Business
Bank of Industry boosts SMEs with single digit loans
Mr. Olukayode Pitan, Managing Director, Bank of Industry
By OBINNA EZUGWU
Almost everyone who has run or tried to run a business in Nigeria has a familiar experience to share about how difficult it is to secure funds. It’s no news stating that accessing facilities from commercial banks in the country is difficult. The banks just wouldn’t lend, and when they do, it’s often at cut-throat interest rates and few are able to meet up with necessary conditions.
But it’s hard to blame the banks, nonetheless. Poor infrastructure and unfriendly environment, among others, have combined to ensure that mortality rate of Small and Medium Enterprises (SMEs) in the country is one of the highest globally. For the banks therefore, apart from probably not having enough liquidity, providing facilities for SMEs is high risk undertaking.
In ideal situations, banks play very active roles in private sector enterprise through loans and other incentives. But in Nigeria, there appears to be a gulf between the average entrepreneur and the commercial bank. But it’s a gulf the Bank of Industry (BOI) was set up to bridge – to provide access to funds for start-ups, SMEs and large enterprises – and it has since stepped in with an array of single digit interest loans for various categories of small and medium businesses.
But exactly how many Nigerians are aware of the opportunities available at the BOI? Indeed, how many are aware of its very existence and its’ mandate? Our mini survey shows that not many do. So, here, we explore the loan opportunities available at the bank.
Owned by the Ministry of Finance Incorporated (MOFI) Nigeria (94.80%), the Central Bank of Nigeria (CBN) (5.19%) and private shareholders (0.01%), BOI raises funds through strategic partnerships and has on offer loans running into billions of naira available for various categories of businesses.
These include: ‘Mechatronics’, meat production and processing, Adire Kampala and Aso Oke, agro-mechanisation, block moulding, cosmetics and beauty care products, cottage agro processing fund, fashion fund, fish farming and processing, furniture products programme, graduate entrepreneurship fund, leather footwear, Nollyfund, solar energy, waste cycling, youth ignite programme, youth entrepreneurship support programme, ASM fund, Bottom of Pyramid and On-lending to commercial banks.
Mechatronics
BOI aims to “bridge the identified skills gap in repair and maintenance of new generation vehicles among auto technicians and mechanics, as well as to complement the delivery of the mechatronics curriculum which the National Automotive Design and Development Council (NADDC) had designed.”
Mechatronics – a blend of mechanical engineering, electrical\electronic engineering, computer control and information technology aimed at creating more functional and adaptable products – is projected to play a major role in industrial development and various fields of endeavour in Nigeria and BOI says the idea is to ensure that people who wish to venture into the field receive necessary funding.
According to it there is up to N500 million fund that can be assessed by limited liability companies and enterprises engaged in “mechatronics diagnostics” and establishments that need to incorporate technology in their operations, including automobile, medical and agricultural industries among others, at 9 percent interest rate and one percent processing fee. The idea being to generate employment across the value chain
Nollyfund
A sum of N1billion fund is available for movie producers and intending movie producers seeking funds for projects. The BOI, according to the information provided in its website, says it intends to intervene in this particular sector because it is an important emerging sector in the economy, which contributed 1.42% ($7.3 billion or N1.4 trillion) to Nigeria’s Re-based GDP in 2013.
Nollywood, ranked 3rd globally after Hollywood and Bollywood in terms of number of contents produced, it said, and has also enhanced the image of Nigeria as its movies are being watched globally. The bank says it’s therefore providing the needed financing required to grow the film industry and make bigger impact in the sector.
The fund can be accessed by limited liability companies and enterprises engaged in film production which includes beneficiaries of the Federal Government’s Project ACT Nollywood Grant for the movie industry. For the purpose of the pilot scheme, fifteen (15) established and emerging producers have been identified as prospects.
The fund is available at single ‘obligor’ limit of N50 million at 10 percent interest rate per annum payable at the end of every month, one percent processing fee and one percent commitment fee. The fund is to be strictly used for film production value chain (i.e. from pre-production to post-production), which is expected to create a minimum of 2,000 direct and 5,000 indirect jobs for Nigerians.
