CBN’s Non-Interest Intervention Will Unlock Funding For Agric, Other Sectors—-Varsity Don

The Central Bank of Nigeria’s introduction of intervention schemes to cater for Non-Interest Financial Institutions would unlock funding for the agricultural and other key sectors of the economy.

The Head of Department, Islamic Law, University of Ilorin, Prof AbdulRazzaq Alaro, said this during a Business Programme on TVC aimed at assessing CBN schemes for Non-Interest Finance Institutions.

The apex bank had last month released a circular for Non-Interest Financial Institutions signed by its Director, Financial Policy and Regulation Department, Kevin Amugo.

The initiative was part of efforts to increase access to NIFIs and promote financial inclusion.

The schemes include Non-interest Guidelines for the Accelerated Development Scheme; Non-interest Guidelines for Intervention in the Textile Sector; Guidelines for the Operations of the Agri-Business, Small and Medium Enterprise Investment Scheme for NIFIs; Guidelines for MSME Development Fund for NIFIs; Non-interest Guidelines for Non-oil Export Stimulation Facility; Non-interest Guidelines for Anchor Borrowers’ Programme and Non-interest Guidelines for Real Sector Support Facility Revised Guidelines.

Others are Non-interest Guidelines for the operation of the Credit Support for the Healthcare Sector; Modalities for the implementation of the Creative Industry Financing Initiative (Non-interest version); Non-interest Guidelines for the implementation of the N50bn Targeted Credit Facility.

Speaking on the benefit of the intervention, the University Don said it would help to increase agricultural production towards food security, job creation and economic diversification.

For instance, he said the intervention would help to engage youths in agricultural production nationwide in order to reduce youth unemployment.

The Varsity Don said based on the way the Non-interest Banking framework is structured, the scheme would be implemented in a manner that would reduce the level of risks usually encountered by entrepreneurs when funding their businesses from loans.

He said, “The Non-Interest Banking system has come to create a synergy between two economic units through which they will all become active participants in the real economic activities to which those funds will be channeled.

“It means an Islamic or Non-Interest Bank must concern itself with what the fund is being channeled to, and how it is being used.”

When asked what Nigerians stand to benefit by keying into this type of Non-Interest Banking intervention, he said “There are a lot of opportunities in this intervention.

“This is a form of financing that accomodate start up businesses. You may not get this type of funding from Commercial Banks because they are hesitant and reluctant to support start-up business but this scheme will do that under this intervention.

“When you look at what is required in terms of collateral security, they are very affordable.

“The percentage of returns is a single digit interest rate and no commercial bank can afford to give you finance at that single digit interest rate.”

On the risk management mechanism for managing the intervention fund, Alaro said that there are adequate safeguards tp protect the mismanagement of funds to be disbursed under the Non-interest Banking Intervention fund.

For instance, he said that one of the safeguards under the scheme is that State Government could stand as guarantors for loans taken by citizens of that state.

He also said that traders could also come together under a collateralized cooperative arrangement to access the loan.

“There are sanction for infractions. If you breach any terms of the condition, you might be prosecuted for failure to pay back. You can also be blacklisted from being a participant going forward from CBN intervention programmes,” he added.