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Fresh push for industrial sector revival

Rasheed Olaoluwa, MD BOI

Rasheed Olaoluwa, MD BOI

IT has often been said that democracy and development are two sides of the same coin.  If this assertion is anything to go by, then the Bank of Industry (BoI), a development bank should be responsible for institutionalizing a solid base for the growth of major indices that could deepen the growth of the economy through support for small and medium enterprises SMEs in Nigeria.

The cottage industries which thrive more under democratic dispensation are indeed the engine of the economy of any nation.

But Nigerians are yet to feel impact of this institution in the area of support for industrial growth and development.
However, the Managing Director of the bank, Rasheed Olaoluwa, seems to differ as he said that the concerted move by the bank to contribute to the economic development of Nigeria informed its seemingly overt concentration on SMEs, agriculture and the mining sector. Olaoluwa insisted that ranking Nigeria among other African countries may not give a clearer picture as the country is now at par with other global economies.  

Olaoluwa said it was high time Nigeria economy begins to shift from rating between it and other Africa countries, but rather, it should begin to be compared with global economies. 

He said the bank has put in place some deliberate efforts and polices that would enable it work and deliver on its mandates based on global best practices adding that the operations of the bank and procedures have been highly computerized and automated such that a lot of time and resources are saved and the old cumbersome ways of doing things have been eliminated.

The BoI boss said priority is being given SMEs so that they can have strong financial base while the bank serves as a midwife between them and commercial banks and other stakeholders.

The Bank has over time been criticised for putting up very stringent conditions for SMEs in their quest to access loans, but Olaoluwa insisted that lack of understanding of business owners who do not want to know the risk factors the bank had to consider before giving out loans is the bane.  He said to make things easier for customers, the bank had appointed over 100 Business Development Service Providers (BDSP) whose responsibilities include assisting customers to draw up workable business plans and proposals in line with the requirement of the bank.  He said issues surrounding finance are critical ones and people cannot just have the impression that they could walk into the bank without solid plans and expect to walk out with loans.

“We have done a lot to support SMEs. It is clear that SMEs need finance, but we also believe their needs are beyond finance. While, we are giving the loans, we are also trying to make the process more efficient. We are trying to hold their hands and that is why we appointed over 100 Business Development Service Providers (BDSP).  The role of the BDSP is to help our customers to prepare lendable business plans. Our BDSPs understand our risk acceptance criteria; they know exactly what we are looking for.’’ He said.

He said the bank has also streamlined the activities of the BDSPs in term of their service charge so that SMEs would not be subjected to undue financial burden adding that any of them who tries to overcharges business owners has the bank to contend with.

‘’What we have also done is that because we know people are afraid of the fee charged by these consultants, we have negotiated and agreed on very reasonable token fees for the SMEs. For instance, if you are applying for a loan less than N10m, the chargeable fee is N10, 000. If the loan is between N10m to N50m, all you pay to get your business plan done to international standard is N25, 000. However, if it is between N50m and N200m, the amount chargeable is N50, 000. It is really very reasonable. It is not easy to get them to accept this. The BDSPs have taken it as part of their social responsibility to the national and economic development of the country. We believe that, going forward, the rate of successful application would be higher.   While we expect our customers to help us in monitoring their activities, on our part, are going to publish the token fee payable to the BDSPs.  We can blacklist them if we find out they go beyond our terms of agreement.’’.

Another area the bank had intervened in the challenges of SMEs is the lending interest rate charged by commercial banks.  Olaoluwa said the BoI appreciates the need for SMEs to survive and be able to pay back loans collected from commercial banks.  He said as part of its effort to ensure SMEs are not crushed with the burden of high interest rates, the BoI negotiated with commercial banks to add only 6 percent to the Monetary Policy Rate (MPR).  He said until the MPR is improved, SMEs may still need to continue with what is obtainable which he said is still a fair deal compared to when SMEs approach commercial banks independently without the intervention of the BoI.

‘’We are also doing a lot to support even working capital requirement. You will recall that late last year, we signed agreement with10 SMEs-friendly banks.  The essence of the agreement really was the interest rate that we negotiated with the banks. If we recommend SME to them to get working capital facilities, they will only charge interest rate of MPR+6. MPR today is about 13 per cent as set by the Monetary Policy Committee of the Central Bank of Nigeria (CBN), plus 6 gives 19 per cent. If you are to approach any of the banks yourself, you will probably be charged between 25 to 26 per cent. That is something we have done for our SMEs’’. 
 
He however said one area the bank is experiencing difficulty is the attitude of business owners in Nigeria who had been able to access loans from the institution and has exhibited apathy in paying back such loans.  He said the mind set of these business owners is that they perceive such loans as part of the national cake and feels they do not have to pay back.

Olaoluwa is however optimistic that by the time the bank is partially privatised, the mindset of the people will be changed.  He said the Bank had to employ the services of the EFCC in order to recoup some of the loan but still put none performing loan currently at 10 percent.

In order for the Bank to get closer to SMEs located in rural areas and capture their activities; the Bank expanded its operations to fourteen locations from the original seven.  However, the BoI boss insisted that further expansion of its operations would depend largely on state executives whom the bank rely solely for office spaces for the take off of its operations in the states.  He appealed to state governors to emulate their counterparts in other states across the country and provide office accommodation for the bank. 
 
‘’We have also expanded our national coverage. Before we used to have seven locations, but today we are taking about fourteen locations just to make sure that we get closer to our SMEs. Also, in order move along with the technological advancement across the world and to serve our customers better, we are automating a lot of our processes and we also want to give our SMEs the opportunities to enjoy that benefit of digitalization. A lot of our SMEs do not know how to keep records because, first, they don’t have accountants who understand technical details of accounting. We want to empower the SMEs with a simple solution that enables them do it on their mobile telephone.’’

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