Photo: Waheed Olagunju

Mr. Waheed Olagunju is the Executive Director in charge of Small and Medium Enterprises at the Bank of Industry. In this interview with Kunle Aderinokun, he addressed the concerns of start-ups and budding entrepreneurs as he also spoke on the essence of industrial parks and other pertinent issues

Recently, you were re-assigned as executive director, SMEs of BoI, what are your mandates?

Essentially, when the new management came on board, it came on board with the mandates to  implement two Nigeria’s programmes that were launched in February- the Nigeria Industrial Revolution Plan and the Nigerian Enterprise Development Programme. So there was need to realign our programme at BoI in consonance with this new drive of government. NEDEP was fashioned to ensure the development of SMEs in Nigeria, to ensure that we realise the potentials of SMEs in Nigeria. And that is anchored on well-known premise that the SME sector is the engine of growth in any economy. Most advanced economies in the world today, be they in the West, in Asia, are being propelled by SMEs and in the context of our own country, we’ve lost many years of development, although in the last five, six years, we’ve been recording high GDP growth rate, about 6 to 7 per cent per annum but the GDP growth has not been inclusive; it’s been without jobs. We have had a lot of investments but most of those investments have been in large enterprises. And we know that the development impact  or multiplier impact in large enterprises is not as high as that of the SMEs. In fact, per unit of investment, the multiplier effect of investment in SMEs is much higher than what you have in large enterprises. I will give  you an example, the Bank of Industry just launched CAPFUND,  the cottage agro-processing fund, which is a N5 billion fund. We are targeting to create 20,000 jobs within the life of the fund.

We are looking at an average of 4,000 jobs per billion. Whereas it is possible to lend the whole N5 billion to a large enterprise, who will not  employ 1,000 workers, that’s what I  mean. If you invest in agro-processing, you are stimulating development across the entire value chain because those who are engaged in primary production would be assured  of off-takers, who will buy their products when they are harvested. Over the years, we had a lot of post-harvest losses where farmers were not able to sell the harvested products; they put them by the roadside, after two, three days, they get rotten , nobody buys them. But where they are sure that there are processors who will buy them, processors, who  perhaps will be located right  next to them in their farms .

They are sure of ready market. There can even be outgrowers’ schemes; we know of cases where processors invest in famers, give farmers money to produce for them to ensure that they have raw materials. When you invest in processing, you are stimulating production at the primary level, creating jobs at that level and when they supply you and when you are eyeing value and  processing their inputs, you are also employing people. And the output of your processing company  can either be a finished product or intermediate raw material that will go into another company.

Those who will buy from you, either as distributors or other manufacturers who buys intermediate products, will employ workers; you can see that you will be creating jobs across the entire value chain . Those are some of the advantages of investing  in SMEs. Typically when you invest in  an SME, you are talking of creating about 3 to 5 direct  jobs and there will  many other indirect jobs as well and this is the pattern all over the world.

The idea is to ensure that our credit delivery process gets to the underserved, hence the emphasis on SMEs. Right now we  are not satisfied  with the percentage of SMEs that are accounted for by risk asset at BoI. We want to ensure that we will triple the  BoI’s exposure between now and next year.

When will the implementation of the CAPFUND begin ?

The CAPFUND has been launched, it has started running and we are expecting applications from members of the public. It has stimulated a lot of interests within and outside the country; people are excited and they are saying that for the first time, Nigeria is beginning to get it right because if you look at the objectives of the CAPFUND, we are talking about reducing post-harvest losses, we are talking about reducing huge import bills of food; we are talking about being self-reliant in terms of food production, which can also border on national security at times because if you depend on outside world to feed yourself, it can be a security risk. It has a lot of dynamics, it has a lot of developmental impact for the country.

There has been a misconception what SMEs really are. To some SMEs are start-ups, microbusinesses amongst others, to the other, they are not. According to the World Bank definition , SMEs are not start-ups. And the already established enterprises are the being regarded as SMEs, which are getting all the benefits. What is your take on this?

As per the BoI business model, we are taking about micro small and medium enterprises. A national definition  is being evolved by the federal government because there had been so many definitions, some anchored on turnover,  some talking of asset, some use number of workers and the Central Bank and other agencies have their own definition also. I’m aware that the federal government is in the process of coming up with a national policy , a nationally-accepted set of  definitions for MSMEs. This we believe will happen very soon.

But at the BoI, we take care  of MSMEs in my own group- these include  start-ups that we call greenfields and on-going  concern that we call brownfields. So we don’t discriminate; we support all those that come with viable business plans. All they need to do is to come to us, tell us what they want to do. What is the market for them? What is the gap they are trying to fill, because there must be demands for your products.

