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Home Financial Literacy

How to apply for a micro-finance loan in Nigeria

Op-Ed Contributor by Op-Ed Contributor
July 17, 2019
in Financial Literacy
How to apply for a micro-finance loan in Nigeria
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  • 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.

Microfinance bank

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.

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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.

AGRIC, BUSINESS, EDUCATION AND ASSETS

[Find Out: Why A Drop In Inflation Does Not Necessarily Mean A Drop In Prices Of Commodities]

The interest rate on Microfinance loans ranges from 5%-6% depending on the loan
size.The tenure of the loan depends on the loan type and they could range from:

• 1-3 months
• 4-6 months
• 4-12 months

The maximum maturity date is 18 months however this only applies to businesses whom are granted up to 5 million naira credit facilities.

The following factors should be considered before applying for a business loan:

  • In order to prove credit-worthiness, most banks require prospective customers to have an account in the bank which has been active and serviced for at least 6 months.
  • It is advisable to distinguish one’s personal account from business account to ensure
    accountability.
  • For Small and Medium Scale Enterprises, thorough research must have been carried out about the business before applying for a loan. The business must also be active for at least one year and operating from the same location for at least six months.

Documents required when applying for a Micro Finance Loan

The documents required for a Microfinance loan include:

  1. Loan application form
  2. Excellent Business Proposal (for SMEs)
  3. Letter of Application (for individuals)
  4. Valid means of identification (National I.D card, International Passport, Driver’s License)
  5. Copy of recent utility bill
  6. 4 recent passport photographs
  7. 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.

Collateral loans

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.

[Don’t Miss: Why A Drop In Inflation Does Not Necessarily Mean A Drop In Prices Of Commodities]

Documents required for the Guarantor

  1. 2 recent passport Photographs
  2. Copy of recent utility bill
  3. Valid means of identification (National I.D card, International Passport, Driver’s License)
    Finally, it is pertinent to note that a Microfinance loan can be repaid before it’s due date.

Ijeoma Uhuegbulem is a Business Analyst and writes from Lagos, Nigeria.

Related

Tags: ExplainersMicro finance loans

Comments 26

  1. Mr Roland m umahi says:
    September 30, 2019 at 12:34 pm

    Comment: Thanks for ur contribution to d society i will try to keep entouch as i’ve got some question to ask later to see d posibility of geting loan for my production company

    Reply
  2. Chinedu g Emmanuel says:
    April 24, 2020 at 10:54 pm

    How do I apply am in Lagos am interested on the lon I have land here which I intend to use for agriculture products but I need money to start

    Reply
  3. Kolawole Kemisola says:
    June 19, 2020 at 11:09 pm

    Please i need loan am a business woman

    Reply
  4. CHRISTIANA says:
    April 23, 2021 at 10:24 am

    HOW LONG WILL TAKE TO GET THE LON

    Reply
  5. Obasi Charles says:
    May 13, 2021 at 1:31 pm

    Please i need loan to uplift my business

    Reply
  6. Christy says:
    May 27, 2021 at 10:24 pm

    How do i apply loan on line

    Reply
  7. Christy says:
    May 27, 2021 at 10:28 pm

    How do I apply loan on line in micro bank

    Reply
  8. Yusuf says:
    June 10, 2021 at 3:00 pm

    Sorry

    Reply
  9. Nnamdi says:
    July 13, 2021 at 1:46 pm

    How do i apply and can i get upto 500,000?

    Reply
  10. Olabanjo funmilola susan says:
    July 17, 2021 at 4:38 pm

    How do get a loan of 100k plssss

    Reply
    • Stanley chukwuemeka says:
      March 10, 2022 at 9:48 pm

      How can i get a loan

      Reply
  11. Chidimma, E. Ashimole says:
    July 26, 2021 at 12:02 pm

    Good day pls, I need loan of #500,000 to upgrade my business and finish my shop expansion I’ve started to enable my business get larger

    Reply
  12. Zainab Garba Rufai says:
    September 4, 2021 at 9:00 pm

    I need corrona virus loan to finish my study

    Reply
  13. Mustapha bello ibrahim says:
    September 9, 2021 at 5:59 am

    I am a furniture I will like to get a lone at least five hundred thausand in order to improve my business will you rent the amaunt withing 5 to 6 month the money will return to the bank.

    Reply
  14. Umar husseini Ardo says:
    October 11, 2021 at 11:05 pm

    I am a cattle trader I wish to apply for loan of 500000 to bust the business the money will return to the bank in 4years.

    Reply
  15. Ayodele Ifeoluwa says:
    October 14, 2021 at 3:50 pm

    How can I get a loan to get an apartment
    Please. I and my husband are working we will be paying back monthly..
    Kindly assist us

    Reply
  16. Ekpong confidence etem says:
    November 25, 2021 at 1:24 pm

    Please I need a loan to pay my house rent

    Reply
  17. Ekpong confidence etem says:
    November 25, 2021 at 1:25 pm

    I need a loan to pay my house rent

    Reply
  18. usoh david says:
    December 7, 2021 at 5:09 pm

    please i need a loan of 1 million naira

    Reply
  19. Stanley chukwuemeka says:
    March 10, 2022 at 9:44 pm

    Be

    Reply
  20. Stanley chukwuemeka says:
    March 10, 2022 at 9:45 pm

    Ur the best like it

    Reply
  21. Olagoke Daniel says:
    March 19, 2022 at 7:37 am

    Thanks all information well understood… I just wanted to start up a business can I get loan too?

    Reply
  22. Adamu Abdullahi musa says:
    June 14, 2022 at 11:25 pm

    My name is adamu Abdullahi musa was born in potiskum yobe state I want to get my loan because my business is mini thank you

    Reply
  23. Adamu Abdullahi musa says:
    June 15, 2022 at 6:45 am

    Yes

    Reply
  24. Monday husseini Amos says:
    June 16, 2022 at 7:49 pm

    I need 500,000 to upgrade my business.

    Reply
  25. Sodiq Soetan says:
    June 29, 2022 at 12:19 am

    I need someone that can get me a car for taxi and I will be paying back as instalment, am from ogun state you can call on my number 08169028579

    Reply

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