Are you thinking of getting a loan for your business? If yes, then the main reasons why you cannot access loans in Nigeria will be discussed in this write-up.
The Central Bank of Nigeria (CBN), the Bank of Industry (BOI), and Lagos State Employment Trust Fund (LSETF) recently stated that funds are made available for micro, small and medium enterprises (MSMEs) in Nigeria, however, a lot of business owners are not qualified to access the loans.
Business Structure, Documentation and Financial History
They stated lack of proper documentation, lack of good business structure, and lack of financial history among other factors are responsible for their inability to access loans in Nigerian financial institutions. The Head of SME Funds, at BoI, Mike Oye stated that a lot of Nigerians establish their business without the thought of taking loans later on, which is a reason why a lot of them do not take documentation and accounting seriously.
“For example, an individual who makes shoes and seeks for a loan. He sponsored himself through school from his shoe business. It is easy to believe such a person because when he is asked questions about where he sources for his leather, how he sells them, and other questions, He could answer off the top of his head, so this implies he has been into the business for like 5 or 6 years. However, unfortunately, it is difficult to give him any loan because he does not have a bank account, sales record, and receipts.”
Entrepreneurship and Employment Mindset
Oye said this at an event organized by the Arts and Civics Table Organization (TACT), a non-governmental organization-themed, SME Sustainability & Growth Conference in 2018. The head of the development finance office at the CBN, Adebisi Adedeji said there is some kind of disconnection between the SMEs and the lenders in Nigeria. He said there are some ways to look into these challenges.
“It is a training and orientation problem. It is an orientation challenge because I have seen instances where I spoke to Nigerian graduates who haven’t been working for five to six years, waiting for white-collar jobs. Nigerians are not trained to create their own jobs or wealth. The mindset of the majority of Nigerians is set to graduate school and get a good job in an office apartment fitted with an AC. This is the first primary challenge.”
He stressed the need for an average young Nigerian to have a change of attitude geared towards starting up a business. The Head SMEs at LSETF, Charles Anyanwu cited the lack of entrepreneurial training on graduates as one of the major reasons why business owners are not qualified for accessing loans in Nigeria. He stated that some graduates of accounting cannot even draft simple business plans. He stated that the CBN has encouraged academic institutions to key into entrepreneurship in their curriculum which some have done, especially, private schools.
“You are running a business for ten years, without a bank account, no documentation, no paper trail? All transactions are made in person. It does not go into your bank account and you want to access a loan facility? These are the challenges that we really need to engage people in,” He said at a panel conversation.
Way Forward
The way forward for SMEs in Nigeria, Africa’s largest economy to be eligible for loans, the stakeholders in the conference raised a variety of ideas which included formalizing their business structures to allow them to gain recognition by the government.
A survey from the conference stated that only 4.2% of 37.07 million MSMEs in Nigeria have been able to access loans or overdrafts from a financial institution, while startups or new entrants find it difficult to access business loans from Nigerian banks. So if you have a business and you need a loan to boost your business growth, then you should start learning daily bookkeeping accounting. You can also hire a professional accounting firm to help you with the tasks.
