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State govts to provide ISPO for ABP in new guidelines.

The Central Bank of Nigeria (CBN) has revised its Guidelines for the Anchor Borrower Programme (ABP) with a requirement that the state government that wants to key into the intervention, henceforth, should present an Irrevocable Standing Payment Order (ISPO), a sub-sovereign loan guaranty.
Such an ISPO should cover the entire value of the facility, including accrued interest, the bank said in the new guidelines, posted on its website, yesterday.

 

The participating state government, has also been given the responsibility to identify and organize the smallholder farmers according to commodity; provide contiguous and validated farmland; provide aggregation services and provide off-taker(s) for the produce, as well as, identify PFI(s) to partner with.
Models under the new ABP guideline
The new guideline provides two windows for accessing funds under the Programme: Private Sector-led window and Public Sector-led Window.
According to the CBN, “Under each window, a Project Management Team (PMT) shall be established in each state for each project to coordinate and monitor the implementation in line with the provisions of the Guidelines.
“Membership of the PMT shall include: Representatives of PFIs – Chairman; Head DFO, CBN; Representative of Anchor/Commodity Association/ Cooperative/State Government – Co-Chairman; Head, State Agricultural Development Programme (ADP); Representatives of farmers; and Insurance Company.
“The membership of the PMT may vary depending on the model. In the case of national commodity association, the PMT at the Head Office shall comprise Commodity Champion, RACD, RMD, AMD, the PFI, Commodity Association and Insurance Company for each commodity.”
Risk Sharing and Procedure for Write-off
The new guidelines showed that the CBN shall bear 50 per cent credit risk after satisfactory evidence that every means of loan recovery has been exhausted by the PFI.
It added, “CBN may vary the risk sharing ratio based on the specific peculiarities/prospects of the Anchor/Project. For losses arising from the negligence and/or inaction of the PFI in the execution of any project, the PFI shall bear the full risk and financial losses thereof.
“The PFI shall foreclose on pledged collateral one year after expiration of initial facility and the risk sharing ratio prescribed above shall apply on the amount net in default.”
Eligibility Criteria
Smallholders farmers are to provide 10 per cent minimum equity contribution; be a member of a farmer group; have a bank account with the PFI; provide a valid Bank Verification Number (BVN); not be a defaulting borrower; have a validated farmland; provide vii. not participate under multiple associations in one cropping season.
Diversion of funds.
Any PFI that diverts funds made available for on-lending to anchor borrowers would be charged its maximum lending rate while the amount diverted would be recovered by the CBN.
Banks are also not to impose unauthorized fees on borrowers, as “the amount involved shall attract penal charge at the PFI’s maximum lending rate.”
Failure to disburse funds within a specified period, according to the new guidelines, the apex bank would recover the undisbursed amount, plus interest.
“The amount involved shall attract penal charge at the PFI’s maximum lending rate,” it said, while the offending institution would also bear 100% of Credit Risk for failures in production and/or aggregation.
Similarly, any anchor that diverts the funds would be blacklisted from all CBN interventions.