BEYOND NUMBERS AND EXTERNAL VALIDATIONS

to fund the SMEs, only few banks responded. In fact most banks preferred to lend the money out to speculative borrowers and pay the penalties for not lending to local businesses as instructed by the apex bank instead of gambling with the SME operators as they are wont to say. The CBN needs to wield the big stick and enforce compliance. I am also assuming that the Federal Government would get its acts together and pursue its new economic programme for there is very little the banks can do without an enabling environment.

Second, banks should get more creative. Rather than being obsessed with declaring huge profits (which is alright), they should come up with creative ways of working with local businesses and assist them develop their small businesses into mega operations that can offer employment. Who says banks cannot deploy their senior officers into the offices of the small-scale businesses and work with them on a continuous basis to grow their businesses. The economists are needed more in the factories than in the banking halls drinking coffee and wasting their intelligences which can be deployed to help their customers.

This would ultimately pay off. In this regards a few banks have done very well. First Banks, for instance, has been known over the years to support small and medium scale enterprises. This is obvious when you analyse the destinations of their loans. The bank’s imprints were visible in a number of projects: contributions to building infrastructure and improving power generation through lending to investors and off-takers. The bank also participated in financing the new Lekki-Epe Expressway, Tejuosho Shopping Complex, Aswani Shopping Complex and the financing of the, several housing estates across the nation. The bank has played active role in financing local oil businesses and which possibly accounted for while it was affected the most when the oil sector started having problem.

Access Bank is another bank that is actively pushing its finances in areas which could have ripple effects on the country ultimately. The bank, for instance, is actively involved in financing most of the infrastructure development of Lagos state. So is GTB which has remained very creative in coming up with platforms for promoting entrepreneurship. Most SME operators also give thumbs up for Diamond Bank for being very supportive of their causes. Heritage Bank though not quoted is another bank to watch in terms of helping to grow the productive sector of the economy. More banks should go in this direction.

The final suggestion I would offer on how the Nigerian banks can add more value to the economy is drawn from the story of Muhammed Yunus founder of Grameen Bank a bank that specialises in extending micro credits to the poor, as told by Stephen Covey in his highly seminar book-The 8th Habit. Dr. Yunus who holds a PhD in economics was a class teacher in one of the universities in Bangladesh. It dawn on him one day that the theories he was teaching in the classroom needed to be practicalised on the streets near his school campus where people were ravaged with poverty. He tried an experiment one day as he was returning home. He asked one of the women in the cluster of the neighbourhood how much it would take to run her small business and he learnt it was not more than a dollar. Then an idea came to his mind. Dr. Yunus put some amount together and gave it as a loan to 42 petty traders. To his surprise, all of them repaid the loan without any defaulting. With that success rate, an idea came to his mind, that he could approach the bank and convince them to partner with him to help develop those small businesses. It will be nice to quote verbatim the interactions between him and the banks:

“I thought of the bank branch which was located on the campus of the university, and I went to the manager and suggested that he lend money to the poor people that I had met in the village. He fell from the sky! He said,

You are crazy. It is impossible. How could we lend money to poor people? They are not credit worthy”. I pleaded with him and said: “At least, give it a try, find out-it’s only a small amount of money,” He said “No. Our rules don’t permit it. They cannot afford collaterals, and such a tiny amount is not worth lending. “He suggested that I see the high official in the banking hierarchy in Bangladesh”. I took his advice and went to the people who matter in the banking sector. Everybody told me the same thing. Finally after several days of running around, I offered myself as a guarantor. “I’ll guarantee the loan, I’ll sign whatever they want me to sign, and they can give me the money and I’ll give it to the people I want to”. So that was the beginning. They warned me repeatedly that the poor people who receive money would never pay back. I said: “I’ll take the chance”. And the surprising thing was that they repaid me every penny. I got very excited and came back to the manager and said:” Look they pay back, there is no problem”. But he said: “Oh no, they are just fooling you. Soon they will take more money and never pay you back.” So I gave them more money and they paid me back. I told this to him but he said, “Well, maybe you can do it one village, but if you do it in two villages, it won’t work”. And I hurriedly did in two villages and it worked”.

The banker suggested that he should try his experiment in four, five, six, seven and 100 more villages that it won’t worked but it worked. Exasperated, Dr. Yunus looked away from the direction of the bank and invested his own money into promoting micro credit. As at the time of that report, Grammeen Bank was in more than 46,000 villages in Bangladesh through 1267 branches and over 12,000 staff members and they had loaned out more than $4.5 billion.

The lesson here is that banks can get more creative, deploy their top level staff to the street to locate promising small businesses, put their weight and expertise behind them and work with them to grow. Ultimately, they would be the beneficiaries. The profit may not be instant but in the process of time, they would discover that is the only way to grow their profits on a sustainable basis and thus be in a position to meet their obligations to their shareholders. Speculative lending is not the way up The federal government can also take a cue. Before developing the budget for the year, they should despatch their ministers to the factories, to the farms to find out the real situation of things. They will gain vision on how to run the economy and there won’t be any need for budget padding.

I rest my case.