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General Operational Framework of Micro Credit Loan Scheme in Nigeria
1. Overview
? A micro credit loan is described as a facility granted to an individual or a group of borrowers often described as operators of micro-enterprises, such as artisans, traders, technicians, peasant farmers, fishermen, women, senior citizens and non-salaried workers in the formal and informal sectors, whose principal source of income is derived from business activities involving the production or sale of goods and services.
? The loan is typically limited to N500,000 per individual/enterprise with a maximum repayment period of 180 days (6 months) and is usually granted with little or no collateral security, but considered on the basis of the applicant’s character and the combined cash flow of the business and household.
? Micro credit loans may require joint and several guarantees of one or more persons and further strengthened by the concept of ‘Peer Pressure’ in the timely collection of loan repayments from borrowers.
? Repayment of Micro credit loans may be on a daily, weekly, bi-monthly or monthly basis in accordance with the loan agreement.
• Micro credit loans are usually distinguished by three basic features:
- smallness of loans advanced and/or savings collected,
- absence of asset-based collateral, and
- simplicity of operations.
2. Objectives
i) To capture the unbanked yet economically active Nigerian population who are excluded from access to formal financial services into the formal financial system.
ii) ...