Zenith Bank Plc, has advised Micro, Small and Medium Enterprises (MSMEs) to be conversant with the five principles of credits as part of measures to boost chances of accessing funding facilities.
The Group Managing Director of the bank, Mr Ebenezer Onyeagwu, gave the advice at the Lagos Chamber of Commerce and Industry (LCCI) financial services group webinar on Thursday.
The webinar was titled : “Addressing the Funding Challenges for your Business”.
Onyeagwu represented by Dr Temitope Fasoranti, Executive Director, Zenith Bank Plc listed five key principles of credit as character, capacity, capital, collateral and conditions.
He explained that these principles were used to measure the business credit history, ability to repay loan and other parameters to influence the lender’s desire to finance the customer.
He said that having a continuity and succession plan, knowing types of funding available to specific business, and educating the banks to understand your business type would also improve access to funding.
The Zenith Bank MD advised business owners to work out remediation plans as opposed to running away.
“The challenges MSMEs face are from unfriendly business environment, poor funding, low managerial skills, lack of modern technology, poor governance, lack of succession planning but among these, shortage of finance is central.
“According to the World Bank Doing Business in Nigeria Report 2020, Nigeria scores 15 out of 100 for ease of getting credit.
“However, notwithstanding the evolution of the banking industry and digital disruptions, the five C’s of credit are sacrosanct in the bank’s lending decisions.
“This means that banking and financial services are highly regulated and so banks are not donor agencies.
“But to access funding more easily, businesses must be conversant with the five Cs of credit, top of which, character is key.
“Business owners must consciously keep and update financial records regularly and make every effort to service existing loans obligations,” he said.
In her remarks, Mrs Toki Mabogunje, the President, LCCI, noted that the global consensus that MSMEs were crucial to economic development continued to be at risk.
Mabogunje, represented by Mr Gbenga Ismail, the Vice President, LCCI said this was because difficult access to affordable finance and funding continued to impede the growth of the sector.
According to her, many Small and Medium Enterprises (SMEs) continue to struggle with the risk assessment criteria of commercial banks and other lenders, also poor accounting records, cash flow rigidity, among others.
“The objective of this webinar is to provide a veritable platform to facilitate discussion and interface between managers of loanable funds and businesses, especially the MSMEs on the huge financing gaps that still exist in the economy despite the various intervention measures,” she said.
Also, Mr Obinna Anyanwu, the Chairman, Financial Services Group, LCCI, stressed that inadequate funding inhibited the scale up, competitiveness and sustainability of MSMEs, further compounded by the pandemic.
Anyanwu noted that a survey conducted by the Pan-Atlantic University and Development Bank of Nigeria in 2018, reported that the rejection rate for loans by banks to MSME was pegged at 50 per cent. nan.
