BoI, 10 banks collaborate to fund SMEs

By Franlin Alli

The Bank of Industry and ten banks have signed a memorandum of understanding (MoU) to provide loans to Small and Medium Enterprises (SMEs) at low interest rate.

The ten banks are Access Bank Plc, Diamond Bank Plc, Ecobank Limited, Fidelity Bank Plc, First Bank Limited, First City Monument Bank Limited, Skye Bank Plc, StanbicIBTC BankPlc, Standard Chartered Bank Limited, and United Bank for Africa Plc.

According to the MoU signed on Monday, the ten banks would provide working capital loans to SMEs qualified by the BoI at interest rate of Monetary Policy Rate plus six percent, with tenor ranging from six months to 12 months.

The BoI on the other hand would provide Term Loans to the qualified SMEs at interest rate between nine and ten percent with tenor ranging from three to five years, and moratorium of six to 12 months.

Disclosing this at the MoU signing ceremony, Managing Director/Chief Executive, BoI, Mr. Rasheed Olaoluwa said, “Access to affordable finance has been identified as one of the major challenges inhibiting the growth and development of SMEs.

However, 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 (BOI inclusive), is the fact that their loan requests are poorly packaged and their business plans are 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. The BDSPs are to: Assist the SMEs in the development of bankable business plans and proposals, which will facilitate their access to finance; and pprovide post-finance services to the SMEs such as mentorship, handholding, financial advice and inculcation of best practices.

“Another strategy was to approach SME-Friendly Commercial Banks to partner with BOI in co-financing the SMEs. The activities in which BOI and the SME-Friendly Banks will collaborate include the following: Provision of the long-term loans to qualified SMEs by BOI based on its Risk Acceptance Criteria; Provision of working capital to the SMEs by the SME-Friendly Banks also based on their individual Risk Acceptance Criteria.

- Culled from: http://www.vanguardngr.com