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BOI, 10 banks partner to enhance SME financing

By BusinessNews Staff on December 24, 2014

Small and Medium Enterprises (SMEs) in the country monday received a major boost following the announcement of the Bank of Industry’s (BOI’s) partnership with 10 banks to tackle their funding challenges.

The banks are Access Bank Plc, Diamond Bank Plc, Ecobank Nigeria Limited, Fidelity Bank Plc, First Bank Nigeria Limited, First City Monument Bank Limited, Skye Bank Plc, Stanbic IBTC Bank, Standard Chartered Bank Limited and the United Bank for Africa Plc.
The Managing Director (BOI), Mr. Rasheed Olaoluwa, who spoke on the partnersip in Lagos, stated that access to affordable finance had been identified as one of the major challenges inhibiting the growth and development of SMEs. He also noted that the new move by BOI was to throw its full weight behind SME development.

Olaoluwa during the signing of the Memorandum of Understanding (MoU) between the BOI and the banks, however stressed that BOI was able to identify the fact that the main factor responsible for the current low level of financial support to SMEs by banks generally was that their loan requests used to be poorly packaged and their business plans are mostly non-bankable.

“BOI therefore decided on a multi-pronged approach to addressing the problem of poor loan packaging and access to finance. The first approach was the recent accreditation of 122 Business Development Service Providers (BDSPs) located all over the country.
“Another strategy was to approach SME-friendly commercial banks to partner with BOI in co-financing the SMEs,” he said.
He added: “We wrote on August 12, 2014 to ten commercial banks that are renowned for their SME-centric activities to partner with us in the financing of our SME customers.”

According to him, the areas of collaboration would include provision of the long-term loans to qualified SMEs by BOI based on its Risk Acceptance Criteria (RAC), provision of working capital to the SMEs by the SME-friendly banks also based on their individual RAC and financing sectors such as agro-processing, solid minerals and metals, light manufacturing, logistics and the likes.
These, he said are the critical sectors identified under the Nigeria Industrial Revolution Plan (NIRP) launched by the President, Federal Republic of Nigeria, President, Dr. Goodluck Ebele Jonathan, on February 11, 2014.

The BOI boss added that the loans to beneficiaries would be in accordance with BOI term loans with a tenor of 3 to 5 years for 6 to 12 months at 9 to 10 per cent interest rate.

He said the MoU was geared towards the development of a virile SME sector in Nigeria and a platform for the realisation of the economic transformation objectives of the Federal Government.

He noted that the importance of SMEs to Nigeria’s economic development cannot be overemphasised, with over 17 million Micro Small and Medium Enterprises (MSMEs) in Nigeria according to the National Bureau of Statistics, accounting for over 90 per cent of all companies in the country, employing over 30 million people and accounting for an estimated half of Nigeria’s Gross Domestic Product (GDP).

“The synergy that has evolved between BOI and the SME friendly banks, which is unprecedented between a development finance institution and commercial banks, will undoubtedly foster greater access to finance for SMEs, financial inclusion for Nigerians and also engender wealth creation and accelerated job creation for Nigerians.

“It is also our expectation that the SMEs that will benefit from this partnership will be good corporate citizens and meet their financial obligations to the partnering banks. This will stand them in good stead for consideration for larger loan amounts with the hope that they will in the near future metamorphose into large enterprises,” he stated.

[ThisDay]

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