1.What is micro-credit
Microcredit simply is about providing specialised credit savings and other financial services of small amounts to micro-enterpreneurs to enable them expand their business opportunities, increase income and consequently improve their living conditions and well-being over time. It is a product of new thinking in community development which established that the rural entrepreneurs are bankable and that majority of them will remain below poverty line until they are exposed to formal banking and given access to credits, information and capacity building.
2.Why is NLNG implementing the scheme
Nigeria LNG Limited being aware of the limitations of the poor to access financial institutions for loan has launched the scheme in its host communities to among other things:
contribute to the economic development of its Host communities through lending at very low rates and without collateral
inculcate the development of entrepreneurial and banking habits amongst the participating groups
improve the economic status of the small scale entrepreneur in the host communities by making funds available for business start up and expansion
3.Who is the scheme for
The scheme is restricted to groups from NLNG’s Host communities engaged in economic regenerative business such as farming, fishing, trading, on-lending and enterprise development and have expressed the greatest need for and have demonstrated capability to utilise micro credit.
4.What are the features of the scheme
It works through co-operatives
NLNG provides seed money
Allstates Trust Bank manages and disburses the funds
CDF assesses the applications to determine viability and sustainability of proposed business and recommends further action
Loan beneficiaries open account with any Allstates Trust Bank branch nearest to them
Loan revolves among members/funds groups projects
What are the criteria for Group selection
To participate, a group must:
5.Be registered with the Ministry of Industry and Co-operatives
Have existed for at least six months post registration
Have membership strength of at least 10
Be engaged in income generating activity with good track record in savings and credit
6.What is the procedure for application
Any interested group with the above criteria should write a letter of application addressed to the Manager, Community Relations, Nigeria LNG Limited, Bonny. The letter should be submitted through the community CDC or Head Chief with photocopies of group registration certificate and summary of business plan
7.How long will the scheme last
The scheme has an initial pilot phase of 3 years at the end of which the performance of the groups would be evaluated. The report/result of this evaluation would determine the continuation or otherwise of the scheme
8. What factors could hinder the continuation of the scheme
High rate of loan defaults
Community members treating funds as some form of compensation
Request for funds over and above what is actually required
Diversion of funds from the purpose for which it was approved
9.Are collaterals involved in this scheme
No. Members of beneficiary groups however, are jointly responsible for ensuring loan repayment, so they are required to give a joint guarantee/commitment for recovery of the loan.
10.What are the repayment terms
Repayment terms would vary, depending on the type of loan or business activity. In general however, interest on loan is repaid Monthly while principal repayments are made in quarterly installments through the Allstates Trust Bank in which the Beneficiary-group maintains its account.
11.Can a group benefit more than once
Yes. A group that fully repays its loan on time is eligible for a repeat loan of higher value. It would operate as a revolving fund, and performing groups would continue to have access to micro credit funds.
12.Is there a ceiling to the amount that a group can get
For the first loan, yes. Subsequent loans would then be incremental based on satisfactory performance.
13.Can loans be given to individuals
For this phase of the scheme, No. Loans are to be given only through registered community based groups. So individuals wishing to take advantage of the scheme need to belong to a group.
