How To Apply for Loan From Microfinance Banks In Nigeria
Microfinance Banks are credit institutions established to provide assistance to small and medium scale enterprises, and individuals seeking to set up or fund their businesses.
The areas that benefit most from loans given by microfinance facilities are Business, Agriculture, assets procurement, Educational initiatives, poverty eradication schemes, etc.
Microfinance loans are disbursed with interests that range from 5% to 6% depending on amount requested.
Also, each financial institution have their loan type and the tenure of the loan could be between;
- 1-3 months
- 4-6 months
- 4-12 months
For businesses that are granted up to N5 million (N5,000,000) credit facilities, the maximum maturity date is 18 months.
As an individual or business owner, there are steps one must follow and adhere to if you wish to obtain a loan from Microfinance Banks in Nigeria.
- Business Plan or Project
Make sure you have a very good business plan and reason for wanting a loan before approaching any Microfinance Bank. This increases your chances of getting an approval from the management of the micro-lending institution. Also note that they mostly grant loans that fall in the category of SMEs.
- Proof of Registered Business
Having an already established business before applying for a loan most times helps your case because it gives the MFB confidence that you are not looking for money to squander or spend lavishly.
Go with proof of your business entity which has already been registered with the Corporate Affairs Commission, CAC, and show the financial institution. They might also demand bank statements or receipts of transactions to prove that you’ve been operating a business.
- Own MFB Account
If you have done all the necessary documentation and followed all the steps, you will not get the loan unless you have an account with the microfinance bank you visited.
Open an account with the microfinance bank and get your data captured. This also helps to show your commitment to the bank.
Important Items You Need When applying for Loan
I. Loan Application Form
II. Excellent Business Proposal (for SMEs)
III. Letter of Application (for individuals)
IV. Valid means of Identification (National I.D card, International Passport, Driver’s License)
V. Copy of recent utility bill
VI. 4 recent passport photographs
VII. Evidence of Business Location
For individuals or petty traders seeking microfinance loans, having collateral when applying is optional.
But for large business loans, agriculture loans and asset procurement loans, the MFB demands a collateral whose value must be equal to or greater than the loan amount.
For small business owners, petty traders and individuals, you will be asked to get guarantors instead of collateral.
The minimum number of guarantors required by Microfinance Banks is two.
Guarantors must be financially stable and at least 25 years old. It is the duty of the Guarantors to ensure that the loan is paid back when due.
If you default in repayment, the person(s) you put as guarantor(s) will be required to repay the loan amount.
The prospective customer and guarantor(s) will have to be present on the day the loan is approved because they will both sign the agreement.
Documents Guarantor Must Have
2 recent passport Photographs
Copy of recent utility bill
Valid means of identification (National I.D card, International Passport, Driver’s License)
If you apply for a loan from a Microfinance Bank in Nigeria, and you make the money back from your business early enough, try to be repaying before the due date because this gives the assurance that you are capable of repaying the loan and on time, so the MFB would fast track any future loan you apply for.
It is very important for you to understand the terms and conditions as well as compare interest rates of different microfinance banks so you can choose the best deals.