The National Credit Guarantee Company (NCGC) was created to handle Nigeria’s credit guarantee schemes, with the Nigeria Credit Guarantee Scheme being one of the flagship initiatives under its watch. At its core, the company exists to solve a very practical problem: banks and other financial institutions are often hesitant to lend to small businesses, farmers, and entrepreneurs because of the risk of default. The NCGC steps in to share that risk by guaranteeing part of the loan. For lenders, it’s an extra layer of confidence. For businesses, it’s a chance to access credit that would otherwise be out of reach.
Because the NCGC is still fairly new, many people are asking what it really does, how it works, and why it matters. To clear up some of the confusion, here are answers to some of the most common questions about the NCGC and its role in Nigeria’s credit space.
Also read: What is the National Credit Guarantee Company (NCGC)
1. What exactly does the NCGC do?
The NCGC provides guarantees to banks and other lenders, covering up to 60% the principal in case the borrower defaults. This makes lenders more willing to give out credit to small and medium enterprises (SMEs), startups, and other groups that often struggle to meet traditional collateral requirements.
2. Who can benefit from NCGC guarantees?
The guarantees are mainly targeted at:
- Micro, small, and medium enterprises (MSMEs)
- Farmers and agribusinesses
- Entrepreneurs without large assets for collateral
Both individuals running small businesses and registered companies can qualify if they meet the set requirements.
3. Do borrowers still have to meet their banks’ requirements?
Yes. The NCGC doesn’t replace the bank’s due diligence. Borrowers still need to meet the lender’s basic credit criteria, present relevant documentation, and show they have a viable plan for repaying the loan.
4. Does the NCGC give loans directly?
No. The NCGC doesn’t lend money to individuals or businesses. It works through banks, microfinance institutions, and other approved lenders by offering them credit guarantees.
5. How does the guarantee actually work?
If a borrower defaults, the NCGC will cover an agreed percentage of the principal amount up to 60% and depending on the scheme. This reduces the bank’s loss and makes them more open to lending to businesses they might otherwise consider too risky. However, this is subject to the bank proving they issue the loan in line with approved prudential guidelines. If the bank is found to have cut corners, nothing would be paid.
6. Are there fees for accessing NCGC-backed loans?
Yes. Borrowers may have to pay a small guarantee fee, which is usually a percentage of the loan amount. The exact rate will depend on the specific guarantee program and the lender’s terms.
7. Will this make loans cheaper?
Not automatically. While the guarantee reduces risk for lenders, interest rates are still set by the lending institution. However, the guarantee can make it easier for borrowers to get approved in the first place.
8. What documents do I need to apply for an NCGC-backed loan?
This will vary depending on the lender, but you’ll typically need:
- A valid ID
- Business registration documents (if applicable)
- Basic financial records or proof of income
- A business plan or description of loan use
- Any and all other documents as required by the bank
9. Can large corporations also use NCGC guarantees?
No. The focus is on smaller businesses, startups, and individuals who can’t access credit easily through regular banking channels.
10. How can lenders participate in the scheme?
Banks, microfinance institutions, and finance houses can register with the NCGC to offer guaranteed loans. However, this is currently limited to the Central Bank of Nigeria licensed institutions; money lenders and cooperatives are not invited at this time.
11. Does the NCGC work with all lenders?
No. The NCGC typically partners with licensed financial institutions, such as commercial banks, microfinance banks, and other approved lenders that meet its eligibility requirements. Borrowers can only access credit guarantees through these approved partners.
12. How much of the loan does the NCGC guarantee?
The guarantee coverage can vary depending on the loan type and the agreement between the NCGC and the lending institution. In many schemes, it can range from 50% to 60% of the outstanding principal value, meaning the lender still bears part of the risk.
13. Can the guarantee be withdrawn?
The NCGC can revoke or decline a guarantee if the lender fails to follow agreed lending practices or if the borrower provides false information during the application process.
Also read: What NCGC will (and won’t) do for Nigerian lenders
14. How is the NCGC different from traditional collateral?
Traditional collateral involves physical or financial assets pledged by the borrower. The NCGC guarantee, on the other hand, is a promise to the lender that a percentage of the loan will be repaid if the borrower defaults. It’s a risk-sharing tool, not a physical asset.
15. What happens if an MSME defaults?
If an MSME defaults on a guaranteed loan, the lender follows its recovery process. If recovery is unsuccessful, the NCGC steps in to cover the guaranteed portion, as long as the lender met all terms of the agreement.
16. How is NCGC different from private loan guarantees?
While private guarantees are usually offered by banks or third-party insurers, NCGC is backed by the Nigerian government, giving it more credibility and a mandate to support public economic policy. This backing also makes it possible for lenders to accept higher-risk borrowers with confidence.
17. Does NCGC cover non-performing loans automatically?
No. Coverage kicks in only if all due recovery processes have been followed and the lender has met the scheme’s compliance and reporting requirements.
18. Does NCGC charge lenders for guarantees?
Yes. Lenders pay a guarantee fee, which may be factored into the borrower’s loan terms.
19. What happens if a borrower repays early?
Early repayment benefits both borrower and lender, but the guarantee coverage simply ends once the loan is settled.
20. Where can MSMEs or lenders learn more about the NCGC?
They can visit the NCGC’s official website, contact approved lending institutions, or reach out to service providers like Lendsqr for more insights on integrating with the scheme and expanding MSME lending.
Also read: How lenders should prepare for the new credit guarantee era
If you’re a lender or small business owner interested in using NCGC guarantees effectively, you can reach out to us at support@lendsqr.com for guidance on aligning your processes with the scheme.
