Some stakeholders in the nation’s financial market have adduced reasons on why most banks refuse to give out loans to small businesses.
They told our correspondent that it is very difficult for a new business to get a loan from commercial banks, because new businesses are the most risky loans that any bank might give, adding that most banks are nervous about start-up loans.
An economist, Mr. Bolaji Ajayi, said a new business, especially a service business, has few business assets to rely on, and that banks are wary of lending to businesses that have existing debt with other lenders.
“In many cases, they won’t even consider lending to a business that has already taken financing,” he said.
Ajayi noted that in the wake of the recent recession, banks have increased their credit score standards, but many small businesses have credit scores that are still suffering from the aftermath of the financial crisis.
National Chairman of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said the problem affecting the turnover of the banks is that the regulators have not been giving them breaking steps and that the Central Bank of Nigeria also contemplated on the increase in the interest rate.
He said the CBN doesn’t want banks to make provision on the performing loans, which is why most of the commercial banks are shunning giving loans to
businesses.
“This general impression about the companies that had released their first half 2018 results, most especially banks, is that, they made a positive result compared to the result that was presented in the first half of 2017.”
According to Okezie, “the result that was released shows that the companies operating under the Nigerian economy are still doing well despite the problems and challenges in the economy, their half year result was encouraging in the likes of First Bank, Zenith Bank, GTBank, Sterling Bank and others.”
He further explained that, the kind of system being operated in Nigeria is not encouraging even though the governments are not showing concern.
“The federal government is only fighting corruption without embracing the economy. The corruption will continue to be on the high level. If the economy is running very well and people have money to build their businesses, there will be less
corruption.
“The reason why banks sustained increase in their liability was that, over the year, they make provisions for performing loans to sectors such as power sectors, oil and gas and those who are more exposed that have to provide for it,” he said.
