₦airaland Forum

NgHotGirls:
Rule 3 Don't follow the crowd.

AngelicBeing:
Rule 4, avoid Ponzi schemes aka invest 10 dollars and earn 1000 dollars in 15 days

emmanuelewumi:
Do you understand how $10 will turn to $1000 in 15 days?

It still boils down to investing in what you understand and how the cash flow is generated.

emmanuelewumi:
Very few Nigerians are credit worthy, the average Nigerian is not honest.

It is not easy getting an unsecured loan from GTB, you must have a job in some of the big organizations acceptable to GTB before you can get a loan. Yet some of the loans went bad and going bad.

Some of such workers have lost their jobs, some have changed jobs ( thank God for BVN GTB can always recover such loans), some got the loans and japa to Canada and other countries.


Banks should learn from microfinance banks, the microfinance banks give revolving loans to artisans associations or cooperative societies which will now give to their members or the microfinance banks will make the associations or societies to guarantee the loans.

Giving out loans based on where one works is currently not working in Nigeria, some of the banks are now requiring guarantees from employers

jedisco:
In every part of the world, there are two things humans don't like paying- debt and taxes.

The issue is that without an objective system, there is no way to track credible borrowers and there are no rewards/repercussions for being credit worthy.

I'd give an example- I have benefited on more than one occasion from the GTB quick credit scheme... Both times, I paid back in full before maturity but my limit remained same... If there was a way to track that I've been a good borrower, that'd mean that in future, the bank could offer higer credits for longer periods to those deserving and build from it.

There are people who pay their rents, electric bills e.t.c regularly... The infrastructure could be built to track and reward all these. That way, there'd be a repertoire of credible borrowers who could eventually access higher sums at cheaper rates.

The issue of changing jobs, emigration et.c would not affect a robust credit system as weve seen with other nations.
95% of houses and even cars and electronics we buy as second hand are bought brand new with credit in Western nations. They can do that bot because their citizens are honest but because of the repercussions for defaultees. The pros outweigh the cons.

Even in multicultural nations like the US, access to cheap credit has proven to be one of the determinants that differentiate poor areas from others. If the nation cannot seek ways to utilise the deposits in commercial banks for nation building, then we have failed to maximize the monetary system and have in essense fallen foul of it

freeman67:
MTN Bond issue..

dobnina:
@Emmanuelewumi, pls come and explain if it's a good investment or not so we don't make any mistake.

emmanuelewumi:
Reason why it is good to build our credit ratings, try and apply for loans, let them turn down your loan requests.

Ask why your requests were declined, you will get valuables financial lessons from such discussions.

Credit is a 2 edged sword it can make or mar one, that is why it requires disciplined to succeed with loans.

Business and Investment minded middle class who understand the language of finance are actually getting loans and credits to harness opportunities as they arise

jedisco:
In my case, the loans were automatically approved.
But then, my point say there should be a verifiable way of sharing such data across industries and rewarding good borrowers with improved ratings. For example, If I had been a good borrower from FBN, that should count for me such that over the years, I could switch to Zenith and those records can still be viewed. Retail outlets could bank on that data to have structured paying for items. With time, I could build on all that and access facilities for a mortgage (if available).

Credit goes both ways- consumer credit when managed well can help to boost the spending capacity of the middle class which is a win. But then my focus is on industrial credit and that available to SMEs which is the bedrock of any developed society and also what Nigeria struggles with. In today's world, it's almost impossible to build viable and competitive SMEs and even larger industries without the nation availing them accessible and cheap credit.

Before the recent CBN intervention which has helped, folks who got access to credit just like most things in Nigeria were usually the few rich and powerful. The rest had nothing or got very little at cutthroat rates. If that wasn't the case CBN wouldn't have increased the ldr few years back with a hefty 50% fine for defaulting banks. Even at that, a number of banks are still below the threshold.

emmanuelewumi:
Businesses are still getting credits, check the annual reports of the banks. They only need to democratise the credit.

A bank will prefer to give N1 billion credit to a business with track records of success in the business than to give N10 million to 100 small businesses.

It is almost impossible for a start up or business without a track record to get credit, the first source of capital for a small or start up business are personal savings, grants, loans from friends, patents, family members or sale of personal assets like cars, land, shares, gold and other valuables.

Read about how Fola Adeola, Jim Ovia, Erastus Akingbola, Peterside Atedo, raised N20 million in 1989 when they got licenses to establish GTB, Zenith, Intercontinental, Stanbic.


Instead of debts, start ups should consider equity from venture capitalists who are skilled in identifying growth potentials of new businesses


You don't start a business with a loan, you can use a bank loan to expand a business after it must have operated for about 3 years and above

jedisco:
With the ldr increase, I agree that banks have been forced to grant SMEs more loans. Many now have a dedicated page on their website with clear terms and a good number actively advertise these online. That said, there is still alot of work yet to be done.

Yes, banks would rather give bulk sums to the few rich individuals who are (more likely to default as little can be done to them) than give an equivalent sum to a multitude of SMEs. As we know, SMEs are the building rock of any society. 1 million given to 1000 SMEs is most times more beneficial than 1B given to a large coy. This is where the CBN has to step in and enforce safeguards. 1 billion extra in Otedolas pocket hardly helps the economy. Moreso, such big voys can easily access credit through various means.

I'm not asking banks to freely give loans to start-ups (which will mostly fail) but they can identify SMEs with good history and potential to support. The data from the recent ldr increase shows that they know how to do this.

I wouldn't compare the financially knowledgeable banking folks to our SMEs.

