06 March 2016, Lagos – Recently, the Bank of Industry took bold steps and solved an aged-long problem of the Micro, Small and Medium Enterprises (MSMEs) sectors of the economy.
The National Bureau of Statistics estimated that there are over 17 million MSMEs in Nigeria. They account for over 90 percent of all companies in the country, employing over 30 million people and accounting for an estimated half of Nigeria’s GDP.
Despite the sectors potential to the country’s economic development, financial supports to companies in the sectors by commercial banks and the development finance institutions like BoI itself and the Bank of Agriculture, International Finance Corporation, IFC, was one of the major challenges inhibiting the growth and development of the sectors.
According to the 2nd Deputy National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Iyalode Alaba Lawson, operators in the sectors are concerned about their inability to get both machinery and working capital loans from the bank.
Working capital Lawson noted that before now, BoI only provided machinery loans for the MSMEs without any provision for the working capital.
“It is the working capital that will make it possible for the machinery to work and that will enable the operators to refund the loan as at when due.
“I have an experience where one of our women got the machineries through the BoI intervention fund but as we speak, she has not got the working capital,” said Lawson.
In answer to the operators yearning, the new management of the bank recently initiated a two –fold approach to solve the problem.
The BOI Managing Director, Mr. Rasheed Olaoluwa, disclosed that the first approach was the recent accreditation by the bank of 122 Business Development Service Providers (BDSPs) located all over the country.
“The BDSPs are to: Assist the SMEs in the development of bankable business plans and proposals, which will facilitate their access to finance; provide post-finance services to the SMEs such as mentorship, handholding, financial advice and inculcation of best practices,” he said.
It was gathered that the BDSPs comprise IBFC Alliance Ltd; BoI- ITC; BCG Associate, Fortis Academy Ltd and Nigerian Youths Chamber of Commerce, among others. Mr. Olaoluwa said that another strategy was to approach SME-Friendly Commercial Banks to partner with BOI in co-financing the SMEs.
“We wrote on August 12, 2014 to ten (10) commercial banks that are renowned for their SME-centric activities to partner with us in the financing of our SME customers. “The ten SMEs-Friendly banks are Access Bank Plc, Diamond Bank Plc, Limited,
Fidelity Bank Plc, and First Bank Limited. Others are First City Monument Bank Limited, Skye Bank Plc, Stanbic IBTC Bank Plc, Standard Chartered Bank Limited, and United Bank for Africa Plc,” he disclosed.
He continued, “I am glad to announce that all the banks graciously obliged our invitation by assigning the Heads of their SME Business Units to work with us in drawing up the framework for the collaboration. This has culminated in the MOU signing ceremony we performed today.
Areas of collaboration: He clarified that the activities in which BOI and the SME-Friendly Banks will collaborate include the following: “Provision of the long-term loans to qualified SMEs by BOI based on its Risk Acceptance Criteria. Provision of working capital to the SMEs by the SME-Friendly Banks also based on their individual Risk Acceptance Criteria.
Loans to beneficiaries shall be in accordance with the following terms: BOI Term Loan: Tenor: 3 – 5 years. Moratorium: 6-12 months. Interest Rate: 9 -10 percent per annum. Working Capital Facilities by SME-Friendly Banks: 6 – 12 months.
Moratorium: As may be applicable. Interest Rate: MPR + 6 percent per annum. “The synergy that has evolved between BOI and the SME-Friendly Banks, which is unprecedented between a Development Finance Institution and commercial banks, will undoubtedly foster greater access to finance for SMEs, financial inclusion for Nigerians and also engender wealth creation and accelerated job creation for Nigerians.
“It is also our expectation that the SMEs that will benefit from this partnership will be good corporate citizens that meet their financial obligations to the partnering banks.
This will stand them in good stead for consideration for larger loan amounts with the hope that they will in the near future metamorphose into large enterprises.
“I commend and appreciate the enthusiasm exhibited by my colleagues the Chief Executives of the SME-Friendly Banks in forging this partnership. This goes to show that Nigerian banks all have a developmental orientation, which is what our economy requires at this point in time,” he said.
*Franklin Alli – Vanguard