WHAT'S IN A NAME? UNRAVELLING NIRSAL MFB VS. NIRSAL PLC CONUNDRUM

 Collins Imoudu Andrew  |

I must confess from the onset that like many people until I conducted research, I couldn't tell that differences existed between NIRSAL Microfinance Bank and NIRSAL PLC. However, I discovered that the entities have nothing in common as far as their core mandate, ownership, and management are concerned except for the acronym NIRSAL.

It is a given that, in the realm of financial institutions, acronyms often abound, and it's not uncommon for confusion to arise, especially when two entities share related names. Such is the case with NIRSAL MFB and NIRSAL PLC. They are prominent players in Nigeria's financial sector but serve different purposes, operate under distinct regulatory frameworks, and have different management.

Whereas NIRSAL MFB is a licensed bank performing all functions of a financial institution including accepting deposits and creation of credit facilities, NIRSAL (The Nigeria Incentive-based Risk-sharing System for Agricultural Lending) PLC, is a non-bank agriculture-focused institution that promotes commercial lending to key players in the Agricultural sector of the Nigerian economy, by de-risking such lending. It is also a subsidiary of the CBN.

The purpose of this piece, therefore, is to share with the general public the knowledge I gained while the conundrum lasted.  This submission equally aims to keep the discussion going until people become conscious of the differences that exist between NIRSAL MFB and NIRSAL PLC.

One of the most important pieces of information the public needs to know is that NIRSAL MFB is a bank, with a microfinance license, established to provide financial services to small and medium-sized enterprises (SMEs), farmers, and other individuals in the agriculture value chain. It is a leading micro-finance institution incorporated as a Private Limited Company in 2019 and commenced operations following the grant of a license by the Central Bank of Nigeria (CBN) to operate as a National Microfinance Bank in the same year. The Bank is owned by the Bankers Committee (75%), NIRSAL PLC (15%), and NIPOST (10%).

The core function of NIRSAL MFB is to facilitate financial inclusion and access to credit for individuals small and micro businesses engaged in agriculture and related sectors. It offers a range of financial products and services, including loans, savings accounts, and financial advisory services, tailored to meet the unique needs of its target market.

The Bank operates under the regulatory framework of microfinance banks in Nigeria. It is subject to the supervision and regulations of the Central Bank of Nigeria and the Nigerian Deposit Insurance Corporation (NDIC), and it primarily serves individuals and businesses involved in agriculture, agribusiness, and small-scale enterprises.

It is reassuring to know that four years down the road, the NIRSAL MFB has pulled many Nigerians out of extreme poverty while acting as the most effective vehicle for the government to deliver life-saving interventions in the form of business credit facilities to start a new business or sustain an existing one. The bank’s defining moment came in the year 2020 when the global health crisis, occasioned by the COVID-19 pandemic, led to a sharp decline in oil revenue with an attendant adverse impact on financial systems with a toll on the earning and purchasing power of businesses and households.

During that trying time, NIRSAL MFB made the task of touching the lives of the people easier with far-reaching and rewarding consequences so that, in addition to performing normal banking functions befitting its license, it equally served as a participating financial institution and an intervention vehicle saddled with the implementation of five major intervention schemes funded by the Central Bank of Nigeria to eligible beneficiaries.

As gleaned from their website, the five major special intervention schemes financed by the CBN and implemented by NIRSAL MFB are: 

Agri-Business, Small, and Medium Enterprise Investment Scheme (AGSMEIS) under which the sum of ₦118,396,107,435.10 was disbursed to 32,355 beneficiaries; under Targeted Credit Facility (TCF) – Household and SME - ₦373,900,000,000 was disbursed to 757,962 beneficiaries; Non-Interest TCF (NI-TCF) – Household and SME under which 34,985 beneficiaries go ₦16,400,000,000; under Anchor Borrowers’ Programme (ABP) 107,035 beneficiaries got the sum of ₦33,800,000,000; and under National Youth Investment Fund (NYIF)  the sum of ₦1,967,000,000 was disbursed to 5,539 beneficiaries.

The disbursed funds were dedicated to investing in the innovative ideas, skills & talents of Nigerian youths to turn them into entrepreneurs, wealth creators, and employers of labour to enable them to contribute their quota to national development.

The Nigerian Incentive-based Risk Sharing System for Agricultural Lending PLC is not a bank but rather a specialized agency established to de-risk the agricultural lending process in Nigeria. It was initiated in the year 2011, as part of the Federal Government's efforts to promote agricultural development and ensure food security; it was set up as a CBN subsidiary.

The primary function of NIRSAL PLC is to provide risk-mitigation services for financial institutions, including banks and microfinance banks when lending to the agricultural sector. It does this by offering guarantees, technical assistance, and capacity-building support to financial institutions, thus making them more willing to lend to farmers and agribusinesses.

The organization operates as a specialized agency and is not a financial institution like a bank or microfinance bank. It works in partnership with regulatory bodies such as the Central Bank of Nigeria (CBN) and the Nigerian Agricultural Insurance Corporation (NAIC) to ensure the success of its risk-sharing initiatives.

The core mandate of the agency is to collaborate with financial institutions, including banks and microfinance banks, to encourage them to increase their lending to the agricultural sector. It aims to create an enabling environment that attracts more financing into agriculture and mitigates the risks associated with agricultural lending.

The point of convergence between NIRSAL MFB and NIRSAL Plc. is the fact that they share the NIRSAL acronym, but that should not cause any confusion at all because their goal is to advance Nigeria's agricultural sector and at the same time serve distinct roles within the Nigerian financial ecosystem.

Although the differences between them have been stressed enough, to put the case as strongly as possible it is worth knowing again, that NIRSAL MFB is a microfinance bank and a private limited liability company that directly serves individuals and businesses, offering financial products and services tailored to their needs. In contrast, NIRSAL Plc. is a specialized agency of the CBN that collaborates with financial institutions to de-risk agricultural lending, thus encouraging more significant investment in the sector.

Understanding these differences is crucial for stakeholders in the SME, agriculture, and financial sectors, as both institutions individually play vital roles in supporting Nigeria's agricultural transformation agenda and economic development including the areas of food security and financial inclusion in Nigeria.

 Collins Imoudu Andrew is a Media Entrepreneur and Publisher of Agribusiness, Entaprano and Spectacles Magazines. He can be reached at colinzano@gmail.com.