The Creative Industry Financing Initiative (CIFI) is a loan scheme developed in collaboration with the Central Bank of Nigeria (CBN) to provide access to long-term and low-interest financing for entrepreneurs in the creative industry, including Fashion, Music, Movies, and Information Technology.
Creative Industry Financing Initiative of the CBN (CIFI)
The Central Bank of Nigeria (CBN), in partnership with the Bankers’ Committee, developed the Creative Industry Financing Initiative (CIFI) in May 2019 as part of efforts to encourage job development, particularly among Nigerian youths. The CIFI will be sponsored by the Bankers’ Committee’s Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS), which has a seed capital of N22.9 billion (The Fund).
CIFI was created with the goal of improving access to long-term, low-cost, and long-term financing for entrepreneurs and investors in the Nigerian economy’s creative and information technology sub-sectors (often referred to as “Creative”). The project is intended to complement the CBN’s existing development finance schemes, accelerating financial inclusion in the country and harnessing the entrepreneurial potential of the country’s youth in the target industries, with the ultimate goal of economic development.
As a result, on July 1, 2019, the CBN went a step closer to putting the CIFI into action by providing a framework for its implementation. Modalities for the Implementation of the CIFI is a framework that establishes the fund’s objectives, scope, and operational rules for accessing and administering the fund.
Eligible activities under the CIFI are divided into three categories, as specified in the framework:
- Existing enterprises in the creative industry;
- Start-ups engaged in the creative industry;
- Students of higher institutions engaged in software development.
The focal sub-sectors of the eligible activities for financing purposes include: (i) Fashion (ii) Information Technology (IT) (iii) Movie and (iv) Music.
Depending on their areas of business, creatives whose firms fall under the focal sub-sectors of the eligible activities can get a loan ranging from N3 million to N500 million. An interested Creative should approach any of the Participating Financial Institutions (PFIs) with a clear business plan or statement outlining how much capital is required to carry out the sketched business idea, and complete the loan application process according to the PFI’s guidelines. PFIs include all commercial and microfinance banks permitted to operate in Nigeria by the CBN.
For each of the CIFI’s accessible loans, the implementation framework establishes single obligor limits (SOL). While the SOL for Student Software Development Loan (SSDL) is N3 million, the SOL for movie production and distribution is N50 million and N500 million, respectively. The framework does not specify the appropriate SOL for loans in other qualified sub-sectors, such as fashion, information technology, and music.
Minimum Equity Contribution (MEC) and Term Loan are the finance structures required to fund successful applicants’ projects. Creatives seeking for CIFI loans in the other main sub-sectors will have their projects partially supported by MEC and Term Loan, with the exception of SSDL, which will be wholly financed by banks (100 percent Term Loan with 0% MEC).
While qualified movie industry loans require 30 percent MEC (from borrowers) and 70 percent Term Loan (from banks), eligible fashion, IT, and music business loans require 20 percent MEC and 80 percent Term Loan, respectively.
The MEC by borrowers (where applicable), as well as the execution of All Assets Debenture and Legal Mortgage, as well as Personal Guarantee and the provision of Credible Guarantor, are all required collateral for SSDL and movie industry loans. In lieu of debentures and mortgage deeds, a borrower must deposit certificates of his or her university degree and National Youth Service Corps (NYSC) with the PFI for SSDL. Borrowers in the fashion, IT, and music industries will also have a lien put on their related stock of trade and equipment in addition to the aforementioned collateral security. The annual interest rate on all CIFI loans will be 9%. (all inclusive).
The SSDL and movie distribution loans have a monthly repayment schedule. In the case of film production, however, quarterly payback is necessary. Loans for other qualified operations in the fashion, IT, and music industries must also be paid back on a quarterly basis.
The earnings of software sales or patent utilisation, movie tickets at the box office and other channels of distribution, music record sales, and money from services offered generally, as the case may be, will be used to satisfy the debt.
While the CFI loan has a maximum tenor of ten (10) years, repayment terms vary and are dependent on the target sub-sectors concerned. Except for SSDL, which has a three-year tenor, all other loans for film production and distribution, as well as equipment purchase and rental/service fees in the fashion, IT, and music industries, have a tenor of ten years.
Furthermore, whereas SSDL has a 9-month moratorium from the date of loan issuance, movie industry-related loans have a 24-month embargo. The corresponding moratorium for loans in the fashion, IT, and music industries is each 36 months from the date of loan distribution.
Other general and important conditions for the grant of CIFI loans to Creatives are: a good (“No bad”) credit history with the Credit Risk Management System (CRMS) or any commercial banks in Nigeria; preference for areas where their businesses have low penetration; and, in some cases, a minimum of three (3) years relevant experience or at least three (3) referrals from recognised sponsors, bodies, or associations.
While the CIFI’s goals and objectives are admirable, there are still some issues with the scheme’s implementation. As a result, in order to position the project for optimum success, the identified obstacles, as listed below, must be addressed comprehensively.
The CIFI implementation framework suffers from a lack of clarity and uniformity in terms of loan application documentation requirements. This is likely the most obvious aspect that could cause problems with the scheme’s seamless operation.
The broad freedom given to each PFI in determining what documents/information a loan application must provide leaves too much to the discretion of the banks and may cause transparency difficulties in the selection process. To guarantee a seamless regime, the CBN’s framework should have specified uniform and industry-wide documentation criteria.
Another concern is that the CIFI’s scope is limited. The stated eligible activities in the target sub-sectors do not cover all aspects of the creative industry in this regard. As a result, the status of other Creatives whose enterprises, abilities, and skills are not listed (Fashion, IT/Software Development, Film, and Music) remains uncertain. The qualifying creative industry sectors be expanded beyond the four listed or, alternatively, the initiative be made to embrace all economically viable creative industry activities.
As a result, the CIFI should be extended to Creatives with skills and investments in other areas of the industry, such as Performing Art, which includes dance, music, drama/theatre, and many aspects of Visual Art, which includes painting, drawing, printmaking, sculpture, ceramics, photography, design/industrial design, graphic design, interior design, and decorative art, among others.
The government and other corporate sponsors have consistently undercut the ability of these sectors to bring about cultural, social, and economic revolution in Nigeria by excluding some Creatives from the CIFI.
It should also be noted that the CIFI framework does not provide a deadline for the scheme’s implementation. In other words, there are no explicit checks in place to ensure that the funding process is efficient.
The CIFI should not be left without a suitable evaluation process, in order to avoid it following in the footsteps of similar efforts in the past, which merely existed on paper and made headlines, but had little impact in terms of beneficiaries and outcomes.
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