The Central Bank of Nigeria has said farmers must have an insurance cover for loans to be disbursed to them under the Agricultural Credit Guarantee Scheme Fund.
The CBN said this in its guidelines for the Agricultural Credit Guarantee Scheme Fund released on Friday.
“All loans under the scheme must be insured as a condition precedent to guarantee,” it said.
According to the central bank, the security that may be offered to a bank for the purpose of any loan under the scheme may include a charge on land in which the borrower holds a legal interest or a right to farm, or a charge on assets on the land, including fixed assets, crops or livestock.
It said the security might include “a charge on the movable property of the borrower; a life assurance policy, a promissory note or other negotiable security; stocks and shares; a personal guarantee; any other security acceptable to the bank, which must be adequate and realisable.”
It said all assets registered on the National Collateral Registry; warehouse receipts; and letter of indemnity from an employer for those in paid employment, signed by authorised signatories, could also be used as collateral.
According to the guidelines, for loans of N100,000 and below, banks are not expected to demand tangible securities and feasibility reports, but there should be a cross-guarantee among members in a group or cooperative, and any other guarantee that may be acceptable to the bank.
The apex bank said the purpose of the fund “is to provide guarantee in respect of loans granted by lending banks for agricultural purposes under the scheme with the aim of increasing the level of bank credit to the agricultural sector.”