Post by Trade Coach on Mar 20, 2021 22:35:34 GMT 1
Reasons Why It Is Difficult For SMEs To Get Loans From Nigerian Banks – Zenith Bank GMD
If you run a Small and Medium Scale Enterprise in Nigeria, you will understand how difficult it is to get a loan with a single digit interest from Nigerian banks. A lot of SMEs have tried and failed, many still do not know the reason why the banks put up such attitude when it comes to lending to small scale business people.
In any society especially a developing economy like Nigeria’s, small scale businesses form the bulk of business organization that employ the most number of people. But why is it that instead of supporting them, the banks neglect them and be running after the big and large scale companies.
However, the Group Managing Director of Zenith Bank, Mr. Ebenezer Onyeagwu has revealed the reasons behind their actions during an interview recently with Arise TV.
During the interview he let out some insights into the difficult relationship between Nigerian commercial banks and Small/Medium Enterprises. When explaining why those small and medium scale businesses cannot access single digit interest loans from the banks, he said that the operational and regulatory costs of running a bank in Nigeria are too high.
He said that most of the regulatory costs are not know by the public. “Our cost profile depicts the operating environment”. The cost of doing business in Nigeria, especially that of running a bank is very high, he explained.
He further explained that the regulatory cost of running a bank as big as Zenith Bank is as much as 28% of the total overhead. With such costs and others, the cost of doing business as a banking institution in Nigeria is huge.
The Group Managing Director stated the three key reasons why it is difficult to obtain single digit interest loans from Nigerian Banks. They are as follows:
Fiscal Deficit
Government Borrowing
Money Supply and Demand
He stated that it is almost impossible to issue an interest rate by a fiat statement; interest rates will generally be determined by market forces.
Interest rate issues are governed by first money supply in the banking system and the economy, secondly matters of government borrowing and thirdly, fiscal deficits. All these put together will show you that nobody can just wake up and decree what an interest rate will be without considering the realities in the market.
But apart from these, the Central Bank of Nigeria (CBN) has put many policies in place to make the SME’s access single digit interest loans in Nigeria. We have brought many of them to you in this forum.
Remember the Agri-Business/Small and Medium Enterprises Investment Scheme. If you operate in this area, you can access this intervention fund with long-term low interest rate. There is the Anchor Borrowers Scheme, the commercial agricultural credit scheme.
He explained that the biggest problem is that you can just see an SME approaching the bank for a loan, the SME may not have a track record, and tells you that he needs a single-digit loan and needs N20 million. No bank can give you that type of money without knowing where you are coming from.
The good news is that the regulatory authorities have provided funding schemes in almost all facets of the business in Nigeria.
But the GMD said that the funds are there but when the SMEs come, they don’t always meet the eligibility criteria for accessing the funds.
We have been bringing to our members in this forum various funding interventions setup the Federal Government through the Central Bank of Nigeria (CBN). It is very important that as an SME that you take your time to prepare and meet up with the criteria for accessing the fund.
We have been explaining to our readers who are small scale business people, you must prepare your accounts; the banks cannot talk to you if you cannot show them where you are coming from. What have you been doing? Where did you get your initial funding from and how did you utilize the loan?
You must have a business plan. When your business has audited accounts, no matter which auditors you used, it is something, you have started; very soon you will become big.
For the banks to work with you, your accounts and other business records must be clearly prepared.
If you run a Small and Medium Scale Enterprise in Nigeria, you will understand how difficult it is to get a loan with a single digit interest from Nigerian banks. A lot of SMEs have tried and failed, many still do not know the reason why the banks put up such attitude when it comes to lending to small scale business people.
In any society especially a developing economy like Nigeria’s, small scale businesses form the bulk of business organization that employ the most number of people. But why is it that instead of supporting them, the banks neglect them and be running after the big and large scale companies.
However, the Group Managing Director of Zenith Bank, Mr. Ebenezer Onyeagwu has revealed the reasons behind their actions during an interview recently with Arise TV.
During the interview he let out some insights into the difficult relationship between Nigerian commercial banks and Small/Medium Enterprises. When explaining why those small and medium scale businesses cannot access single digit interest loans from the banks, he said that the operational and regulatory costs of running a bank in Nigeria are too high.
He said that most of the regulatory costs are not know by the public. “Our cost profile depicts the operating environment”. The cost of doing business in Nigeria, especially that of running a bank is very high, he explained.
He further explained that the regulatory cost of running a bank as big as Zenith Bank is as much as 28% of the total overhead. With such costs and others, the cost of doing business as a banking institution in Nigeria is huge.
The Group Managing Director stated the three key reasons why it is difficult to obtain single digit interest loans from Nigerian Banks. They are as follows:
Fiscal Deficit
Government Borrowing
Money Supply and Demand
He stated that it is almost impossible to issue an interest rate by a fiat statement; interest rates will generally be determined by market forces.
Interest rate issues are governed by first money supply in the banking system and the economy, secondly matters of government borrowing and thirdly, fiscal deficits. All these put together will show you that nobody can just wake up and decree what an interest rate will be without considering the realities in the market.
But apart from these, the Central Bank of Nigeria (CBN) has put many policies in place to make the SME’s access single digit interest loans in Nigeria. We have brought many of them to you in this forum.
Remember the Agri-Business/Small and Medium Enterprises Investment Scheme. If you operate in this area, you can access this intervention fund with long-term low interest rate. There is the Anchor Borrowers Scheme, the commercial agricultural credit scheme.
He explained that the biggest problem is that you can just see an SME approaching the bank for a loan, the SME may not have a track record, and tells you that he needs a single-digit loan and needs N20 million. No bank can give you that type of money without knowing where you are coming from.
The good news is that the regulatory authorities have provided funding schemes in almost all facets of the business in Nigeria.
But the GMD said that the funds are there but when the SMEs come, they don’t always meet the eligibility criteria for accessing the funds.
We have been bringing to our members in this forum various funding interventions setup the Federal Government through the Central Bank of Nigeria (CBN). It is very important that as an SME that you take your time to prepare and meet up with the criteria for accessing the fund.
We have been explaining to our readers who are small scale business people, you must prepare your accounts; the banks cannot talk to you if you cannot show them where you are coming from. What have you been doing? Where did you get your initial funding from and how did you utilize the loan?
You must have a business plan. When your business has audited accounts, no matter which auditors you used, it is something, you have started; very soon you will become big.
For the banks to work with you, your accounts and other business records must be clearly prepared.