Association of small businesses to float mini-bank

The Association of Small Business Owners of Nigeria (ASBON) is working on establishing an SME mini bank to enable  small businesses source finances tailored to their unique challenges. This was stated by Femi Egbesola, president of the association during a press briefing in Lagos recently.

Later in a telephone interview, Egbesola said this mini bank starting as a cooperative which is already very active in giving loans to members within the association would metamorphose into an SME bank. “The Central Bank of Nigeria (CBN) is aware of the SME bank our asociation wants to set up, we have written to them and there are some conditions they have given us which we are working at meeting,” he said.

He said it is only members of the association that would be able to access the loans at this starting point. He explained, “The reason is that we need to know borrowers very well and we already have a working relationship and agreement with our members, and we know our members very well. Becoming a member of the association is however very easy, even for the smallest business.”

The membership is in categories and this would determine the amount of money that can be loaned. The association president said, “The categories depend on the nature and size of the business. We have those who are into petty trading. They can access about N30,000. We have the artisans such as carpenters and vulcanisers, they can access about N100,000 and this amount goes on and on depending on the size of the business.”

He said the period of repayment for the members would be worked out based on the source of the money. “Some lenders require two years, others like Bank of Industry (BoI) require four years. We also borrow from NGOs and international funding organisations.” On interest rate, he said it is about 25 percent which is what the commercial banks give but many of these small businesses are unable to access loans from commercial banks so they approach the Microfinance Banks that charge them 10 percent per month, by the end of one year they can pay as high as 120 percent. But as an organisation, we are able to access loans from commercial banks and we give to our members at about the same interest rate.”

With the launching of the N220 billion Micro, Small and Medium Enterprises (MSMEs) Development Fund recently by the CBN, more money would be in circulation for micro, small and medium enterprises to access. According to the CBN guidelines, the funds would be disbursed through Microfinance Banks, Microfinance Institutions  such as NGOs and Financial Cooperatives, Finance Companies’ Lending Institutions and Deposit Money Bank (DMB) known as commercial banks or any other financial institutions. ASBON plans to access the funds for its members through commercial banks, NGOs and any lending organisation that can provide reasonable interest rate and repayment period.

ASBON also organises capacity building for its members as it realises the need for business owners to have access to the expertise and market knowledge required to make their business a success. Egbesola said “If our potentials are properly annexed and channeled, small businesses (micro enterprises) will be able to contribute between 21 to 25 percent to the GDP, generate enormous employment opportunities and provide a stable source of revenue to the government for the  financing of  socio-economic programmes.”

He further said the association is preparing a blueprint to be presented to the government for the accelerated development of the small business sub-sector. He  said the association is starting a  campaign  to raise  awareness  of the government to help smaller firms. He stated that the Nigeria  Small and Medium  Enterprises  (SME) sector has an estimated 17.6 million small businesses operating  across the country. The  sector  has  created  32  million total employment opportunities  and  contributed  45 percent  to the nation’s Gross Domestic Product (GDP).

He   added, “The small business sector is a critical component of the job creation drive, with a target of creating eight million additional jobs every year, adding  that  the  sector  aims to reduce unemployment largely through the development of small businesses.”

The Association of Small Business Owners of Nigeria (ASBON) was established early this year as an umbrella body for micro, small and medium enterprises to promote collaboration between the Nigerian private sector and other stakeholders including the Nigerian government, actively supporting its members within those months of existence.

By: OLUYINKA ALAWODE