Agricultural Credit Guarantee Scheme Fund (ACGSF)

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The Agricultural Credit Guarantee Scheme (ACGS) was established by Decree No. 20 of 1977. The Scheme became operational in April 1978, and is fully subscribed to by the Federal Government (60%) and Central Bank of Nigeria (40%). The share capital under the Scheme is N50 billion (fifty billion naira).

The Scheme is under the management of the Agricultural Credit Guarantee Scheme Fund Board and the Central Bank of Nigeria is the Managing Agent for the administration of the Scheme.

Objectives of the ACGS include:

• To provide guarantee in respect of loans granted by lending banks for agricultural purposes, with the aim of increasing the level of bank credit to the agricultural sector."Loan" under the Scheme include advances, overdrafts and any other credit facility.
• To mitigate risks associated with banks' lending to agriculture by guaranteeing 75% of the net amount in default in accordance with the provisions of the enabling Act.

How to Apply:

• All applications for loan guarantee under the Scheme shall be made on the form prescribed for the purpose
• The ACGS application form should be completed by the beneficiary; Application forms shall be signed and stamped by the lending bank concerned and forwarded to the nearest office of the Central Bank in the State in which the bank is situated or as may be otherwise directed.
• Agricultural enterprises guaranteed under the Fund must be mapped/tagged and the cost borne by the customer.
• All loan applications should be subject to Credit Bureau and Credit Risk Management System (CRMS) checks by the lending bank.
• The Development Finance Office in the State will conduct visits to the project sites and attach reports (including pictures and video clips) and submit same to the DFD Head Office.
• All applications for ACGSF guarantee should be submitted to CBN by the lending bank not later than 30 days after receipt of application from beneficiary
• All lending banks are expected to carry out all necessary credit reviews and due diligence in good faith as well as competence, with which they would treat all applications for loans received in the normal course of their banking business

Eligible participating financial institutions under the scheme:

• Deposit Money Banks
• Microfinance banks under the regulatory and supervisory role of the Central Bank of Nigeria (CBN)

Eligible participating Stakeholders under the scheme:

• Small Holders Farmers (SHF) across the Agricultural value chain
• Medium Scale Farmers and Agro Processors within the Agricultural value chain.

Agricultural purposes for which loans can be guaranteed:

The Agricultural purposes in respect of which loans can be guaranteed by the fund are those connected with:

• The cultivation or production of crops, establishment or management of plantation;
• Animal Husbandry; and
• All activities within the Agricultural Value Chain.

Interet Drawback Programme (IDP) Claims Payment

The IDP was introduced in January 2003 as a compulsory programme under the ACGSF. The programme has a capital base of ₦2.0 billion subscribe to by the Federal Government (60 per cent) and Central Bank of Nigeria (40 per cent). The Interest Drawback Programme is an interest rate rebate set up to assist farmers borrowing under the ACGSF to reduce their effective borrowing rates.

Objectives of the IDP includes:

• To provide interest rebate to farmers who borrow at market determined rates by granting them a drawback of a certain percentage of the interest paid as at when due.
• To reduce the burden of high interest payment by the beneficiaries through 40% reimbursement of the interest element on loans under the Agricultural Credit Guarantee Scheme Fund.

How to Apply:

The lending bank files for claims on behalf of the ACGSF beneficiaries.

Eligibility:

A customer is considered eligible for IDP claim, if such a customer has fully repaid both loan principal and interest within the agreed tenor. However, a grace period of three (3) months for repayment may be allowed but interest accruing during the grace period will not be part of the amount to be refunded. The IDP is presently available to farmers borrowing under the ACGSF only.

Documents required for processing IDP Claims

• Completed Form IDP/1 from the lending bank in triplicate. The lending bank shall retain the triplicate for record purposes. b) Original ACGSF guarantee certificate in respect of the beneficiaries. Loans under the IDP shall be subject to all terms and conditions for borrowing under the ACGSF.

ACGSF DEFAULT CLAIMS SETTLEMENT

ACGSF Default Claims Settlement is paid in the event of default on loan repayment under the ACGSF.

How to Apply:

In the event of default in loan repayment, the lending bank is to send to the guarantor, Central Bank of Nigeria a notice of default. Afterwards, the lending bank is expected to make further effort as it deems fit to recover the amount in default from the borrower. If any balance remains after the above steps and the default persists after six months of notice of default, the lending bank could realize the pledged security and therefore put a claim to realize 75% of the outstanding balance. After due inspection and verification, the CBN issues a cheque valued 75% of the balance outstanding as at the time of the application for clams to bank. Under the guidelines establishing the Scheme, the amount paid in settlement of claims should not be credited to the account of the borrower who will be held liable to the bank for his/her total indebtedness.

