Central Bank of Nigeria (CBN) has barred Credit Guarantee Companies (CGCs) from accepting deposits and other commercial instruments from depositors.
It disclosed this in its guidelines for regulation and supervision of CGCs.
According to CBN, its efforts to stimulate lending to Micro, Small and Medium Enterprises (MSMEs) facilitated the
development of guidelines for the establishment and operation of CGCs in Nigeria.
“On non-permissible activities, a CGC shall not provide guarantee to entities within its holding company structure and to connected entities; guarantee loans of any institutions it is indebted to; accept demand, savings and time deposits or any other deposits; provide credit to customers and manage pension funds or schemes.
“On permissible activities, a CGC may provide guarantee for risk assets of participating financial institutions; render advisory services for financial and business development; invest surplus funds in government securities and partake in other investments, as may be approved by the CBN.
“The CGCs may also provide technical assistance to lenders and borrowers on credit and business development as well as maintain and operate various types of accounts with banks in Nigeria and other activities as may be prescribed by the CBN from time to time,” the guidelines stated.
The CBN explained that the objectives of the credit guarantee scheme include improving access to credit for MSMEs; reducing credit risks in lending by providing guarantees to Participating Financial Institutions (PFIs); stimulating lower interest rates on loans and promoting flexible collateral requirements by PFIs.
Others are to encourage new business formation, develop, expand and accelerate economic growth and reduce unemployment, foster sustainable and inclusive growth, as well as improve risk management in the financial system The Trumpet gathered.
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The CBN stressed that it will sanction the CGCs, their directors and employees for contravening any of the provisions of the guidelines with monetary penalties, ban them from declaring or paying dividends and suspend guarantee operations, capital expenditure, or debt insurance.
It said it will also suspend or remove directors, officers or employees of such CGCs from office, as well as disqualify any such directors, officers or employees from holding any position or office in a CGC and revoke their licenses.
