BoI to underwrite SMEs projects

By The Citizen
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The Bank of Industry (BoI) has signed a Memorandum of Understanding (MoU) with 10 SME-friendly banks to finance Small and Medium Enterprises (SMEs).

This is coming on the heels of the success of the accreditation of 122 Business Development Service Providers (BDSPs) to assist SMEs in the development of bankable business plans and proposals to facilitate their access to finance.

Managing Director, BoI, Mr. Rasheed Olaoluwa, explained that 10 commercial banks that are renowned for their SME-centric activities were chosen to partner with them in the financing of their SME customers.

He listed the banks as Access Bank, Diamond Bank, Ecobank, Fidelity Bank, First Bank, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank, and United Bank  for Africa.

He said the activities in which BoI and the SME-friendly banks would collaborate include the provision of long-term loans to qualified SMEs by BoI based on its Risk Acceptance Criteria (RAC) and the provision of working capital to the SMEs by the SME-friendly banks also based on their individual RAC.

According to Olaoluwa, the MoU is geared towards the development of a virile SME sector in Nigeria, besides acting as a platform for the realisation of the economic transformation objectives of the Federal Government.

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

He said access to affordable finance is one of the major challenges inhibiting the growth and development of SMEs. He however, noted that investigations revealed that the main factor responsible for the current low level of financial support to SMEs by banks generally and BoI inclusive is the fact that their loan requests are poorly packaged and their business plans non-bankable.

Pointing the way forward, he said: 'BoI has decided on a multi-pronged approach to addressing the problem of poor loan packaging and access to finance.

'Another strategy is to approach SME-friendly commercial banks to partner with BoI in co-financing the SMEs.'

Sectors to be financed shall include agro-processing, solid minerals and metals, light manufacturing, logistics, etc. identified under the Nigeria Industrial Revolution Plan (NIRP) launched by the Federal Government recently.

On the terms of the loans, he said it would be in accordance with BoI term loan with a tenor of three to five years. While the moratorium will be six-12 months, interest rate is between nine and 10 per cent per year. On the other hand, working capital facilities by SME-friendly banks will be on a tenor of 6-12 months; interest rate:  MPR + 6 per cent per annum. Moratorium:    As may be applicable.

The BoI boss further said: 'The synergy that has evolved between BoI and the SME-friendly banks  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 goodstead for consideration for larger loan amounts with the hope that they will in the near future metamorphose into large enterprises.'

He commended the SME-friendly banks for exhibiting a developmental orientation, which the economy requires at this point in time.

Responding, UBA Chief Risk Officer, Mr. Uche said the relationship offers huge opportunity and opens up a new vista for banks in this sector of the economy. He said the synergy with BoI will also address the problem of fund -mismatch, which has bedevilled the sector for a long time, leaving the SMEs to their fate.

Also, Access Bank Plc Executive Director, Mrs.Titi Osuntoke, said SMEs contribute less than five per cent to the GDP and as a bank will wish to contribute their quota to drive the economy with their firm belief that it is the engine of growth of any economy.

For the Deputy Managing Director of Diamond Plc, Mrs Caroline Anyanwu, her bank has been in the fore front of SMEs support in the last five years.

She said the involvement of BoI brings a fresh vista and they were willing to run with vigour more than ever.

Skye Bank Executive Director, Mrs Ibiye Ekong, pledged the support of the bank for the SMEs and their wish for the real sector to grow and contribute of the economy.