Consumers charge lenders to support start-ups
BY KENNETH EZE
While the COVID-19 pandemic attempted to strangle the economy in 2020, five deposit banks in Nigeria, deployed about N10.3 trillion as loans to customers in the bid to abate the situation.
The loan amount went up from about N8.2 trillion disbursed by the same financial institutions in the corresponding period of 2019.
The figure is a summation of gross loans to customers as detailed in the 2020 annual reports and financial statements of the lenders examined by in-house analysts at The Point.
The five lenders whose annual returns were examined include Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc, FCMB Group Plc and Stanbic IBTC Bank.
The study revealed that Access Bank led the pack with a gross loan disbursement of N3,256,216,275,000.00 in 2020 as against the sum of N2,318,107,026,000.00 in 2019.
It was closely followed by Zenith Bank, which lent out the sum of N2,919,342,000,000.00, in 2020, up from N2,462,359,000,000.00, which customers were able to borrow from the bank in 2019.
Next was UBA which disbursed the sum of N2,554,975,000,000.00 as gross loans in 2020, against the sum N2,061,147,000,000.00 in the corresponding period of 2019.
While FCMB disbursed N822,772,612,000.00 and N715,880,600,000.00 as loans in 2020 and 2019 respectively, Stanbic IBTC deployed N625,139,000,000.00 and N532,124,000,000.00 in similar periods.
This is even as many bank customers are decrying difficulty in accessing any form of loan from the banks to keep their businesses alive.
There are basically two types of loans available at Nigerian banks from the financials analysed.
From the summary financial information of the UBA, presented by the Directors to the public, as part of the 2020 audited accounts, the applicable loans were broadly divided into overdrafts and term loans to individuals and corporate customers. They would have been disbursed to current account or non-current account holders at each of the banks.
However, bank customers in Nigeria are complaining that the bogus figures being brandished by the lenders as loan disbursements are not getting to them.
A proprietor of a school in the Ikeja area of Lagos, Tande Itinu, maintains banking relationship with several banks and expressed the opinion that all the banks shared similar traits.
In a telephone interview with The Point, she said, “All the banks are just the same. I have approached many of them for just a small loan to support this school, but they would not.”
She explained that mere overdrafts would not support business or responsible lifestyle. She considered the overdrafts being offered by the banks as an invitation to spendthrift because “they study your cash flow and offer you something that would help you count your eggs before your chicks are hatched,” she lamented.
What she wants to see the banks do, is partner businesses. “No business can grow on short term funding,” she observed.
She made an example of her segment, education, asserting that the primary need of schools is adequate housing and instructional materials which would require long term support from financiers.
She decried that no lender in Nigeria was offering support to this sensitive segment, though government had been gradually withdrawing from education at lower levels, yet “the banks cannot identify the opportunity and tap into it,” she pointed out.
She observed that government has been beating a tactical withdrawal from education since this democratic dispensation with several primary and secondary schools handed back to their original owners, be they missionaries or individuals.
“How come the banks see no opportunity to explore there,” she asked?
Other bank customers who spoke with The Point shared the feelings of Itinu.
Chief Executive Officer, Elohim Solar, Olusola Ayobami would want to see the banks backing businesses for expansion and improved services on long term basis.
He said, “With the state of the economy, I would have loved to be able to access funds to expand my business. The opportunities in alternative power supply in Nigeria are huge, but you have to have money to invest.”
A financial analyst, Chinakwe Okonta, told The Point in a telephone interview, that Nigerian banks were risk-shy and unwilling to support start-ups.
“The banks operating in the Nigerian market are not banks in the strict sense of the word,” he started.
Tending to agree with Itinu and Ayobami, Okonta asserted that “it should be the responsibility of the banks to identify opportunities and invite daring investors to venture there. In our economy, the banks only indulge in short term lending, which can only serve trading or flimsy lifestyle purposes. It cannot deepen the economy.”
The analyst insisted that huge opportunities existed in agriculture and natural resources, just as in education and alternative power supply but the banks would not venture there because such segments require long term funding.
He pointed out that the banks have abandoned their duty of lending to the government, which has seen the Central Bank of Nigeria delve into lending support for agriculture in recent times.
On why government had been standing aside on this, Okonta warned that “everything cannot be government. Who would say that the CBN is not doing well in this regard? Or is the CBN not part of government,” he asked?
Asked if it had to do with default rates, he countered that loan disbursement is a risk that can be mitigated.
“What are the risk management departments of the banks doing,” he asked?
He opined that no one can expect the banks to be spraying cash on the streets but they must be strategic, if they want to earn the respect of the public.
“There are safety-valves for business risks, including lending,” he pointed out.
“In our economy, the banks only indulge in short term lending, which can only serve trading or flimsy lifestyle purposes. It cannot deepen the economy
“
He urged the banks to “cede the inherent risks in lending to other businesses, with expertise in risk management, where this cannot be internally domiciled.”
Okonta wondered what business strategy the banks would be deploying outside Nigeria, now that many of them have been aspiring to set up shops across Africa.
A retiree, Chinda Okpe (not real names) agrees with Okonta.
Okpe said that the public should “use glasses to look at the figures being brandished by the banks.”
He pointed out that the banks have perfected ways of “smelling like roses in the public with financial statements.”
He advised that whoever was in doubt should do a spot check of colleagues and neighbours to see if he or she can find anyone who has been so favoured to have benefited from a loan from any bank in Nigeria.
Another point, where Okpe saw eye to eye with Okonta was on the issue of risk mitigation.
“As an ex-banker, I can assure you that most consumer loans are insured. That means that the bank has full assurance of recovery and the cost of the insurance is borne by the borrower,” he asserted.
He decried a situation where some banks would still be debiting customers for the consumer loans, where the borrowers were no longer in paid employment, a consideration for which they were offered the loans, even with the premium paid for the loan-risk.
From experience, he explained that it would normally be spelt out in the terms and condition precedent to drawdown that loss of employment constituted a supervening circumstance, which like death, mental illness or permanent disability would free the borrower from the burden of repayment and left for the insurance company to shoulder.
He would not know if the insurance companies are defaulting or the banks had failed to remit the premiums after debiting the customers’ accounts, but volunteered that “this particular situation has led to litigation in certain circumstances.”
