The Managing Director of Nigeria’s Bank of Industry (BoI), Kayode Pitan, was recently quoted as saying that it is very challenging to get repayment on loans issued to SMEs. According to him, some business owners in the country often behave as if loans given to them by the BoI represent their own share of the “national cake”. As such, they refuse to pay back the loans when they are supposed to.
“People have the perception that money from BoI and other DFI, are their share of the “National Cake, so they avoid repayments.”
It is very easy to see Pitan’s frustration. After all, the issue of loan default is a general problem bedevilling the Nigerian banking sector. The problem also explains why Non-Performing Loan has been a major problem in the country for such a long time. Interestingly, it is the same entrepreneurs who often complain about lack of access to financial facilities that are guilty of defaulting on loans. This makes it very problematic for banks to lend, no doubt.
In the case of the Bank of Industry, however, there is another way to consider the issue of loan default. Some Nigerians who reacted to Pitan’s complaints have pointed out that one of the reasons SMEs default on BoI loans is because said loans are supposedly given to people who are underserving of them in the first place. One person even alleged that the BoI only gives loans to entrepreneurs who are willing to give kickbacks to officials of the institution.
Because the authority doesn't give it to those deserving of it.
They give it to people who will cut their share for them and keep the rest…
We know right¡
— Ikechukwu (@OdoThomasIkech1) October 8, 2019
Other people also asserted that staff at the BoI only approve loans for those they know, regardless of whether such people meet the loan requirements. In other words, due diligence is seldom followed through, allegedly. Sadly, when the loans are not paid back, BoI’s Pitan begins to complain.
You just said the truth, the era of "I know you" is killing Nigerians. Legit businesses hardly get the loans, but relatives do and now they complain people are not paying back.
— Aj (@Aj_anwuli) October 8, 2019
Other people, however, did point out that refusal to repay loans is a bad attitude that must stop. Those of us here at Nairametrics agree to this point of view because loan defaults have disadvantages that somehow affect everyone, albeit negatively.
Somebody once said to me " to borrow a Nigeria money is human,but for him to pay back is divine"
I for one think as a people we have a very bad attitude to loans
— Joseph Ullah (@Ummah_Joseph) October 8, 2019
This is a huge blindspot to off grid electricity systems too. BoI have been huge in driving pilot projects. Challenges are that these projects might never reach anticipated scales based on these 'national cake' perception by the users.
— Hafiz Bello (@FizoFizoFizo) October 8, 2019
Note that the Bank of Industry is a state-owned development financial institution whose primary function is to fund the real sector of the economy by providing funding “for the establishment of large, medium and small projects as well as the expansion, diversification and modernisation of existing enterprises…”