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BoI And Its Commitment To Sustainable Industrial Growth In SMEs, Agriculture

smallRaising capital has always been one of the greatest challenges for the growth and sustainability of small, medium and micro-enterprises (SMMEs).

With a huge credit gap to unmet by deposit money banks in the country, the Bank of Industry (BoI) has helped in providing cheap funds for all sectors of the economy, including SMEs and agriculture.

Among the institutions whose role in the development of a growing nation’s economy is well recognised but inadequately emphasised are the development banks.

Playing multiple roles, these institutions have helped promote, nurture, support, and monitor a range of activities though their most important function has been as drivers of industrial development. To alleviate poverty and reduce the developmental gap that separated developing economies like Nigeria from the developed countries, development finance institutions like the BoI are established to intervene in accelerating the pace of growth of productivity and per capita gross domestic product (GDP).

To implement its development intervention strategy, the BoI, within the last one year, re-jigged its board to reflect the agenda; new products were introduced while operational efficiency became a measure of appraising the bank’s performance. On his part, the managing director (MD)of the BoI, Rasheed Olaoluwa, on assumption of office on May 19, 2014, leveraged his vast experience in the financial sector to address the imbalance caused by commercial banking institutions in the area of financial intermediation for industrial firms and small businesses by restating the bank’s commitment to the growth of SMEs.

According to him, the problem of many SMEs is not access to cheap funds as claimed by many present and intending small businesses but the inability of such entrepreneurs to develop and defend bankable projects. Indeed, the financial sector in a typical economy is saddled with the primary responsibility of financial resource mobilisation and intermediation. It engages in the redirection of funds from surplus spending units to deficit spending units.

To ensure that the BoI’s impact is felt in the economy, Olaoluwa explained that the bank developed a five-year strategic plan from 2015-2019 under the advice of the international consulting firm, KPMG Professional Services, spanning the bank’s vision, mission, goals, and objectives as well as the core values. Indeed, the strategic initiative has seen the bank come out with an introduction of a N5 billion Cottage Agro Processing (CAP) Fund, N1 billion Fashion Fund, appointment of 122 business development service providers (BDSPs) to facilitate SMEs’ access to loans as well as the reduction of non-performing loans from 12.98 per cent to 4.09 per cent while improving its operational efficiency with an upgrade of its system and introduction of mobile applications.

Last month, the bank also launched the N2 billion Graduate Entrepreneurship Fund (GEF) to assist teeming unemployed youths emerge from the vicious cycle of unemployment, adding that each beneficiary of the GEF can access a minimum loan of N500,000 and a maximum of N2 million for the procurement of machinery and equipment as well as for working capital at a single digit interest rate of 9 per cent with a loan tenor of three to five years inclusive of six months moratorium.

To further improve access to its facilities, the bank partnered with 10 banks to tackle SMEs’ funding challenges. The banks are Access Bank, Diamond Bank, Ecobank Nigeria, Fidelity Bank, First Bank Nigeria, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank and the United Bank for Africa.

The BoI has managed the N235 billion CBN Intervention Fund for manufacturing, re-financing, and restructuring facilities of banks’ loans and also N300 billion CBN Power and Airline Intervention Fund (PAIF). Others are the Managed Fund Cassava Bread Fund, Cottage Fund, FGN Special Intervention Fund For MSME (NEDEP), National Programme on Food Security (NPFS), Rice and Cassava Intervention Fund, Sugar Development Council Fund, NAC Fund and Cement Fund.

Over time, the MD of BoI has reassured of the bank’s commitment to continue to provide financial support to agribusiness entrepreneurs in the country as a strategic option of improving their productivity and ensuring their products can compete in the global market. He stated that the bank had expanded the scope of its agriculture sector financing, adding that this initiative is aimed at positioning the bank at the vanguard of current efforts to diversify the nation’s economic base through financial access to genuine agro processors and exporters.

Olaoluwa explained that the synergy between the BoI and 10 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. He also noted that one of the major weaknesses of SMEs is poor record keeping and weak financial management which makes it difficult to evaluate their financial performance and invariably inhibits their ability to access loans from banks or attract investors.

He said that to address this deficiency, Kinesis Consulting Limited, in partnership with the BoI, has developed an SME Accounting Application (SAAPP), tested to ensure that it enables users to keep proper records of transactions as well as generate requisite financial statements.

“The BoI is trying to achieve a balance in its functions as a development finance institution in terms of delivering social impact and maintaining a sustainable loan infrastructure. We are confident that key shareholders in the NIRP initiative, like the Ministry of Finance Incorporated and the Central Bank of Nigeria (CBN), will continue to support the bank with some equity injection. But considering the fact that there is a lot of demand on government’s resources, we are exploring alternative modes of funding such as continuation of sector-specific intervention funds by the CBN, Ministry of Agriculture, Ministry of Solid Minerals, and others; managed funds from various state governments and foundations; long-term loans at very low interest rates from multi-lateral/international development institutions,” he added.

With operational efficiency serving as a key benchmark, Olaoluwa said that the BoI is automating a lot of its processes to give SMEs the opportunity to be served better. Already, a renowned international rating agency, Fitch, has assigned the BoI a national long-term rating of ‘AA+(nga)’ and national short-term rating of ‘F1+(nga)’, noting that the national ratings reflect the bank’s creditworthiness relative to the best credits in Nigeria. He noted that the BoI decided to leverage the banks’ branch network to further reach its customers as well as increase its intervention across spheres of small businesses.

According to Olaoluwa, in recent times, we tried to improve the public’s access to our services. We used to have seven offices across the country in the past but we have now doubled this to 14. We have now established state offices and we are doing more; we are not stopping at those 14. For stakeholders, there is no single solution for financing SMMEs, but in institutional diversity there will be greater support for innovative firms.

They emphasised the need for governments to support the responsible growth of these innovative institutions and financing mechanisms.

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