfinance institutions are essential to the growth of small-scale enterprises, agriculture, and the fight against poverty.
Most microfinance banks in Nigeria require the following steps in order to approve a loan:
1.) Have An Honest Loan Project or Plan
Ensure you have a plan and a business plan to back up your proposal before approaching any MFB. This raises your chances of receiving a positive answer from the microfinance company. Remember that the only reason these microfinance organizations were founded was to boost the economy. Consequently, they only approve loans that are classified as SMEs.
The majority of microfinance banks provide loans for a variety of uses, including company financing, asset acquisition, agriculture, education, and salary-earning loans.
2.) Evidence of Your Legal Entity
You may be able to obtain the money you require from a microfinance bank by providing the lenders with documentation of your business entity or plan. If you are a trader, for instance, the paperwork for your business registration may need to include evidence of business ownership. Additionally, bank statements or transaction receipts attesting to your business’s operation may be required.
3.) Have An Account with The Bank
The next step is to open an account with the microfinance bank after making sure all the paperwork is correct. The first step in applying for a loan at a microfinance bank is to open an account. This is done to demonstrate commitment to the bank and to collect data.
4.) The Bank Account Should Be Active
Before you apply for a loan, some microfinance banks will want you to keep an account with them for a certain amount of time. But it’s not a standard procedure. It takes more than just opening a bank account to be eligible to apply for a loan; the account needs to be active, which entails regular deposits and withdrawals of funds.
5.) Provide A Collateral
In a microfinance bank, collateral may also be required when applying for a secured loan. It might not, however, apply to individual and small-business loans for petty traders. A few microfinance institutions don’t require collateral. However, it will be required for business loans for things like buying assets, farming, and other applications requiring a larger sum of money.
Conclusion
When selecting a microfinance bank, be cautious. A number of these banks frequently handle clients in an unethical manner and are not authorized providers of financial services. This poses the question of whether SMEs actually require microfinance banks.
To obtain the best offers, ensure that you fully understand the terms and conditions and evaluate the interest rates offered by various microfinance institutions.
