Book keeping, faulty proposal may deny many MSMEs access to N250b facility—Expert
The recent efforts of the Bank of Industry (BoI) to secure $750 million (N250 billion) syndicated loan facility received from the African Export-Import Bank (Afreximbank) has continued to elicit reactions from experts.
Whereas the key target of the facility which is to give out loans to Micro, Small and Medium Enterprises (MSMEs) at single digit interest rate, analysts have raised an issue of urgent industry importance, saying that applying MSMEs may find it hard to meet given conditions.
In an interview on Tuesday, development economist and SME consultant, Dr. Kyrian Nwankwo told our correspondent that “Issues bordering on book keeping and errors in loan proposals will deny a number of applicants to the loan.
He added that “Many small business owners hardly draw growth plan or apply financial discipline in their day-to-day business activities and this has been the source of worry for financial institutions that are ready to give out loans”.
“For an SME to grow, the entrepreneur must have a business development plan which must be followed to the letter with fewer defaults.
“Avoidance of defaults starts from good book keeping culture and smart way of writing and packagi9ng loan and even business proposals ahead of time.
While advising prospective MSMEs who are hopeful in accessing the loan from BoI, Dr. Nwankwo called for special training programme for MSMEs who will access the loan before giving out the fund to avoid loan default even if it is in single digits as claimed.
Business Hilights recalls that the Managing Director of BoI, Mr Olukayode Pitan had given the hint at the just concluded Afreximbank 25th Anniversary and Annual General Meeting in Abuja.
He disclosed that “The loan will be given to entrepreneurs in Nigeria for a period of between five and seven years, would enable the BoI bridge the funding gap for MSMEs which estimated at about N700 billion.”
He said “This fund would be given to companies operating in the creative industry, manufacturing and gender based businesses to help reduce the unemployment rate in the country and create wealth for small and medium scale entrepreneurs.
“We are looking at small, medium and large enterprises. We are looking at enterprises or companies that have a focus in using local raw materials, companies that generates that generates employment and bring down their cost of borrowing” he said.
According to him, “The loan will be deployed at less than ten per cent interest per annum. We are working with the Central Bank of Nigeria so that the loan we will give to Nigerian businesses will be a longer term loan of between seven to eight years for the industrial sector.”
“The idea is to support industries. What this loan allows us to do is, it gives additional N250 billion depending on the exchange rate that is used, between N230 billion to N250 billion to deploy to the industrial sector. There is gap in the funding of the industrial sector, to the tune of N704 billion. This is our way to reduce that gap.”
The deal was signed off in the presence President Muhammadu Buhari who insisted on witnessing the agreement signing ceremony in Abuja because the N250 billion syndicated facility financed by 16 banks (among which are: Africa Export-Import Bank, the ECOWAS Bank for Investment and Development, and British Arab Commercial Bank Plc and four Nigerian banks based in the United Kingdom) is the single largest facility of its kind to be received by a Development Finance Institution (DFI) in Nigeria.
