Paycheck Protection: LSETF’s $6.6m Boost for MSMEs

 

Paycheck protection. Sounds like a great idea, doesn’t it? Well, what is even better is that it is not only for real but already available for no fewer than 2,500 businesses in Lagos under the state’s COVID-19 Action Recovery and Economic Stimulus (CARES) programme.

The CARES programme is a $6.6million initiative of the Lagos State Employment Trust Funds (LSETF) facilitated by the World Bank to support the recovery of micro, small and medium enterprises (MSMEs) from the COVID-19 pandemic.

According to LSETF Executive Secretary, Tejumola Abisoye, it is a state-level intervention designed to mitigate the local effect of the pandemic, especially by protecting the livelihood of existing businesses and supporting the recovery of economic activity especially among SMEs.

“It’s a brand new programme for MSMEs in Lagos, paycheck protection; it seeks to make sure people don’t lose their jobs,” Abisoye told journalists in Lagos last month.

 

How does it work?

How does the LSETF fund these paychecks for companies to make sure that they don’t need to sack people?

Abisoye explained that that the intervention is in three categories: Loan limitation, operational grant and programme

She said: “The first is by reducing loan limitation. People that have existing loans with financial institutions. How do we provide credit grants to them? A maximum of 40 per cent of their loans will be given to them as grants to help ease the burden of interest payment where the loans have been taken to push the effect of the pandemic for the business. So, it must have been taken post-COVID-19 pandemic. Those who have taken loan post-pandemic are eligible for the grant.”

The second is the unavoidable cost or operational grant programme.

“This is to reduce up to 50 per cent of businesses’ unavoidable expenses such as payroll, rent, utilities, things that are direct without which the business cannot operate. For those who couldn’t pay their staff, we are going to support such business with a maximum of 50 per cent as a grant for operation for one year. That means we will support for six months maximum,” Abisoye said, adding that this grant will not be used to pay for taxes and regulatory levies.

The third category is the adoption or upgrade of digital technology. It is called an IT enhancement grant.

“Here we are going to strengthen businesses and make it more resilient in case of another pandemic or any issues around what technology can solve for you. If you recall, businesses that were online were not affected. In fact, you heard about Amazon making more money within 11 months than traditional businesses, luxury businesses that were online made more money in this space.

“So, what were those things that enabled those businesses? It was the IT infrastructure that already existed. We want to support businesses to adopt IT infrastructure to make them do much more in any event.”

BVN, LASRRA ID, company registration ID, Tax payment essential  CARES Project Coordinator Bukola Kolajo shed more light on the scheme.

Kolajo said: “It is open to businesses in Lagos State, as long as it can provide the Bank Verification Number (BVN), Lagos State Residents Registration Agency (LASRRA) ID and company registration ID, evidence of Tax registration and payment especially where you are applying for payroll protection for your staff.

“We are asking people to provide all the verification material to us for us to be able to verify and determine how urgent or impactful the grant will be to businesses. We are very keen to support micro-enterprises with less than nine employees.

“For a small business, we assume you have more than 10 employees and for a medium enterprise we assume you have more than 50 employees to be able to benefit from the grant.”

 

Maximum of N5m

How much can a business get? Kolajo said: “The maximum grant amount any business can get is N5million across the different programmes.”

But there must be a registration first.

She added: “The portal is open at LSETF website; there are also hardcopy forms that people can use to apply and they are uploaded at our liaison offices. Once you submit the application, you will get an automated generating message that your application has been received and undergoing processing and if you don’t receive that email that means we have not received your application.”

Then internally the coordinating unit will look into each application; the ones that need to get to the next stage will be sent for assessment and verification where assessment partners will come physically to the business location to check the business and see the original of the documentation and make a recommendation to the unit.

She said after that the unit will provide a general disbursement schedule for the grant.

Kolajo added: “Then we have a steering committee section well involved in the state CARES coordinating unit. So, it’s just not LSETF, it’s the state coordinating unit that sits in the Ministry of Economic Planning and Budgeting that’ll approve these disbursements and within 24 hours or 48hours of that approval, the disbursement will start.

“For operational grant, they will be monthly depending on the application. If you are applying for rent, it will be bulk but if you are applying for staff it will be disbursed on a monthly basis. There are different structures and I don’t want to go into the operational details but the idea is to give you an overview of CARES programme and the idea for us to make sure we sustain businesses during these times.

“The sustainability of a business is not in having a business but to be able to continue in whatever situation you find yourself, that’s the whole idea of CARES programme.”

 

World Bank’s role

The programme is facilitated by the World Bank as an integral part of the national approach adopted to alleviate the burden of the COVID-19 pandemic and enhance the wellbeing of businesses.

The maximum for each state in Nigeria is $20 million but, Kolajo explained that regarding the MSMEs recovery, “it has been allocated the $6.6million for the next two years. It is a World Bank-supported programme and each state government has access to a maximum of 20million dollars.

“For Lagos State, we are taking $20m across three different result areas. What LSETF is focused on is result area three which is to support MSMEs recovery and for that it is for $6.6million.

“Based on our calculation, we are looking at supporting a minimum of 2,500 businesses in Lagos. Businesses from agriculture, manufacturing, artisans, fashion and beauty businesses, one-man businesses can apply, micro-businesses, etc.”

 

Preventing hijack by politicians

Can the programme fend off political interference? Yes, said Abisoye.

She explained that “Some of the criteria for this programme has been set in such a way that application is online which will document anyone applying. The World Bank has also said that they will only refund based on the impact of your programme, so, unless I have supported the business and I have evidence that this business needed it and we supported this business with this recovery programme the World Bank will not refund the government of that fund.

“So as much as possible we are creating structures that help to prevent anything that makes it political but rather an economic agenda to develop the state. It is a programme for results. It is impossible to give a friend the grant because there is a laid down procedures where we have an independent verification agency that we don’t know, who we are going to speak with the beneficiaries and ask them how they were chosen and the process they followed.

“At every point, there are checks and balances to ensure that there is accountability.  Apart from LSETF doing their own verification, the World Bank will also be doing their own verification to confirm what has been done and who got the grant.

“This programme Lagos CARES has three result areas; we are just handling one of it. Ours is MSMEs recovery.  LSETF is focused on businesses. Any business you can demonstrate the effect of Covid-19 on that business, is the business we will be supporting with this grant. The idea is to protect employment in these businesses because MSMEs actually employ the most in this country. Over 80 per cent are actually employed by MSMEs, so, we want to create that safety blank for them to land post-COVID-19.

“The portal for registration was opened on May 1st. The applications are ongoing and we have received about 200 applications already across the different categories.”