All over Nigeria,  it has been established that in each of the 774 local governments, there are raw materials- agricultural and solid minerals. The Raw Material  Research and Development Council set up a committee some time ago,  headed by Prof. Bamiro , former vice chancellor of University of Ibadan and they have this documented. It’s a compendium of  raw materials available in each of the 774 local governments in Nigeria. These raw materials can be processed into finished goods or intermediate goods.  We are trying to encourage as many Nigeria as possible,  to identify raw materials in their own localities, to see how best  they can harness business opportunities. In order for these to happen, we are in the process of appointing business development  support providers to be spread all over the country; they are supposed to assist current and potential entrepreneurs  in putting together proposals that will be bankable because most of the challenges  we also face, is that many of the applications received are not really well prepared and that increases the turnaround time . If you come with an incomplete application  and we now say you should go and bring additional documents, you will now say: ‘I apply to BoI  more than a year ago, I didn’t get any response.’ Your application is not complete or you’ve not applied until you submit a complete documentation; so we don’t recognise an application until it comes with all the necessary documents. Most of them don’t even know what all the necessary documents will be; that’s why we appointed these business support providers to guide them, to let them know what and what  should be in an application to a bank. And the business support provider will not only help them prepare their business plans, even after the plans has been written , the BDSPs will also monitor them to ensure their credit performs because a good credit officer is not one who throws money at a customer and turns his back. A good credit officer is adjudged on the basis on how that credit performs down the line because if the credit  doesn’t perform (in order words, if the customer doesn’t repay) that credit officer is a failure, not even minding whether it was secured or not. Collateral is the last resort, the business must not fail in the first instance. Well appraised projects stand a better chance of succeeding. It has been established that out of every 10 projects, if they are well appraised, seven would succeed but those that are not appraised, out of every 10, seven would fail. In order words, only 30 per cent would succeed when they are not well appraised. Even those that are well appraised, it doesn’t mean they would not fail but they can fail due to some other factors, but it’s just that only  the percentage of those that would fail would  be less, may be about 30 per cent would fail out  every well appraised projects. When appraising a project, you are looking at the strength of the project, you are looking at the weakness of the project; you are trying to identify the risks, you are trying to evaluate the risks and come up with mitigants  for those risks at the end of the day.

At the Bank of Industry, we are trying to ensure that SMEs account for at least 30 per cent of our  total risk assets within a very short time. It’s only by so doing that the impact of the bank will be felt at the right level by way of developmental impact.

This is not the first time BoI is supporting SMEs; SME development is basically the job of BoI. What are the challenges that you have faced in this endeavour? And going forward, how are you going to resolve the challenges?

The decision to appoint BDSPs is a response to some of those things we identified in the system because when you receive applications that are not well packaged, turnaround time is increased and efficiency  level is reduced. All over the world, there are standards, there ratios of number of staff to investment in the portfolio of an organisation. When you receive 100 applications and only 10 are well prepared , you are battling with how to reconstruct the other 90, you are wasting time. But if 100 applications pass through BDSPs, it’s most likely that almost 80 per cent of them will be considered and be bankable. That will reduce the turnaround time that will enhance speed that will increase the number of customers that we will be able to serve.

Secondly, the issue of security. According to the laws of this country, BOFIA for instance, we are regulated, you are required  to ensure that credits are secured, particularly by DFIs at a given level. Anything above certain figures must be fully secured and you must know  that in the environment in which we are operating,  the system is a product of the culture and the environment. What is the attitude of most people to credit in this environment? Unfortunately and regrettably , our experience has shown that as high as up to 7 or 8 applicants out of 10  believe that this is government money; it’s their own share of the national cake. And they are coming with the mind-set of not paying back. So how do you now distinguish between a genuine applicant and somebody that just come to defraud?  Irrespective  of their standing in the society, we’ve had people who are supposed to be ‘respectable’, who are’ high up in the society’, who come to the bank with forged security document and it takes the scrutiny of our professional staff to fish them out. That makes us to be more careful when we are appraising projects, and they say our turnaround time is slow. We are trying to increase it but those who are also coming to us should help us to enable us serve them better. Let them come with better proposals and when it comes to security arrangements, let them ensure that the proper security is put in place.

We know that this is still a challenge for some people but we’ve come up with suggestions on the way forward. For example, those at the very low level, at the bottom of the pyramid, we’ve suggested that they could be formed into cooperatives and mutually guarantee each other. And then we tell them to  also bring external guarantors, perhaps two,  who also come up with notarised statement of networth to guarantee such cooperatives. These are measures that we are taking to ensure that we serve more and more people.

