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Intervention fund: BOI rewards 10, blacklists 24 companies

By BusinessNews Staff on October 19, 2014

The Bank of Industry has established a hall of fame for 10 companies for repaying their loans while placing 24 other defaulting companies on its black list.

The Managing Director and Chief Executive Officer of the bank, Rasheed Olaoluwa, stated this on Friday, saying that the 10 companies had demonstrated a high level of integrity in their dealings with the bank and had fully repaid loans granted them by the bank as and when due.

“These companies obtained long-term credit facilities from BOI at least twice and they fully repaid the loans as and when due. They have proven that integrity is not a function of size or of the business environment. They have shown considerable honour and character that we commend and applaud,” Olaoluwa said.

Meanwhile, the 24 companies that defaulted were blacklisted by the bank not just for failing to pay but for showing a high level of dishonesty and lack of integrity, according to the MD.

“Just as we have had exemplary customers, we have also had the very bad and difficult ones. We have had customers of shady character and questionable integrity, who diverted loans meant for acquisition of plant and machinery to other ventures outside the agreement signed with the bank. Some of these customers provided cloned title documents, thus committing outright fraud,” he said.

In a keynote address he presented during the induction of the companies into the Bank of Industry Hall Of Fame, Olaoluwa observed that banking was about financial intermediation.

He said, “In addition to their shareholders’ funds, commercial banks mobilise deposits in order to have sufficient funds for on-lending. Therefore, the ability of banks to repay the depositors is a function of their ability to collect the loans granted. The banking intermediation model depends on the ability of a bank to mobilise deposits and the concurrent ability of the bank to collect the loans granted.

“A high level of non-performing loans can impair the ability of a bank to meet its maturing deposit obligations and this can lead to a run on the bank. The adverse effect of non-performing loans can usually be offset by continuous mobilisation of significantly higher levels of deposit, all things being equal.”

He, however, noted that while the scenario he painted might be true for commercial banks, it was different for development banks like BOI.

“We, development banks, derive our funding, not from millions of depositors but from government funding, which is provided from government resources that are limited, finite and subject to competing demands.”

He added that the names of the 10 companies would be published on the bank’s website and in the hall of fame column while the names of the 24 defaulting companies, their shareholders and directors, would be published on the website under the blacklist column. This, he said, would serve as a deterrent to future borrowers and a caution to intending lenders.

[Punch]

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