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The Trust Fund Model

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The Trust Fund Model is a framework for enhancing credit supply to the agricultural and rural sectors of the economy. Under the Model, oil companies, State/Local Governments and Non Governmental Organizations (NGOs) place funds in trust with lending banks to augment the small group-savings of the farmers as security for agricultural loans.

The Trust Fund secures 25% or more of the intended loans of the prospective borrowers, the farmers’ savings secure another 25% while the ACGSF guarantees 75% of the remaining 50%, thereby leaving the lending bank with a risk exposure of only 12.5%. Sometimes, the state government, taking cognisance of the low capacity of the poor farmers in the state, may decide to increase its stake beyond 25% in order to assist the peasant farmers who may be unable to muster sufficient savings to qualify for a meaningful amount of loan.

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Facts : 1/1/1990
Guidlines for Licensed Banks:In 1990, the CBN introduced a set of Prudential guidelines for licensed banks which were complimentary to the capital adequacy requirement and statement of accounting standards. The guidelines spelt out the criteria to be adopted by banks in classifying non-performing loans.
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