The Graduate Entrepreneurship Fund (GEF)
GEF is BOI’s novel youth programme which was launched in October, 2015 and is implemented by the Bank in partnership with the National Youth Service Corps (NYSC) Directorate. The initiative, the bank says, is specifically targeted at youths undergoing the mandatory one year national service programme.
The aim is to change the job-seeking mindset of Nigerian youths to entrepreneurship and self-reliance by encouraging them to develop skills for self-employment and to contribute to the accelerated growth of the national economy. To address the entrepreneurship capacity gap of the young NYSC members, deepen financial inclusion by de-risking the NYSC members and making them eligible for small business loans to be provided by the bank, among others.
The fund is also available to serving NYSC members that have successfully passed through a Screening process, attended the capacity building programme developed specifically for the prospects under GEF and submitted a bankable business plans in respect of any of the Bank’s identified 40 SME clusters
The fund, according to the bank, shall be deployed to support the establishment and/or expansion of an estimated 1,000 enterprises promoted by NYSC members across the country. The scheme is expected to create a minimum of 5,000 direct jobs and 25,000 indirect jobs annually, totaling 30,000 jobs. It’s limit, N2 billion in the first year, at obligor limit of up to N2 million with zero percent interest rate.
Agro Mechanisation
The BOI is looking to improve mechanised farming in the country with N10 billion fund split into N3 billion each for micro and small scale farm holding and N4billion for medium scale. The fund is available in single obligor limit of up to N10 million for micro, between N10 million and N50 million for small scale and between N50 million and N500 million for medium scale at nine percent interest rate.
The bank seeks to improve the country’s mechanisation rate currently at around 0.27 hp/hectare which is far below the FAO recommended rate of 1.5 hp/hectare. According to it, highly industrialised countries like Japan have mechanisation rate of 7.0 hp/hectare, while Nigeria has ratio of three Tractors per 1,000 hectares which makes it one of the countries with the lowest mechanisation rates in the world.
The idea therefore, is to boost development of MSMEs in the agric sector of the Nigerian economy by providing funding to Agro Mechanisation Service Providers at competitive interest rates. To increase productivity of cultivated land by providing funding to MSME’s that provide agro mechanisation services to small and medium scale farm owners, thereby improving farm output, capacity utilization of agro processors, generate employment and diversify the revenue base of the country.
Block Moulding
BOI says it’s looking to contribute to the estimated N59.5 trillion needed to bridge the country 17 million units housing deficit, by providing funds of up to single obligor limit of N500 million at 9 percent interest rate.
Here, the target market is for the supply of blocks and interlocks to the mass estate developers, major construction sites and private residential/office property developers nationwide, including start-ups, limited liability companies, wholly Nigerian owned companies and foreign/locally-owned companies with minimum of 51% Nigerian ownership in its shareholding structure
The bank says it expects that a typical small to medium scale block/interlock making business will create an average of 10 – 20 direct jobs and 50 – 100 indirect jobs, totalling 60 – 120 jobs.
Adire (tie and dye) and Aso Oke
In its effort to help return the country’s textile industry to the old days when it was reputed to be the largest single non-government employer of labour, accounting for a good percentage of the country’s manufacturing value added and had made considerable progress in backward integration, and was second only to the food and beverages sector in terms of capital investment, output and contribution to Gross National Product (GNP), the BOI is providing facilities in single obligor limit of up to N10 million at 9 percent interest rate for manufacturers of Adire and Aso Oke.
Adire is the indigo dyed cloth made in south western Nigeria by Yoruba women, while Aso-Oke is a hand loomed cloth woven in Nigeria also. Aso-Oke means top cloth in the English language. Usually woven by men, the fabric is used to make men’s gowns, called agbada, women’s wrappers, called iro, and men’s hats, called fila.