We also suggested that they form clusters, we advocated the establishment of industrial parks by state governments as we’ve seen done in other parts of the world. When the state government create an industrial park and the entrepreneurs are located in those industrial parks that remove the problem of C of Os or governor’s consent to mortgage. When they are in a particular location, it’s easier for the credit institutions- commercial and DFIs to monitor their loans and there is also synergy when they are all located in a place, they mutually re-enforce each other, they learn from one another, the output of one can be the input of the other. And then for the BDSPs too, it will be easier for them to keep an eye on them; that reduces their start-up costs, that also reduces their operating expenses. Typically, an SME that wants to start a business will go and look for a piece of land. The land, according to the Land Use Act as at today is vested in the governors and the title you need to bring to us, it’s only the governor or the  state government that can authorise it; it’s either the C of O or consent of an assignment . How many MSMEs have the clout to get a C of O from the governor? You know there are some states that the governors don’t even sign. I know of a state where a governor was on seat for eight years and didn’t sign a single C of O and he was succeeded by another who spent four years . In that state for 12 years, no C of O was signed.

As part of our advocacy role, we approach state governors, we appeal to them, we plead with them. I will mention a good example, prior  to Governor Peter Obi ‘s assumption of office in Anambra State, he had some political issues, therefore there was a backlog of C of Os. But immediately he settles down the management of BoI called him and gave assurance that every night, before he goes to bed, he will sign some C of Os and every night as he was signing C of Os, he will send text messages to the MD and some of us, whose numbers he has in the bank, to say I’ve signed C of Os for so , so and so companies. Anybody left? How many BoI’s customers are still looking for C of Os. How I wish other governors can emulate Peter Obi in what did when he was the governor of Anambra State.

However, moving forward, we are suggesting that if we can have industrial park in each of the senatorial district for example, you can imagine what effect that would have. And in those industrial parks, we can organise capacity building  programmes for them as well. Those are some of the things NEDEP provides for. We know that  some lack capacity, they don’t even know the first step to take. But those capacity building programmes could be organised in those industrial parks or designated locations where they will be told what to do. And when they graduate from those capacity building programmes or even the EDCs, they can be allocated space. When they are allocated space, then they will pay rent, they will not be looking for bulk money to buy a piece of land, bulk money to develop the land, to build the factory, provide security, to build the fence, to put bore hole in place, to buy generator, to put their sewage in place. The solution will be to have as much as possible these industrial parks allocated. They don’t have to do anything expensive. We’ve seen so many models; in the past we’ve shown governors the simple model that obtains in Malaysia, Indonesia and Singapore, there is no reinventing the wheel. In Egypt there is an industrial estate, where you just plug and play; come with your business plan and the allocated space, then you will just roll in  and start running ; you share expenses, it enhances your survival potential and it also enhances your capacity to service credit.

Before these industrial parks are put in place, what is BoI doing to  support start-ups that have been asked to bring C of Os in order to collect loans?

We’ve relaxed all the conditions, you can give us a rented or leased property with long enough tenure.

Like I told you he can rent a space or form a partnership, combine resources with somebody he trusts. If you need for a loan for four years or five years and you are able to tell us that you can lease the property over a period of eight or 10years, that means you can repay the loan with the tenure of your lease. Why not? We consider such options as well. You don’t have to have your own property or C of O or consent, you can give us a lease facility to show us that you have right over that property for long enough period that you will be able to pay the bank loan, even if you are going to restructuring  along the, you still going to accommodate the restructuring.

BoI is in the process of appointing BDSPs and already we have SMEDAN, which  has more or less been performing the same role. Won’t there be clash between the BDSPs and SMEDAN?

The beauty of NEDEP  is that when it was being put together, the honourable minister of  trade and investment brought together, the chief executives of BoI, SMEDAN and Industry Training Fund were charged with the responsibility of coming of  a blueprint  for NEDEP by which the three of us  will work together or we have already agreed to  work together .  So we are complementing each other, there is no acrimony, there is no rancour.

For the first time the three of us are working together under a framework. And we know our responsibilities. We know how we complement each other. The BDSPs will be located across the country; SMEDAN now has offices in each of the states captured. All of us are development  partners. The country is so big that no single entity can say 'I’m the  only one that perform this duty'; it’s best for all of us to network . That’s why the enterprise development centre is also being brought  into the fold and even the SME council that  was launched by the President recently is an umbrella for all SME bodies in the country . And various implementing agencies are members of the council or members of the council’s sub-committees of the various areas. These are fora where we interface; we ensure that we all work together in harmony to serve our people because a country of about 170 million people, the unemployment rate is about 23 per cent and those in active employment are about 40 million or so. We are looking at double-digit unemployment rate, which means that about 10 to 12 million are looking for jobs and for us to bring the unemployment rate to single digit, it means we need to create as quick as possible eight million jobs and that is why the president also set up job creation council with the target of establishing three million jobs in 12 months. So there is no room for acrimony or rancour.

What are the modalities for the CBN’s N220 billion MSME Fund that was recently launched?

CBN launched the fund and  there are supposed to be participating financial institutions that will include development banks and commercial banks. The CBN is still talking will the participating banks on the implementation. We have been invited for meetings by the central bank and we are trying to agree on modalities on how we play under the scheme.


Source: ThisDay