The NLNG Microcredit scheme provides support to its beneficiaries through credit financing, savings mobilization and capacity building to promote entrepreneurship and enterprise development.

The pilot phase of NLNG Microcredit Scheme was launched in 2002 (for an initial period of three years) and its implementation was guided by the provisions of the MoU signed between NLNG and the other partners – All States Trust Bank and Community Development Foundation (CDF). At the end of the Pilot phase, an impact assessment of the scheme was conducted and findings from the study enriched the planning of the operational framework for the Scale-Up Microcredit Scheme. The revised strategy adopted two lending models to address the constraints encountered during the Pilot phase which are the NLNG Direct Disbursement Model and the Agricultural Credit Guarantee Scheme.

NLNG Direct Disbursement Model: This model consolidates on the pilot phase where disbursements are made directly to the groups’ current accounts domiciled with First Bank of Nigeria. Since inception, over N163 million has been disbursed to a total of 293 cooperative groups with each group consisting of an average of 10 persons who are actively involved in on-lending/ enterprise businesses in NLNG Host Communities.

NLNG Agricultural Credit Guarantee Scheme: The Agricultural Credit Guarantee Scheme Fund (ACGSF) is a policy instrument of the Federal Government of Nigeria established to provide a guarantee on loans granted by commercial banks to farmers for agricultural production and agro-allied processing. Nigeria LNG Limited signed a tripartite Memorandum of Understanding (MoU) with Central Bank of Nigeria and First Bank of Nigeria to implement the scheme across NLNG Host Communities. A total of N38.5 million has been disbursed to 20 cooperative groups who are solely involved in agricultural production and agribusinesses.

In addition to the lending models above, NLNG also adopted an alternative finance model called the Village Savings & Loans (VSL) Model. The VSL Model leverages on groups of individuals who form Accumulated Savings and Credit Associations (ASCAs).

An ASCA group requires no external borrowing, or donations to the loan portfolio. It is entirely self-sufficient and is not formally registered with the government which allows it to operate with less formal booking keeping and thus be more users friendly for illiterate members. Nigeria LNG provides non-financial support by building their capacities in areas of business finance and management, exposure to banking habits, linkages to markets and monitoring of activities.
Since inception in 2008, a total of 567 ASCAs, with each ASCA containing an average of 15 persons, have been formed across NLNG Host Communities with a total savings of over N100m.

RECIPIENTS
The targets of the micro-credit facility are the low income earners in the NLNG host communities particularly those who cannot raise money to start business. One salutary effect of the scheme has been the inculcation and sustenance of savings and banking habits in the people. 

CONDITIONS FOR PARTICIPATION
Only a registered co-operative society with at least 10 members engaged in productive ventures in the community is qualified to apply for the loan.

MICRO CREDIT - Q and A

1.What is micro-credit?
Microcredit simply is about providing specialised credit savings and other financial services of small amounts to micro-enterpreneurs to enable them expand their business opportunities, increase income and consequently improve their living conditions and well-being over time. It is a product of new thinking in community development which established that the rural entrepreneurs are bankable and that majority of them will remain below poverty line until they are exposed to formal banking and given access to credits, information and capacity building.
 
2. Why is NLNG implementing the scheme?
Nigeria LNG Limited being aware of the limitations of the poor to access financial institutions for loans has launched the scheme in its host communities to among other things:
 

• Contribute to the economic development of its Host communities through lending at very low rates and without collateral
• Inculcate the development of entrepreneurial and banking habits amongst the participating groups
• Improve the economic status of the small scale entrepreneur in the host communities by making funds available for business start up and expansion.

 
3. Who is the scheme for?
The scheme is restricted to groups from NLNG’s Host communities engaged in economic regenerative business such as farming, fishing, trading, on-lending and enterprise development and have expressed the greatest need for and have demonstrated capability to utilise micro credit.
 
4. What are the features of the scheme?
It works through co-operatives. NLNG provides seed money and the implementing consultant assesses the applications to determine viability and sustainability of proposed business and recommends further action. Loan revolves among members/funds groups’ projects. 
 
5. What are the criteria for Group selection?
To participate, a group must:
 
•    Be registered with the Ministry of Industry and Co-operatives
•    Have existed for at least six months post registration
•    Have membership strength of at least 10
•    Be engaged in income generating activity with good track record in savings and credit. 
 
6. What is the procedure for application?
Any interested group with the above criteria should write a letter of application addressed to the Manager, Community Relations, Nigeria LNG Limited, Bonny. The letter should be submitted through the implementing consultant with photocopies of group registration certificate and summary of business plan.
 
7. What factors could hinder the continuation of the scheme?
High rate of loan defaults, community members treating funds as some form of compensation, request for funds over and above what is actually required, diversion of funds from the purpose for which it was approved.
Diversion of funds from the purpose for which it was approved 
 
8. Is collateral involved in this scheme?
No. Members of beneficiary groups however, are jointly responsible for ensuring loan repayment, so they are required to give a joint guarantee/commitment for recovery of the loan.
 
9. What are the repayment terms?
 Repayment terms would vary, depending on the type of loan or business activity. In general however, interest on loan is repaid Monthly while principal repayments are made in quarterly installments.
 
10. Can a group benefit more than once?
Yes. A group that fully repays its loan on time is eligible for a repeat loan of higher value. It would operate as a revolving fund, and performing groups would continue to have access to micro credit funds.
 
11. Is there a ceiling to the amount that a group can get?
For the first loan, yes. Subsequent loans would then be incremental based on need and the acceptable standards within the global Microcredit methodology.
 
12. Can loans be given to individuals?
For this phase of the scheme, No. Loans are to be given only through registered community based groups. So individuals wishing to take advantage of the scheme need to belong to a group.