Uche Olowu is the 20th President and Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN).
He believes that SMEs remain major driver of any economy and access to credit is central to the development of the sub-sector.
Speaking on the policies of the institute in providing credit for SMEs the CIBN boss harped on why SMEs encounter difficulties in getting bank loans.
The CIBN is the professional body for all bankers in the country. It is an institution established by the Act of Parliament 5 of 2007 with three basic mandates of promoting ethics and professionalism in the banking sector, capacity building and policy advocacy. We advocate for good policies for banking activities. As bankers, we retrain people and regulate the activities and conducts of bankers. To be a banker in this country, you must subscribe to basic codes of conduct that you signed. We also set the tone for capacity building in various tertiary institutions, in their Department of Banking and Finance and other business courses. We also have the flagship programme which is for professionals in the system.
In terms of policy advocate, that is not stagnant. What is topical for the day is what we look into. Take for instance, financial inclusion is what we are talking about right now. It is about fronting for the government, operators and for the regulatiors too. The earlier we embrace it, the better for the economy.
Bankers give credits to the financial systems, so that means they take risks and they serve as a lubricant for facilitating the growth of business where there is deficit, especially in the Small and Medium-scale Enterprises (SMEs) which will always need credits to jumpstart their activities.
We are working to intervene in the area of capacity building and financial literacy. There are some legislations that would further enhance the ease of doing business. We have collaborated with the Nigerian Economic Summit Group to assisting government in fine-tuning that. We create value for people to understand and we appreciate the business we do.
SME financing certification
On that, what we are doing is that we want to focus on SMEs financing. Today, you have to look at the value chain in banking and create specialisations because you cannot be a Jack of all trade.
One of the areas we have looked at is the area of SME financing because you have to really look at how to manage the risk in that. Not all the risks can be mitigated against, and you need to understand the basic culture for the sector to run. That certification is there for people to have basic knowledge on how to operate the SME market. Yes, we now have more professionals that are into that, especially in the microfinance banks but we also need to train and educate the microfinance banks so they know that their job is different from that of the regular banking system.
Response to SME financing
Yes, it is a response because you cannot put all the risks in one bucket. The risk in corporate banking is different from the risk in managing SMEs. One of the major problems of the SMEs is that most of them are not knowledgeable in keeping basic financing tips and all that. You now need to have specialists that really understand the sector and also interact with the players, understand what their problems are with the aim of providing solutions.
The SMEs remain a major driver of any economy. If credits are not getting into that sub-sector, it means it will lack the oxygen to survive. We have not been really solving the problems and that is basically because the players themselves do not understand the dynamics in that sector. So, we need to always retrain people towards solving the problem. Finance is a coward. It doesn’t go to a place that has not been de-risked. We have to address all that. So, we need the skilled manpower in SMEs to provide the solutions to the problem.
You have to get to understand the various credits. The microfinance banks do more of providing credits to the SME players. When you see fairly structured organisations that are into manufacturing and all that, you will see that they face corporate banking system. But one thing is that if you are seeking finance, you must have a bankable project. You don’t just throw money at people and that is why you have a lot of non-performing loans.
There have been several intervention schemes but they have all always gone down the drain. Then you see the banks refusing to lend out more money because you are not paying back. These are profit-oriented banks and not charity organisations who put money and don’t expect any returns. You also have the SMEs not having the right bankable projects. That has been the problem but now we have specialists that train SME players on what they are supposed to do in the first instance. If you are sick and you don’t know the area affecting you, how do you expect the doctor to heal you? SME players have not been able to look at the areas of covering for their risks and seeking to de-risk them.
No bank will just throw money at you. There are certain things that the government and the relevant agencies are supposed to do to de-risk the entire system for SMEs so that they can have money to jump-start their businesses. The development banks are doing their best through several interventions. It will also be better for people to get faithful to their borrowings. What you have today is that people borrow but don’t pay back. That is why we are supposed to provide bespoke financial services that would structure the right financial services banks offer SMEs.
We have identified that problem and that is what the certification I earlier spoke about does to you. The DBN was set up to lend to the banks and the banks to borrowers. If you keep the money in your vault, you won’t make money as a bank. I have seen banks providing vibrant SMEs desks because of the future that lies in that area. It is important for banks to provide credits for SMEs but our people too have to cooperate. You don’t get a bank loan and spend it on an ‘owanbe’ party.
International best practices
What makes the difference between our banking system here and what is obtainable elsewhere is market and culture. What is good for your people is what I call international best practices. The basic fundamentals of financial intermediation are the same. The most successful sector in Nigeria today is the banking sector which has so many intelligent and smart people. If other sectors are like the banking sector, we won’t be where we are today. Our banking system is better than what you have in the US and the UK. Technology is the enabler today and it has helped a lot of things.
We have supported bank’s recapitalisation as proposed by the Central Bank of Nigeria (CBN) and it is about what the banks are expected to do to be stronger than how they are now. The risks are getting higher and you still want to remain at the N25billion capital base.
The dollar is now N360 to the naira. What capital does to you is that it is a coffer to retrieving your losses. You require additional capital if you have to do well in the sector. That is what you depend on if there are accidents on the way. You are able to regain the losses. This is just about being proactive.