Eligibility:

The lending bank is qualified for ACGSF Claims Settlement only, after due inspection and verification on the loan default. The CBN issues a cheque valued 75% of the balance outstanding as at the time of the application for claim to the bank. The beneficiary bank would be expected to continue to exercise the same diligence in recovering the outstanding amount, as if no guarantee was issued by the fund. Where there are recoveries, 75% of such, is refunded to ACGSF.

Requirement:

In the event of default in loan repayment, the lending bank is to send to the guarantor, Central Bank of Nigeria a notice of default. A beneficiary bank would be expected to have exhausted all the necessary avenues in pursuing repayment of the loan.

FREQUENTLY ASKED QUESTIONS ABOUT AGRICULTURAL CREDIT GUARANTEE SCHEME FUND (ACGSF)

• What is ACGSF?

ACGSF is an acronym for Agricultural Credit Guarantee Scheme Fund which was established by decree No. 20 of 1977. It was established to encourage banks to lend to farmers engaged in agricultural production and its value chain activities. The Federal Government and the Central Bank of Nigeria (CBN) both contribute to the Fund in the ratio of 60% and 40% respectively. However, the CBN doubles as the Managing Agent of the Scheme and the Secretariat of the ACGSF.

• Who is eligible to participate?

• Deposit Money Banks
• Microfinance Banks under the regulatory and supervisory role of the CBN.

• What is the coverage of the issued guarantee

The Fund guarantees 75% of the loan amount in default net of any security realized.

• How long will the guarantee cover be available for credit facility extended to a particular borrower?

The guarantee cover depends on the gestation period of the crop.

• Which agricultural activity does the ACGSF cover?

Agricultural value chain activities, which includes; financing of farm machinery production, implements and equipment for production, processing, storage and transportation and any purpose connected with the activities within the agricultural value chain.

• Can I use the guarantee for other purposes other than Agriculture?

No, it has to be for agricultural purposes as stipulated by the ACGSF guidelines

• Can the guarantee cover be revoked?

Yes, it can be revoked, if the lending bank or the beneficiary do not adhere to the ACGSF guidelines.

• Do I need collateral to access ACGSF?

The maximum for non-collateralized loan is N100,000.00 and maximum for collateralized loan is N50 million.

• Will any guarantee or service fee be charged under the ACGSF?

No fee is charged under the scheme, the application form is free and provided by the CBN.

• What will be the security on credit facility extended under the ACGSF?

For collaterized loan the following may be used as a form of security

• A charge on land with legal interest or a right to farm
• A charge on movable property of the borrower
• A life insurance policy
• Stocks and shares
• A personal guarantee
• Any adequate and realizable security acceptable to the bank
• All assets registered on the National Collateral Registry (NCR)
• Warehouse receipt

• What is Interest Draw Back Programme (IDP)

IDP is an acronym for Interest Draw Back Programme. The purpose of the IDP is to provide interest rate rebate to farmers who borrow at market determined rates by granting them a drawback of a certain percentage of the interest paid as at when due. It is aimed at reducing the burden of high interest payment by the beneficiaries through 40% reimbursement of the interest element.

• How do I qualify for IDP Claims

A customer is considered eligible for IDP claim, if such a customer has fully repaid both loan principal and interest within the agreed tenor. However, a grace period of three (3) months for repayment may be allowed but interest accruing during the grace period will not be part of the amount to be refunded.

• Who files the IDP Claims

The lending bank files for claims on behalf of the ACGSF beneficiaries

• What are the documents required for processing IDP Claims

The following supporting documents shall be required for processing interest drawback applications: a) Completed Form IDP/1 from the lending bank in triplicate. The lending bank shall retain the triplicate for record purposes. b) Original ACGSF guarantee certificate in respect of the beneficiaries. Loans under the IDP shall be subject to all terms and conditions for borrowing under the ACGSF.

• How is IDP calculated

The rebate is calculated on reducing balance method and pro-rated according to the loan duration for the repayment as stipulated under the ACGSF guidelines.

• How long does it take to process IDP Claims

It takes 10 days to process IDP Claims as long as the necessary documents required for processing IDP Claims are provided by the lending bank.

• How will the IDP Claims be paid

The IDP rebate shall be remitted through beneficiary’s (farmers’) bank account where the loan was disbursed and repaid in compliance with other relevant sections of the guidelines.

• What is ACGSF Default Claims Settlement

ACGSF Claims Settlement is paid in the event of default on loan repayment under ACGSF.

• Who is qualified for ACGSF Default Claims Settlement

The lending bank is qualified for ACGSF Claims Settlement after due inspection and verification, the CBN issues a cheque valued 75% of the balance outstanding as at the time of the application for claim to the bank.

• Is the lending Institution required to remit the recovered amount received from the borrower after settlement of Default Claims

Yes, the implication is that, a beneficiary bank would be expected to continue to exercise the same diligence in recovering the outstanding amount, as if no guarantee was issued by the fund. Where there are recoveries, 75% of such, is refunded to ACGSF.