The middle-class entrepreneurs may have gained favour from the banking industry as new strategies are being explored at assisting and nurturing them. The banks are doing this with the realisation that when they are fully mature, they will become among their most valued customers for mutual benefits.
The new measures involve offering loans at concessionary rates to previously unbanked and under-served wholesalers and retailers, with the goal of nurturing smaller businesses into bigger enterprises for the eventual mutually beneficial business relationships.
Consequently, the banks including Standard Chartered Bank, Stanbic IBTC Bank, Renaissance Capital, GTBank, Access Bank, among others, are making conscious efforts at understanding their customers’ businesses so as to offer them specific needs – from advisory services to managing their working capital, aiding business expansion, protection, and even in increasing yields.
It also includes salary advance by way of short-term overdraft facilities to customers whose salary accounts are domiciled with the banks and thereby guaranteeing them cash at anytime of the month.
The development is coming on the heels of evolvement of new business survival strategies by entrepreneurs based on credit purchase or supplier credit, including supermarket operators, leasing and equity capital, among others.
Some analysts say the new win-win approach shows that banks may have come to the realisation that the well-being of businesses depends not just on its wealth, but also on its health that ensures working capital efficiency and growth for long-time relationships.
Ken Iwelumo, former senior vice president – investments, Bank of America/Merrill Lynch, says the development is what the banks are supposed to do, noting that the fortunes of the entrepreneur or the firms as the case may be will rub off on the banks, saying “when the banks nurture these companies from the beginning, they will be in a better position to access bigger facilities for mutually beneficial relationships between the two parties.”
Sola David-Borha, CEO, Stanbic IBTC Bank, says at the recent launch of the bank’s deployment of a new product, SME Quick Loans, that its introduction to the Nigerian market, “would benefit SMEs that could not access funding, due to lack of financial statements and collateral,” adding that the product not only “provides finance to a large pool of entrepreneurs, but does so quickly, in recognition of the urgent financial needs of growing businesses in Nigeria.”
GTBank, in a message to its customers last week, notes, “GTSalary Advance guarantees cash at anytime of the month. It provides a short-term overdraft facility to customers whose salary accounts are domiciled with the bank.”
“There is a new realisation that middle class is emerging and for us to grow our risk assets and remain in business, we must as a matter of necessity nurture them to maturity and equally grow their businesses, hence the new concessions and products aimed at attracting and retaining them,” according to a banker.
However, the small entrepreneurs are currently thriving on the concept of supplier, whereby goods are collected on credit with payments made later. There is also the supermarket business model, whereby the goods are collected on credits and sales done on cash.
There is the leasing option, particularly for the assets or working capital and the cash flow based lending at concessionary rate of about 5 percent, with its attendant benefit of faster and easier access to cash.