The bank says the funding is informed on the need to “promote and sustain the production of indigenous textiles that are unique to Nigeria and can be showcased in any part of the world,” which it projects will be a major source of job creation especially in the areas where they are produced.
“For instance, some Adire makers employ fine artists that specialize in making patterns on prints, and fashion designers who specialize in creating new fashion styles with the fabrics.”
And there is the need to modernize the production processes for Adire and Aso-Oke in order to improve their quality and make them globally competitive, as well as facilitate access to finance for practitioners in the production of Adire and Aso-Oke to enable them acquire modern equipment for the enhancement of their efficiency.
The fund, the bank says, can be accessed by indigenous players in the Adire/Kampala and Aso-Oke production business such as Small and Medium Enterprises (SMEs) – Limited Liability Companies and Enterprises – that are interested in the Adire and Aso-Oke businesses, each of which is expected to create 14 – 23 jobs; direct and indirect.
Cosmetics and Beauty Care Products
The BOI is seeking to change the present scenario where the country’s cosmetic and beauty care products are largely imported, with imports accounting for 70 percent of the domestic market leaving Nigerian producers with just a 30% share by finding local players in the industry to improve capacity and therefore create more jobs.
This, the bank hopes, will improve the ability of local manufacturers to compete against imported products as the nation looks inwards to generate additional revenue from the non-oil sector.
The loans are available in single limit obligor of up to N500 million at 9 percent interest rate of tenor of 2 to 7 year period.
The fund will be available to existing and new Limited Liability Companies and Enterprises engaged in cosmetics and beauty products. The hope being that an ideal small- to medium scale factory will create an average of 5 to 10 direct jobs and 15 to 25 indirect jobs, totalling 20 to 70 jobs.
Requirements for BOI Loans
Entrepreneurs looking to access loans from BOI need to meet the following criteria:
– Collateral worth at least 150 percent of intended loan facility.
– A formal letter of application
– Photocopy of certificate of registration or incorporation
– Certified true copies of forms C02 and C07
– A photocopy of the certified true copy of memorandum and Articles of Association of the Company.
– Feasibility Study Report (4 copies)
– Quotations for items of equipment (at least 2 or 3 quotations from different sources), where applicable.
– Three (3) years most recent audited accounts of the company (for existing company).
– Organizational structure and management of the company.
– Three (3) years most recent Tax clearance certificate for the company and two (2) directors.
– Eight recent passport photographs of each of the two directors and the company secretary.
– A completed copy of Bank of Industry Questionnaire.
– Declaration of total outstanding liabilities of the company.
-Statement of account for the past six months from the company’s bankers
Acceptable securities shall include a charge/security interest over all of the applicant’s assets, copyrights, etc. and on the equipment/ assets financed and/or the under-listed securities among others.
– Registered Intellectual Property/Proprietary Assets and assignment of all agreements and Intellectual Property Rights (IPRs) to BOI. The Bank would have right in the negotiation of valuation of IPRs.
– Joint and several guarantees of the directors of applicant’s company with notarised statement of net worth.
– Provision of guarantee cover issued by any financial institution acceptable to the bank.
– Insurance cover from any acceptable/reputable insurance company for short-term lending of not more than one year.
– Marketable financial instruments.
– Assignment of receivables/lien on proceeds/deposits and the right of set-off.
– First hypothecation charge on all the tangible moveable assets under the project.
– Ordinary producers would be required to bring in at least 25 percent of the project cost as promoters’ contribution.
– Producers would be required to tie up the advances from the Distributors to cover 35 percent to 40 percent of the budget.
– A Trust and Retention Account (TRA) may be maintained for all capital as well as revenue inflows and outflows. Thus receivables on the sale of all IPRs would be credited to TRA. The modalities of TRA would be worked out on a case-by-case basis to the satisfaction of the Bank, which will have the first charge on the TRA.
For further enquires vist: https://www.boi.ng or any of the Bank’s branches for further details on each of the products, including tenor and specific collateral requirements.