On the re-opening of SLPP Office … “We would never encourage violence” John Benjamin...

Sierra Leone Bussiness: At SLACB Bankers economic Forum… Banks want collateral registry to support loans for SME’s

George Ndubuisi Meze Managing Director of Zenith has reiterated their earlier request made during a Bank of Sierra Leone session on the need for a collateral registry that will enable them fund small and medium enterprises (SMEs). “It is clear that we are ready and willing to support if there is a guarantee from government.” MD Meze was responding to a question posed to him as one of the panelists at the Sierra Leone Association of Commercial Banks (SLACB) first Bankers Economic Forum at Radisson Blu recently, on how to create a more enabling environment for SMEs. He added that, “if we have the registry in place for the entire country, the funding of the SMEs will be easy for banks to play around it” he hoped.   In the Sierra Leone Economic Outlook 2018, published by the World Bank, it stated that, on the use of financial services by private firms, only 67 percent of small firms have a checking or savings account while 90 percent of medium-sized firms operate bank accounts to manage their liquidity and payments needs. In addition, only 8 percent of SMEs have received a bank loan compared to 42 percent of large firms, indicating a limited pool of funds for firms. The total amount of credit offered by the banking sector to the private sector is less than 5 percent of the GDP, and the largest share of that credit constitutes loans to the five largest borrowers. Haja Marie Bob Kandeh, President of Market Women Sierra Leone, who was also part of the panel, said that the issues of policy need to be looked at as the banks are not providing long term loans because of the collateral challenge which is limited to the Western Area. “We have master farmers with big farms, they want money to buy farming supplements but they do not have the collateral required by Banks, of owning a house in Freetown or a land title in the Western Area, but they have big farms up country. So the Banks should look at it and verify the ownership of their farms which has no impediments to reclaim their funds” she appealed. Ing. Christopher Forster, President Chamber of Commerce, recalled that former Bo Branch Manager of the then Barclays Bank, late Sydney Macfoy used to visit farmers and take a walk with them on their farms and look at the herds or crops. This he said helps him to make a good assessment of which farmer was a credible risk or not, and in those days the Bank made a lot of business with farmers by providing them with loans that they were able to pay back. “It is a culmination of an astute banker and working around the challenges of collaterals, we have to come up with something that actually works and innovative demands” he said. As access to credit is vital for expansion and growth by SMEs, especially those in the agriculture sector, this is virtually impossible for firms in Sierra Leone. During the panel discussion a question on lending agencies that have attempted providing funding packages through certain banks at a certain low level of interest came up. In his reaction panelist Chukwu-Emeka Chikezie, Director for Development Policy Up!-Africa Limited said that the government is the biggest procurer of business and services and that it would have been nice if it was the private sector. He went on to say that there is need to clean up the procurement process, so that it is actually businesses that are performing and are compliant with basic rules by paying NASSIT and NRA should be awarded contracts which are merit based and not on connections. With effective implementation of the Public Financial Management Act of 2016 many of those provisions contained therein, he said will help the cash flow management and government can really prioritise paying SMEs. “At the moment if you as a business have a contract with government, it is bankable, you can actually go and secure finance because the bank will see that you have a good contract and the client the government pays will be more willing to extend credit, but at the moment it is a risk, because you don’t know how long the person will take to get paid” he noted. Citing the fact that, there is little information on how much they have to discount that debt to actually secure the repayment, maybe end up with 60 or 70 percent, so for him this is one of the areas he thinks really needed to be looked at. Adding his voice to the debate, Ing Christopher Forster agreed that indeed government is the largest procurer and that they have restricted procurement to only limited liabilities company that are registered with Corporate Affairs Commission (CAC), which are mandated by law to produce audited accounts. Because the Government knows that these companies have bank records, Ing. Forster said they are now funneling their money into the banking system and not to give loans to some enterprises which do not use the banking system and they cannot go after them for tax. Many of the SMEs he said do not use the banks and they will go to ask for loans, “they have a very good idea but they do not have a written out business plan, a banker will sit in the bank he has money to loan, but you must press all the right buttons to get the funds, so it not just a question of the banks but the SMEs” he said.

By Zainab Iyamide Joaque

Thursday December 03, 2018.

Comments are closed.