Micro, Small and Medium Enterprises Development Fund (MSMEDF) Guidelines

Development Finance Department        Central Bank of Nigeria

Micro, Small and Medium Enterprises Development Fund (MSMEDF) Guidelines 

                                    CHAPTER ONE

 1.0    ESTABLISHMENT OF THE FUND

 As part of its developmental functions and mandate of promoting a sound financial system in Nigeria, the Central Bank of Nigeria launched the Micro, Small and Medium Enterprises Development Fund (MSMEDF) on August 15, 2013. This was in recognition of the significant contributions of the Micro, Small and Medium Enterprises (MSME) sub-sector to the economy.

The sub-sector is characterized by huge financing gap which hinders the development of MSMEs. Section 6.10 of the Revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, stipulates that ‘a Microfinance Development Fund shall be set up, primarily to provide for the wholesale funding requirements of MFBs/MFIs’. To achieve the provisions of  Section 4.2 (iv) of the Policy, which stipulates that women’s access to financial services should increase by at least 15 per cent annually to eliminate gender disparity, 60 per cent of  the Fund has been earmarked  for providing financial services to women.

This informed the decision of the Central Bank of Nigeria to establish the Micro, Small and Medium Enterprises Development Fund (MSMEDF).The Fund prescribes 50:50 ratio for on-lending to micro enterprises and SMEs respectively by Participating Financial Institutions (PFIs).

Special consideration shall be given to Participating Financial Institutions (PFIs) that have signed Memorandum of Understanding (MoU) with the Central Bank of Nigeria’s Entrepreneurship Development Centers (EDCs) to provide credit facilities to its graduates.

In addition, 2% of the wholesale component of the Fund shall go to economically active persons living with disabilities (PLWD).

1.1    Seed Capital

The Fund shall have a take-off seed capital of N220billion.

1.2    Objective

The broad objective of the Fund is to channel low interest funds to the MSME sub-sector of the Nigerian economy through PFIs to:

  • Enhance access by MSMEs to financial services;
  • Increase productivity and output of microenterprises;
  • Increase employment and create wealth; and
  • Engender inclusive growth.

1.3    Components of the Fund

The Fund shall have Commercial and Developmental components.

1.4    Commercial Component

The Commercial Component shall constitute 90 per cent of the Fund which shall be disbursed in the form of Wholesale Funding to PFIs in the following ratio:

  • 60% of the Fund: Women
  • 40% of the Fund: Others

Objectives of Wholesale Funding are to:

  1. Provide facilities to qualified and eligible PFIs for on-lending to MSMEs;
  2. Improve the capacity of the PFIs to meet credit needs of MSMEs; and
  3. Reduce the cost of funds of the PFIs and ensure that this translates into reduced cost of borrowing.

1.5    Developmental Component

The Developmental Component makes up the remaining 10 per cent of the Fund. It shall be earmarked for developmental programmes in form of Grants.

The 10% Grant shall be utilized for the general development of the MSME sub-sector in the following areas:

  1. Capacity building of PFIs
  2. Development of appropriate regulatory regime for MSMEs lending
  3. Financial literacy and entrepreneurship development
  4. Mobilization, training and linking of MSMEs to financial services
  5. Research and Development of MSMEs-friendly financial innovations and products
  6. Business Development and Advisory Services
  7. Building of financial infrastructure in support of MSMEs


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