Introduction to the LASMECO Initiative
The Lagos State Government has introduced a groundbreaking financing initiative aimed at supporting micro, small and medium enterprises (MSMEs) through affordable credit. This new program, known as the Lagos State Access to Finance for SMEs through Cooperatives (LASMECO), offers single-digit interest loans of up to N10 million to eligible businesses. The initiative is designed to address the significant challenges that MSMEs face in accessing traditional banking services.
Key Features of the LASMECO Programme
The LASMECO programme provides loans at a fixed annual interest rate of 9 per cent. This rate is significantly lower than the conventional lending rates, which often range between 35 and 40 per cent. The repayment periods for term loans can extend up to 36 months, while working capital facilities have a maximum repayment period of 24 months. Beneficiaries also enjoy moratoriums of six months and three months respectively.
This initiative was launched during the opening of a three-day LASMECO Accelerator Training Workshop organized by the Ministry of Commerce, Cooperatives, Trade and Investment in Lagos. The workshop aimed to prepare accelerator organizations to identify and support eligible MSMEs.
Role of Cooperative Societies
According to the Commissioner for Commerce, Cooperatives, Trade and Investment, Mrs Folashade Bada Ambrose-Medebem, the programme was designed to bridge the financing gap faced by many Lagos businesses. She emphasized that MSMEs contribute significantly to the state's economy, accounting for about 80 per cent of employment and roughly 75 per cent of Lagos State’s Gross Domestic Product (GDP). However, these businesses often struggle to access affordable credit due to high interest rates and stringent collateral requirements.
Under the LASMECO framework, borrowers are required to provide 10 per cent cash collateral, while their cooperative societies will guarantee 25 per cent of the loan. Sterling Bank Plc would provide a 50 per cent guarantee, creating a layered risk-sharing structure that makes lending more accessible and sustainable.
Target Sectors and Funding Structure
The programme targets businesses in various sectors including agriculture, manufacturing, healthcare, the digital economy, creative industries, tourism, environmental sustainability, and education. The Lagos State Government has released its counterpart funding, with the Bank of Industry (BOI) matching the state’s contribution. This partnership paves the way for loan disbursement, with BOI serving as co-funder and final loan approver, while Sterling Bank processes applications, conducts credit assessments, disburses funds, and recovers repayments.
Implementation and Training
The Permanent Secretary in the ministry, Mr Babatunde Onigbanjo, highlighted that the workshop marked the transition of LASMECO from policy to implementation. He noted that all necessary groundwork had been completed, including the release of counterpart funding, execution of memoranda of understanding, and onboarding of accelerator organizations. Participants were equipped to begin recruiting and preparing loan beneficiaries.
The three-day workshop is designed to prepare accelerator organizations to identify eligible MSMEs, assess their credit readiness, compile loan applications, and support borrowers from application through disbursement and repayment. Onigbanjo urged participants to focus on quality rather than quantity in recruiting loan applicants, warning that poorly prepared businesses could increase loan defaults and undermine the programme.
Financial and Compliance Aspects
Onigbanjo stressed that accelerator organizations would only be paid when the businesses they support successfully secure funding, aligning their interests with the success of the programme. Every loan applicant must belong to a registered cooperative society, as the cooperative model is central to the programme. Cooperatives provide a 25 per cent guarantee for every facility while helping to formalize informal businesses.
Lagos has more than 13,000 registered cooperative societies, although only about 1,900 to 2,200 are currently active. Reviving dormant cooperatives would significantly expand access to the financing scheme. Onigbanjo warned against charging applicants processing, training, or evaluation fees, emphasizing that the only approved deductions are a N200,000 accelerator support fee and a one per cent BOI appraisal fee, both payable only after successful loan disbursement.
Monitoring and Evaluation
The state will closely monitor loan recovery, business growth, job creation, cooperative compliance, and portfolio performance. Only accelerator organizations that deliver strong results will remain in the programme. Onigbanjo described LASMECO as more than a loan scheme, emphasizing that it is also a strategy to formalize businesses, strengthen cooperatives, promote industrialization, and drive inclusive economic growth across Lagos.
Conclusion
The LASMECO initiative represents a significant step forward in supporting MSMEs in Lagos. By leveraging the cooperative model and providing affordable credit, the programme aims to stimulate business growth, create jobs, and enhance the overall economic development of the state. With the workshop marking the beginning of implementation, the focus now shifts to ensuring the successful rollout of this transformative initiative.
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