BoI’s funding options for Nigerian SMEs
Operators of the micro-, small-, medium-scale enterprises (MSMEs) in Nigeria often protest that traditional banks do not pay attention to them.
This is not a wild allegation, given the Central Bank of Nigeria’s recent shocking revelation that only 0.2 percent finance flows to this category of business.
The CBN also revealed that a meagre 3.5 percent of bank finance flows to agriculture but virtually none to exports.
However, in an arena where traditional deposit money banks have failed, the Bank of Industry (BoI) has succeeded.
Under Rasheed Olaoluwa, chief executive officer/ managing director, BoI, the bank has demonstrated knowledge of the fact that Africa’s largest economy cannot move forward if MSMEs and the real sector are continuously starved of funds. The bank has equally removed many road blocks for genuine MSMEs desirous of obtaining funds for growth.
In September 2014, the bank launched the 5 Billion Cottage Agro Processing (CAP) Fund, targeting the MSMEs at the low-technology, labour-intensive end of the spectrum. The fund was meant to finance about 1000 projects at nine percent interest charges and create about 20,000 direct and indirect jobs.
At the launch of the fund, Olaoluwa said the bank would, through the scheme, provide loans to beneficiaries for the establishment of small-scale plants or mini mills to process agricultural products such as cassava, oil palm, plantain, cashew, hides and skin, chicken and fish and paddy rice, among others.
It is worthy of mention that a number of agro processors who could identify their markets and meet simple lending rules have been able to access loans through this scheme.
The bank has also simplified the loan application processes by appointing 122 business development Service providers (BDSPs).
The appointment of BDSPs is targeted at increasing MSMEs funding access and reducing high rejection of loan applications resulting from poorly packaged and non-bankable business plans.
According to the development bank’s CEO, this move became necessary in order to ensure that viable SMEs have access to long-term finance that would aid their contribution to job creation and the country’s Gross Domestic Product (GDP).
“The BDSPs who have been distributed nationwide will be guided by BoI’s Risk Acceptance Criteria (RAC) and will also ensure that a sound business model is developed and presented. They will be collaborating with BoI to conduct periodic post-finance monitoring of the SMEs as well as provide post-finance services such as
mentorship, handholding, financial advice and inculcation of best practices,” he said, during a meeting with the BDSPs.
“They will be supporting the SMEs to develop synergies and sustainable relationships with large enterprises, industrial buyers, and suppliers along the value chain,” he said.
In order to buttress that this is a serious business, BoI identified specific performance benchmarks for the BDSPs.
“Each BDSP is expected to achieve a minimum of ten successful applications annually. This is a worst-case scenario. Any BDSP that fails to achieve a success rate at least 40 percent in terms of successful
loan applications may be disqualified from the renewal of this agreement,” he said. This shows how serious the bank is in ensuring that MSMEs get loans that will steer them and create jobs, in line with the federal government’s target.
These are not all. The bank has launched the Nolly Fund, which is now being accessed by movie producers that have done films of international quality.
Producers of commercially viable scripts with good storylines are leveraging the fund.
The bank has equally unveiled N1 Billion Fashion Fund in fulfilment of its commitment to develop special funds and credit products to deepen penetration of MSMEs.
“We see an opportunity to support Nigeria’s leading fashion businesses to increase their production volumes and quality, thereby making them more competitive in both the domestic and international markets,” Olaoluwa said at the launch.
To crown it all, the bank recently launched the 2billion Graduate Entrepreneurship Fund (GEF) scheme to enable young graduates with viable business ideas to receive training and finance.
But it is not just about fund launch, but also about access. Many operators of MSMEs have testified how, without knowing anybody, they obtained loans from the BoI.
In the creative industry where the bank’s intervention has reached N2 billion, seven projects are currently accessing the bank’s facilities while another ten are at different stages of loan approval. Kunle Afolayan, a movie producer, is already enjoying a loan through the scheme.
“We had applied for facility some few years back but we got denied. With the restructuring of the loan processes in BoI, we have been able to access the funds easily, while the innovative approach to financing by the bank is highly commendable”, Afolayan said, during a visit by the BoI team.
To ascertain that many MSMEs are increasingly accessing the fund, the development bank’s loan portfolio to aquaculture cooperative societies and enterprises in Ogun State alone was N123 million by the first quarter of the year. It was also disclosed early in the year that the bank disbursed N57.24 million to 13 MSMEs in Kogi State. Many MSMEs operating in various parts of the country have benefitted from the bank too. In fact, the bank, being the most active development bank in the country today, disbursed N127 billion to MSMEs in 2014.
Also, big firms such as Emzor, Peugeot, Innoson Technical & Industrial Company Limited, Eastern Metals Limited, UNTL plc, Honeywell Flour Mills, KAM Industries, Lafarge Cement Wapco plc, Dangote Cement, Rumbu Sacks Nigeria Limited, BAGCO, Tara Agro Industries, ANAMCO and Bendel Feed, among many others, have received support from BoI.
Despite all these, the bank has maintained financial stability. Little wonder why it won Fitch’s national long-term rating of ‘AA+(nga)’ and national short-term rating of ‘F1+(nga). It also received a domestic credit rating of A- from Agusto & Co, a leading Nigerian credit rating agency.
With BoI, Nigeria now has a bank that caters for MSMEs. Operators of MSMEs can now heave a sigh of relief and rush to the bank to receive support. As Waheed Olagunju, executive director for SMEs at BoI has consistently said, the bank believes that a support for a small business owner can generate three to ten jobs at a go, a development that can reduce Nigeria’s high unemployment situation to the barest minimum.
ODINAKA ANUDU