By Favour Nnabugwu

For Bank of Industry to give out loans to small and medium sized enterprises, prospective borrowers need to present and convince the bank on the viability of their proposals with assurance to pay back their loans as at when due despite the bank’s insistence on 10 per cent of the total amount to be loaned from the bank especially from cooperative society as commitment fee.

In as much as BOI’s Managing Director, Ms Evelyn Oputu regretted the challenges majority of the SMEs face in their quest to secure loans for their businesses, she observed that many entrepreneurs approach the bank not equipped with the necessary information required of them to secure loans whilst some others do not even know about the mandate and objectives of the BoI.

Ms Oputu at a three-day workshop organised for Business editors and Industry Correspondents in Lagos recently themed: Enhancing the role of the media in the transformation of Nigerian industrial sector, enjoined operators of SMEs to always find out properly about the procedures and processes of securing loans   in order to help package bankable proposals before seeking funding support from development finance institutions as the BoI.

*Managing Director, BOI, Ms Evelyn Oputu

She assured that the bank will continue to support the SMEs sector, which she described as the engine room of growth of any economy because of the potentials of the real sector to generate mass employment.

The Bank of Industry (BOI) has approved more than N16 billion loans to various cooperative groups across the country in a renewed bid to stimulate the development and growth of Small and Medium Enterprises (SMEs) towards contributing to the expansion of the nation’s Gross Domestic Product (GDP). In addition, BOI has trained almost 10,000 small and medium entrepreneurs in entrepreneurial skills on how to establish and run bankable small businesses within the last three years.

Small and Medium Enterprises (SMEs) in Nigeria, as defined by Small and Medium Industries Equity Investment Scheme (SMIEIS), are enterprises with a total capital employed not less than N1.5 million, but not exceeding N200 million, including working capital, but excluding cost of land and/or with a staff strength of not less than 10 and not more than 300.

BoI, Oputu said, requests for collateral as an additional requirement, apart from requiring personal guarantees for SME loans, because the financial and operational transparencies of SMEs are relatively low and their accounting standards poor.

“The enterprises are also perceived as risky due to the fact that, in most cases, the death of the owner leads to the death of the business, diversion of funds, high cost of monitoring loans and the fact that most of the loans may not be collateralised”.

She gave a breakdown of the funds being managed by the bank as “CBN N235 billion re-financing fund; N100 billion Cotton, Textile and Garment Fund; N10 billion Rice Sector Fund; and N16.91 billion National Automotive Council Fund. Others are $4 million UNIDO renewable Energy programme fund; $ 500 million AfDB fund; N500 billion Power/Aviation Fund; N5 billion Dangote Fund, N9.5 billion cement fund as well as N90 million Women Affairs Fund.

According to her;  “You do not need insider connection to access BOI managed funds, rather, the entrepreneur should have a well-packaged bankable proposal before seeking funding support from the bank.

“The bank insists on collateral for big loans because the money is not mine, it belongs to Nigerians and if you don’t pay back the loan, I’ll sell your house and recover the loan,” she warned.

Regarding loan disbursements and recovery, Ms. Oputu said the bank had witnessed unprecedented expansion in its credit operations without compromising the quality of its investments and posted impressive financial results.

“The cumulative value of fresh loans and investments rose by 1.91 per cent from N9.8 billion to N202.3 billion between 2005 and mid-2012.

Risk asset also grew by 691 per cent to N105.27 billion by September last year from N13.3 billion in 2008.

Also, the portfolio of risks assets declined from 65 per cent in 2005 to 15 per cent in 2012,” she said.

Testifying to the goodwill of the development bank at the workshop were the Chairman/Managing Director, Kam Industries (Nigeria) Limited, Alhaji Kamoru Yusuf; Hon. Salisu Buhari (former Speaker of House of Representatives and now a businessman; Mr Felix Egbamuno, Chairman, Femro 3 Nigeria Limited; Hamza Sule, Commissioner for Trade & Industry in Gombe State; Otunba Bimbola Ashiru, Commissioner for Commerce and Industry, Ogun State among others.

Not left out in the drive to help small and medium scale businesses, some 18 states have partnered with BoI through counterpart funding to grant loans to small businessmen and women  in their states. The states include: Anambra, Delta, Kwara, Niger, Kogi, Osun, Edo, Ondo, Ekiti, Ogun, Oyo, Gombe, Benue, Akwa-Ibom and Cross River states, at 5% interest rate for the development of the MSME sector in each of the participating states mainly through the bank’s cooperative lending scheme.

Giving insight into the partnership between BoI and Gombe State Government, Hamza Sule, the state Commissioner for Trade and Industry said BOI disbursed N3 billion to Small and Medium-scale Enterprises (SMEs) under the second phase of trade intervention aimed at providing more funds for entrepreneurs in the state.

He said that Governor Ibrahim Hassan Dankwambo had directed that the fund is to be disbursed as soft and affordable loans to SMEs in the state, to invest in value addition activities in the agro-allied and mineral sectors of the state’s economy.

