Micro-finance loan- How to apply for a Micro-finance loan in Nigeria
This articles explains common steps to follow when applying for a micro-finance loan in Nigeria
It explains factors you should consider before applying, documentation required, interest rates to expect etc.
It also highlights the type of collateral and guarantors that may be required before applying for a Micro-finance loan.
Micro-finance loan- How to apply for a Micro-finance loan in Nigeria
Microfinance Banks are established to assist individuals and Small & Medium Scale
Enterprises in obtaining mini credit facilities.
Due to the rigorous process and high interest rates demanded by commercial banks, Microfinance banks were established to assist individuals (salary earners), petty traders and small businesses in securing loans.
Microfinance credit facilities in Nigeria are given for the following reasons: Business, assets procurement, Agriculture, Educational purposes e.t.c. Therefore, individuals and businesses are eligible for Microfinance loans as long as they meet the requirements stipulated by the bank.
Documents required when applying for a Micro Finance Loan
The documents required for a Microfinance loan include:
- Loan application form
- Excellent Business Proposal (for SMEs)
- Letter of Application (for individuals)
- Valid means of identification (National I.D card, International Passport, Driver’s License)
- Copy of recent utility bill
- 4 recent passport photographs
- Evidence of business location
Collateral
This is optional when applying for a Micro-finance loan. However, large business loans,
agriculture loans and asset procurement loans require a collateral whose value must be equal to or greater than the loan amount.
Guarantors
Petty traders and individuals require 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.
Where there’s a default in repayment by the customer, the Guarantor will be required to repay the loan amount. On the day the loan agreement is signed, the prospective customer and the guarantors are required to sign the agreement.
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