Monday, 22 September 2014

Accessing BoI N5bn cottage fund

While getting access to fi nance has remained the number one challenge of enterprises in the country especially among the Micro Small Medium MSME business models, with the government’s intervention through the recent launch of a N5billion Cottage Agro Processing CAP Fund, the BoI boss has allayed entrepreneurs fears as he gives valuable tips on how to access the fund

Access to fi nance remains the number one challenge of enterprises in the country especially among the Micro Small Medium MSME business models. Entrepreneurs have continued to call on the government through policy interventions to come to their aid, but whenever such interventions arrive majority are unable to access them, not for lack of trying but due to technicalities.
As most scientists would state, “one cannot do the same thing over and over and expect a different result each time”. So what are those defects of loan applications and what can would-be loan seekers avoid/ improve on in their next loan applications, especially with the recent launch of a N5billion Cottage Agro Processing CAP Fund by the BoI last week, in order not to bite the dust of bitter disappointment and start witch-hunting government, loan administrators and even relatives in the village again.
Announcing the take-off of the N5billion CAP Fund last week in Lagos, the Managing Director / Chief Executive Offi cer BoI, Rasheed Olaoluwa stated some of the requirements which if met by applicants, will cause them to smile back to their businesses armed with more capital, at nine per cent interest rates and one per cent management fees only.
He said there were generic and specifi c requirements, for any applicant seeking loan facility from BoI, stressing that it was important that such applications are able to clearly articulate the business model and satisfactorily answer four basic questions.
“First what is the product you are offering; secondly what is your target market – who are you going to sell this product to? And number three why should anybody buy your product – what is your value proposition? There are a lot of products in the market, when you bring your product out, why should anybody buy it?
And the fourth one is, that value proposition, how are you going to deliver it, how are you going to create it to ensure that the product actually comes out.
For me if you can articulate those four issues, I think we have a basis for a very interesting discussion, those are the generic requirements,” he said.
He noted for example that the N5billion Cottage Agro Processing Fund was agro processing based, which means that applicants must have a product that is available in Nigeria and would like to process it into a food product or an intermediate raw material for industry.
“The agreed product must be available in suffi cient quantity; we are not looking at a massive transport cost, so we expect that you would be locating your factory very close to where the raw materials are available, so that your transport cost is minimal.
We expect that you would identify an equipment supplier that is certifi ed and accredited by BoI, we expect that you articulate some kind of personnel requirement that is within the limit of your budget, we expect that you identify some markets for the product that you want to sell or process.
So these are basic elements of the business model that we expect you to be able to articulate. Some people may not be able to do these themselves that is why we are appointing the business development practitioners to help,” he said.
He explained that at the end of the day, these business development fi rms will provide the services almost next to nothing for applicants to enable them increase their chances of success at BoI, noting that as of now, a lot of applications that come to BoI, don’t meet the standards.
“What we want to do is to increase the success rate of loan applications that come to BoI, especially from the small and medium enterprises. A lot more details can be obtained from either our website or you can contact any of our seven zonal offi ces at Lagos, Asaba, Akure, Enugu, Bauchi, Abuja and Kaduna,” said.
In addition to what the BoI Boss outlined, an MSME expert and the Coordinator of the Small and Medium Enterprise Development Agency of Nigeria SMEDAN in Lagos, Yinka Fisher, threw more light on another reason why many loan applications fail.
Under the National Enterprise Development Programme NEDEP, SMEDAN plays the role of preparing MSMEs adequately in terms of entrepreneurship capacity, before they can access funds from BoI, while the skills gap is fi lled by ITF.
He pointed out that some people do not even know what class of business they are doing, but that fortunately SMEDAN has been able to articulate that for them and classify them under the micro, small and medium business categories.
“All what most people were saying in the past was “I’m a business owner, but unaware of the category of the business, they just believe that business is business, but that is not it. All over the world these categorisation of business is standard both in terms of employment classifi cation and fi nancial classifi cation.
He explained that those who are running micro businesses must be employing between 1 to 9 persons with a capital base of N1million to N5million.
“But like a case study that happened sometime ago, somebody wanted to impress a minister and claimed that he had been seeking for N700million funds to inject into his business from the banks without success. And the minister then asked him about the number of employees he has in his organisation and the man said seven.
How can a man who employs seven people be looking for N700million, to do what? So that is to tell you that people have not been well sensitised to be able to understand the nature of business that they are running, so that they can specifi cally apply for the right fi nancial opportunity,” he said.
He noted that no bank will grant a loan to any entrepreneur against the knowledge that the application is beyond the reality and scope of the enterprise.
“I have a lot of applications here, where people are obviously asking for what is beyond their reach because they do not know whether they are, micro, small or medium,” he said.

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