FMO, FCMB, EU Inks $25 Million Agreement To Help Restricted SMEs

Olufemi Adeyemi 

FMO, FCMB, and EU have entered into a $25 million agreement to provide support to SMEs that are currently excluded from financial services.

The Dutch entrepreneurial development bank (FMO) and Nigeria’s First City Monument Bank (FCMB) have entered into a $25 million NASIRA guarantee agreement. This agreement will allow FCMB to increase its funding to agricultural, youth, and women-owned SMEs without requiring collateral. This is significant because these groups are often considered too risky by banks.

As per the official statement released by FMO, the accord was executed during the 9^th Nigeria EU Business Forum held in Abuja on Tuesday. This initiative, financed by the European Commission, NASIRA stands as one of FMO’s pioneering programs, motivating local banks to expand their financial support to small entrepreneurs without requiring collateral.

It has been observed that the FMO guarantee, which essentially serves as a replacement for collateral, is often underutilized. This indicates that the entrepreneurs supported by this guarantee, predominantly women and young individuals, do not exhibit a higher risk profile compared to others.

The creation of employment opportunities in Nigeria, a nation with a population of 220 million and the largest in Africa, is of utmost importance. The country is grappling with significant economic challenges, including high unemployment rates and a substantial 70% depreciation of its currency in the past year. By providing microfinance loans to typically high-risk demographic groups, we can empower them to establish and expand their own businesses, thereby securing a source of income for themselves and their families.

In addition to the USD 25 million NASIRA guarantee, FMO intends to provide FCMB with a syndicated loan of USD 60 million, comprising USD 20 million from FMO, USD 30 million from the European Financing Platform on behalf of BIO, DEG, EIB, FINNFUND, Proparco, and SWEDFUND, and USD 10 million from FMO Investment Management. The purpose of this loan is to facilitate the expansion of FCMB’s existing loan portfolio for small and medium-sized enterprises (SMEs), as stated in the official announcement.

During the signing ceremony held concurrently with the 9^th Nigeria EU Business Forum, Myriam Ferran, Deputy Director General of the Directorate of International Partnerships (INTPA) of the European Commission, made the following statement: “We are very happy to see that the EU investment instruments, such as the European Fund for Sustainable Development (EFSD+) guarantees, have come to Nigeria to play a catalytic role in leveraging private sector investments for the benefit of the real sector, economic diversification and employment creation, especially for youth and women.”

The transaction also includes a technical assistance (TA) program. Through this TA initiative, FCMB and FMO will collaborate to select and support fifteen scalable early-stage agri-tech enterprises in Nigeria. Jointly, FMO and FCMB will identify fifteen disruptive business models that address pressing challenges within the agricultural sector, thereby contributing to the achievement of Sustainable Development Goal 2: Zero Hunger and Food Security.

July 03, 2024