I will give an example of a typical Nigerian SME.. take Mr A who owns a poultry and has built it slowly for years and now grows 1000 birds seasonally. He might have a capacity to grow 1500 during Christmas which there's market for but is limited by funds. Such a person should be able to go to his bank and ask for 1 mil to support his business. I expect the bank to be able to look up his credit history (if we have one), his business account flow, pay his poultry a visit and decide if its sensible to give such a sum. Of course the bank has to check risk but it'd be impractical to ask people like that to provide huhe collaterals as can be the case. There should be a way of identifying dependable SMEs who need little leverage to build on and our banks are good at that. Very many times, such people pay such loans early... After about two times of borrowing 1m for such a venture, he could progress to borrow 1.5 m and further expand his profitability.. everyone wins....

Mostly, such SMEs are left at the mercy of loan sharks who demand an arm and a leg. What then is the use of banks to such folks. Funny enough, these loan sharks make huge profits by ripping off the poor.


Our SMEs in Nigeria are the little restaurants, farms, shops e.t.c. most of what they need are little sums to improve their environment, buy machines e.t.c and mostimes the need this for short periods. I will not expect them to depend on venture capitalists to access credit. Even in the West, SMEs are buoyed by the Government.

emmanuelewumi:
Banks are giving SMEs loans, provided you a have an active accounts and all payments are made to the bank. I can say that about First Bank, UBA, Access Bank, those are the one I have had businesses relationship with in the past

Most SMEs don't have an audited financial report, the only way banks can assess the viability of the business is through inflow and outflow of cash into the banks, unfortunately most SMEs prefer to keep collect cash or keep cash at home.

An old banker told me something many years ago, make sure all payments go to the bank. You can withdraw immediately after making the deposit, but the cash flow is telling the bank something.

If business owners understand the language of finance, funding won't be a problem to their businesses.


Yours truly got 2 credit facilities last week, I turned down the second one from a finance house because of an interest rate of 24%, my stockbroker will be granting another one before Friday at an interest of less than 20%

nwaogukings03:
Talking about rule number one, please who understands how BRANCH works? Branch is a digital bank, like KUDA, but offers a higher interest rate of 20% on investments which can be withdrawn anytime. Withdrawals from Branch app are free, though capped at 100k. For every 100k withdrawal into a normal bank, bank charges apply. So assuming you want to withdraw 500k, bank charges multiply by 5. Since the bank charges are done by your normal bank, how then does BRANCH afford to give 20% ROI per annum? How do they generate their income?

jedisco:
Talking about credit, I'd give an example of two Nigerians who arrive a Western nation.

Mr A comes in and gets a good job. He has heard alot about negatives of 'credit' and only wants to pay for what he can afford which to him means paying for everything in cash.. He does not get a credit card as he wants to avoid temptation. Of course he does that and is happy he is prudent. 10 years down the line, Mr A saves up, wants to buy a house, he approaches the bank asking for hundreds of thousands as mortgage... Of course he wouldn't be given or get a smaller sum at a high rate.

Mr B gets same job but on the other hand accepts a credit card from his bank when given. Spends from it and pays back fully when due. He buys item's weighing these sensibly against his earnings e.g a phone, car on credit and pays monthly even though he may pay higher eventually and can afford those items in cash. He is able to build up a good bank balance quicker while living a comfortable life. He approaches his bank yo aid with a mortgage, they look at his credit history and his balance and lend him an appropriate sum at a sensible rate as he has a good record. Few years down the line, he is able to raise some bulk sum again, places his initial house on rent and gets another mortgage. Now, his bank can lend him bigger sums at much lower rates (1.5%). In a few years, he has 2-3 houses on his name... Tenants in his rented houses are practically paying off his mortgage. He is able to build a good standing for his kids

Meanwhile, Mr A has just settled into his first home cos it took him years to understand how the system works....

I have seen this play out a number of times...

My summary is all about leveraging what the society gives and doing that within ones ability... Credit can be a double edged sword... It can make and also mar

Youngzedd:
The loan interest rate is high and that discourage lots of people.

Some banks giving up to 28% per annum with lots of requirements.

GTBank is giving out credit facility @ 18% per annum for 6 months term, details >> https://www.gtbank.com/business-banking/sme-banking/loans-advances/quickcredit-for-small-business

1. High rate (18% per annum).
2. Short tenure (6 months).


I see no reason why it should be more than 10% if truly the CBN want to change the narrative or boost SMEs.

emmanuelewumi:
18% per annum is okay ooo.


The higher the risk, the higher the interest rates.

Less risky loans can be gotten for between 10% and 14% per annum

ojesymsym:
That one there is 36% per annum, they just use 6 months to mask it.

Youngzedd:
It's 18%


1.50% per month multiple multiple by 6 = 18%


I was approached by account officer to take the loan by the 6 months is too short.

ojesymsym:
That one there is 36% per annum, they just use 6 months to mask it.

Youngzedd:
It's 18%


1.50% per month multiple multiple by 6 = 18%


I was approached by account officer to take the loan by the 6 months is too short.

Youngzedd:
It's 18%


1.50% per month multiple multiple by 6 = 18%


I was approached by account officer to take the loan by the 6 months is too short.

ojesymsym:
You have fallen for the oldest trick of microfinance banks.
Interest rate is measured per annum.

NL1960:
If you take a loan of 500k for 5 months for instance, this will be the calculation:

Principal Repayment = Loan Amount/Duration = 500,000/5 = 100,000/month

Interest Repayment = Loan Amount * (Interest Rate/100) = 500,000 * (1.5/100 ) = 7,500.

Total Monthly Repayment = Principal Repayment + Interest Repayment = 100,000 + 7,500 = 107,500.

NB: Microfinance Banks charge per flat per month