WHAT IS SMIEIS?

WHAT IS SMIEIS?

The scheme is a response to the present administration’s concern for the promotion of small and medium industries as a vehicle for rapid industrialization, sustainable economic development, poverty alleviation and employment generation.

The scheme requires all banks operating in Nigeria to set aside 10% of their profit before tax for equity investment in small and medium scale industries, operating in the real sector with the exclusion of trading.

The main features of the scheme are as follows:
a. Banks (‘The Investor’) will make direct equity investment in small and medium enterprises (“The beneficiary’)
b. That investment represents a certain percentage of the equity of the beneficiary
c. That investment does not attract interest and the beneficiary is not required to provide collateral security
d. That investment can be redeemed (divested) by the beneficiary after a minimum period of three years except where there is a mutual agreement between the investor and the beneficiary
e. For any year the beneficiary records profit, the investor will participate in the dividend payout to the degree of her investment

GUIDELINES FOR BENEFICIARIES OF SMIEIS

ESTABLISHMENT OF THE SCHEME

The Small and Medium Industries Equity Investment Scheme is a voluntary initiative of the Bankers' Committee approved at its 246th meeting held on 21st December 1999.
The initiative was in response to the present administration's concerns and policy measures for the promotion of Small and Medium Industries (SMI) as vehicles for rapid industrialization, sustainable economic development, poverty alleviation and employment generation.
The Scheme requires all banks in Nigeria to set aside 10 (ten) percent of their profit before tax (PBT) for equity investment and promotion of small and medium industries.

PURPOSE OF THE SCHEME

The 10 (ten) percent of the profit before tax (PBT) to be set aside annually shall be invested in small and medium industries as the banking industry’s contribution to the Federal Government's efforts towards stimulating economic growth, developing local technology and generating employment.
Funding to be provided tinder the scheme shall be in the form of equity investment in eligible industries. This will reduce the burden of interest and other financial charges expected under normal bank lending, as well as provide financial, advisory, technical and managerial support from the banking industries.

ACTIVITIES COVERED BY THE SCHEME

The range of activities in respect of which the funds shall be applied are those in the real sector of the economy as listed below with the exclusion of trading.

• Agro-allied
• Information technology and telecommunication
• Manufacturing
• Educational establishments
• Services
• Tourism and leisure
• Solid minerals
• Construction
• Any other activity as may be determined from time to time by the Bankers' Committee.

DEFINITION OF A SMALL AND MEDIUM INDUSTRY

For the purpose of this scheme, a small and medium industry is defined as any enterprise with a maximum asset base ofN200 million excluding land and working capital; and with the number of staff employed by the enterprise not less than 10 and not more than 300. This is subject to review by the Bankers' Committee from time to time.

ELIGIBILITY FOR FUNDING

To be eligible for equity funding under the scheme, a prospective beneficiary shall:
(i) Register as a limited liability company with the Corporate Affairs Commission and comply with all relevant regulations of the Companies and Allied Matters Act (1990) such as filing of annual returns, including audited financial statements;
(ii) Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities, and
(iii) Engage or propose to engage in any of the businesses set out in clause (5) above.

MODALITIES OF THE SCHEME

Funds invested by participating banks shall be in the form of equity investment in eligible industries.

Equity investment under the scheme may be in the form of fresh cash injection and/or conversion of existing debts owed to participating bank.

A participating industry may obtain more funds by way of loans from banks in addition to equity investment under the scheme.

Eligible industries are free to approach any bank, including those they presently have relationship with, to seek funding under the scheme. Prospective beneficiaries should note that the banks may operate the scheme directly, through their wholly owned subsidiary venture capital companies or through venture capital companies floated by consortia of banks.

Prospective beneficiaries are advised to seek the opinion of third party consultants such as lawyers, accountants and valuers in determining the value to be placed on the assets and capital of their businesses in order to determine a fair price before or during negotiations with the banks.

Beneficiaries will-be expected to:

* Ensure prudent utilization of funds
* Keep up-to-date records on the companies' activities under the scheme
* Make the companies books, records and structures available for inspection by the appropriate authorities (including banks and the CBN) when required
* Comply with guidelines of the scheme
* Provide monthly financial and operational reports to the investing banks before the 15th of the next succeeding month.

The recommendations of industrial associations (particularly Manufacturers Association of Nigeria (MAN), National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), National Association of Small and Medium Scale Enterprises (NASME) and National Association of Small Scale Industries (NASSI) will be mandatory for members of these associations. Membership of recognized NGOs engaged in entrepreneurial development and promotion of small and medium scale industries will also be an advantage.

An advisory Committee to comprise of members from the following institutions shall be set up for the Scheme:

• Central Bank of Nigeria (Chairman)
* Bankers' Committee
* Presidency
* Federal Ministry of Finance
* Federal Ministry of Industry
* Manufacturers Association of Nigeria (MAN)
* National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)
* National Association of Small Scale Industries (NASSI)
* Agricultural Finance Department of the CBN shall be the Secretariat of the Committee


BANKERS' COMMITTEE
JUNE 19, 2001.