He recalled that the state government had two years ago signed a Memorandum of Understanding (MoU) with BOI in order to reposition the economic fortunes of the state. This, according to him, led to the creation of a “Matching Fund” of N1 billion through a joint contribution of N500 million each by the state government and BOI to SMEs engaged in value addition activities in fertilizer blending, groundnut oil processing rice processing, poultry feeds processing, fish feeds processing and tomato processing.

The governor said the scheme has generated hundreds of jobs through cooperative societies and the SMEs, adding that 1,380 jobs have been created by 39 cooperative societies while it is envisaged that by the time all the 133 cooperative societies are visited, more than 3,000 new jobs would have been created.

Beneficiaries of the Bank of Industry (BoI) and Dangote Group’s N5 billion revolving loan for Small and Medium-scale Enterprises have expressed delight at the initiative, which according to them, has grown in output and created more jobs.

Also BoI and Dangote Group’s N5 billion revolving loan for SMEs has boosted beneficiaries’ businesses and created more jobs. The Dangote Foundation and BoI, in March last year, signed a Memorandum of Understanding to set up a micro, small and medium enterprises (MSMEs), with N5 billion initial fund to create about one million direct jobs.

President of the cooperative, Mr. Abimbola Olanrewaju, and chief executive of Ojak Technologies, a security installations and cyber cafe operator, are now itching to join the 10-member group. The group comprises members who are into photography, boutiques, cyber cafes and bridals. Olanrewaju said the loan of five per cent interest rate, has grown the business of Ojak Technologies raising sales by about 30 per cent since October last year when the facility was obtained, besides increasing staff strength from two to five.

“The loan has made me very busy,” he said, lamenting the negative impact of poor power supply on the business.

For Mrs. Bukola Opara, her Buchi Kreations has expanded with the use of the Dangote/BoI facility, buying more varieties for her outfit.

Ms. Tracy Uzoma of Tracy Bridals and Makeovers had told Weekly Trust   that the loan “really helped to grow my bridals business, because we were formerly into makeovers only.”

On repayment of the loan, Olanrewaju explained that: “Everyone pays into an account from which we issue a single cheque to BoI to cover interest and principal on a monthly basis since last year.”

Mrs. Opara said the group “hopes to repay the loan on schedule to be able to apply for another one. Very many people want to join our cooperative now, because they missed the opportunity to join at inception, since they never believed at the time that the loan scheme is feasible.”

Stallion Multipurpose Cooperative Society, after repaying the current loan, Mrs Opara noted, hope to receive as much as five times of the amount they got under the current arrangement, helped by the fact that they now have a good credit history.

The Bank of Industry and the Ondo State Government have so far disbursed about N602m as loans to small and medium entrepreneurs for their N2bn joint scheme.

In his presentation, General Manager, BOI, Mr. Mohammed Abdul-Ganiyu, informed the gathering that the bank which has managed series of intervention funds aimed at repositioning the industrial sector, has so far saved about 8,070 jobs in the textile sector.

According to him, this has led to the turnaround of 38 textile firms from imminent collapse. He advised that entrepreneurs who are into similar line of production could form themselves into a kind of cooperative group to access funding from the bank, saying it is easier for them to have cheap access to infrastructure through the industrial cluster initiative.

Abdul-Ganiyu said as a way of increasing funding to the SME sector, the bank in 2006 through its paradigm shift initiative, dedicated 85 per cent of its resources to the funding of the BOI tasked SMEs on bankable proposals. Mr. Joseph Babatunde, BoI’s General Manager (Operations) in a paper he presented at the worshop titled Overview of Bank Of Industry Limited’s Activities and Operations, said the core mandate of Bank of Industry is to provide financial assistance for the establishment of large, medium and small projects; as well as expansion, diversification and modernisation of existing enterprises; and rehabilitation of ailing industries.

Babatunde noted that the bank places emphasis on prudent project selection and management, as such resources are directed to support commercially viable and economically desirable projects with high developmental impact such as value addition to local raw materials, job creation and poverty alleviation to enhance the social economic well- being of Nigerians.

On his part, Mr. Lawal Gada, Renewable Energy Manager/Ag. Project Manager, BOI/UNDP AtRE Project acknowledged that SMEs are confronted with several challenges which hamper their growth and consequently, the nation’s economic development.

The major challenges that need to be addressed immediately have been identified as, but not limited to: high cost of doing business occasioned by poor infrastructure (power, roads, water, etc), multiple taxation, high cost of legal documentation of credit facilities at both the states’ Lands Registries and the Corporate Affairs Commission (CAC); Bureaucracy in obtaining title to land and State Governors’ consent to mortgage property; inadequate capacity-building on the part of the SMEs in the areas of entrepreneurship, skills acquisition, etc and on the part of the financial institutions in understanding the dynamics of the SME sector resulting in their perception of the sector as high risk; poor attitude to loan repayment by the borrowers and limited access to credit occasioned by the above factors among other reasons.