As the Central Bank new initiatives such as the credit card facilities to boost the creative industry, is well thought but should be followed through as loans are issues of concern as many have experienced.
We applied for credit after doing what I thought was a very thorough feasibility report and confident we had a very good business. Even at that, I knew one of the ‘Big Men’ at the top of the bank whom I could reach should the need arise. The financing proposition was for the bank to finance part of the equipment purchase, whilst we provide part financing, and as well bear all installation costs and purchase additional equipment locally. The bank would in effect also make the fund transfer and so they were involved in the transaction.
In all, it would be a 50/50 funding. We already had the business going and the additional contribution from the bank would be far less than the current value of the business. Once we got confirmation from the bank that the credit would be approved, we effected payment of initial 10% deposit amounting to Euro 20,000. It was our first request for bank financing so we made everything pretty clear and based on what we really needed.
After the initial deposit payment, I was to run after the bank severally. I followed up, begged and pushed and was really shocked at the attitude. With delays setting in, the supplier promptly wrote to informed us that we would be surcharged for the delayed payments otherwise they’d cancel the transaction and we forfeit the deposit. We further begged and pushed and eventually, the bank ‘graciously’ obliged us the credit, they gave us 65% of what we requested. I felt this didn’t connect so I asked what happened and was told that, that was all the bank could afford. Caught between losing our deposit and having faith that some miracle could happen we trudged on.
When the equipment arrived, we started installation and commissioning then I started seeing signs of trouble. I alerted the bank; they said I should be grateful I got given in the first place. We channelled all funds we had into the commissioning, essentially using operational funds for capital expenditure. It wasn’t long before we got stranded. Repayment time was up and the bank promptly demanded that we start paying. I took every necessary document to show to them, tried to talk with that we were actually stranded and couldn’t run.
All the talks seemed to count for nothing. I called the ‘big man’ yet again, who wondered why we were given less than we requested stating that the practice is that a customer got what is applied for, otherwise they reviewed and agree with the customer to reduce if there were concerns that the request was frivolous or padded.
Subsequently, my banker again, ‘graciously’ announced that the total facility was granted at the first instance and they had deliberately disbursed the fund short to see if we could survive. I raised the fact that we had been stranded for about four months. That we had had several meetings with the bank on the situation, and that they mentioned that we were being surcharged 40% default charges and asked if that meant anything to him. He just shrugged off.
The nightmare didn’t end there. They eventually released the outstanding funds to us. Then a new twist, we would now have to repay in 10 months. We now had two concurrent loans running together with repayments falling due first, in the first week of the month and next by midmonth. It isn’t allthat, the loan amount had now increased significantly as previous unpaid amounts which earlier fell due were now charged at 40% interest for default.
I just stared at them. I tried having a meeting with them they bluffed me. The bank resorted to threats and intimidation. I felt we borrowed the money and we must pay back and I was reluctant to make any case or be seen to be irresponsible, besides we were debtors and some sense of shame, if you know what I mean! Also, I felt I needed to show gratefulness for this bank’s ‘help’!
At last, I talked with a Lawyer who was appalled at all these and suggested that I have to make the officials understand that it mattered that they appreciate their culpability and that they couldn’t ride rough-shod over us, and that we would escalate and seek re-dress if need be. I told him we owed and needed to pay, he said, yes, but responsibly so.
Then I had one more meeting with the bank executives and very calmly took them through the credit journey showing them e-mails evidences, reminded them of the original request and letting them know that we were committed to paying back but it will have to be within responsible limit. Expectedly, they backed down.
See my story. The question is how do you grow an economy without the SMEs? And how do SMEs grow and survive without credit? How do small and medium scale enterprises access credit fairly and easily? How do we get credit within reasonable interest rates? How can we simplify credit application system and process? What thoughts do you have for financial security system that makes borrowers pay?
What changes do we need to make to our legal and judicial system to ensure accelerated judicial and legal process so that the wheel of justice will move in good time and in good speed? Are there venture capitalists out there? How do business people access you? Do banks have dedicated SME funds? What form of social engagement and responsibility can the banks can engage in to prime business knowledge and awareness to help viable and genuine business entrepreneurs build knowledge and capacity to help them better able to access credit? Do you have a successful credit application story? \
Please tell it. Is it true that Bank Managers actually own the loan shack businesses giving credit at up to 25% per month? That they get the monies to their cronies and then direct bank customers to them? I heard so but I don’t know. Folks, how do genuine business people get credit besides getting from some relative or friend or well-wisher? By the way, my MBA thesis is going to be on a comparative analysis of family and friend’s credit provisions for SME survival against the bank’s effort in this same direction, looking at the Nigerian example and using a special case study.
And you know, interestingly, it comes back to us all, the banks, the SMEs and the economy. It works well, and we all benefit; a vibrant economy, more jobs, people off the street and yes, a safer world.