LAPO empowers Delta, Edo schools with N6.5million science equipment

LAPO MfB wins BusinessDay's Microfinance Bank of the Year

Hope Moses-Ashike Nov 14, 2022

Seplat Energy eyes N1trn from bond issuance

Seplat Energy Plc announces currency exchange rates for interim dividend

Egbin Power promotes sustainability through medical outreach

Egbin Power gives free medical check-ups to host communities

Agric minister to deliver keynote address at FirstBank conference

FirstBank UK celebrates 40 years of enabling international trade

FBNQuest highlight strategies to achieve financial goals

London turns blue as First Bank UK clocks 40

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Companies

CardinalsStone wins 4 awards at BAFI 2022

David Ijaseun Nov 13, 2022

CardinalStone Partners Limited, a Nigerian investment and multi-asset management firm, won four honours at the BusinessDay Banks and Other Financial...

AFEX Commodities Exchange, GTB reach resolution of pending N17.8bn debtcase

AFEX gives farmers key inputs to boost cocoa production

James Kwen Nov 12, 2022

In a bid to improve the productivity of cocoa farmers, Nigeria’s leading commodities market player, AFEX, has been providing cocoa...

We exclusively focus on SME lending – Auto Bucks CEO Olasukanmi Olaoye CEO, Auto Bucks Lenders Limited, one of the subsidiaries of Alert Group, in this interview with Hope Moses-Ashike, speaks on challenges facing lending to Small and Medium Enterprises (SMEs) and other issues, excerpt. What specific risk management strategy did you implement to maintain portfolio at risk below 1 percent? In our inaugural year of operation, we disbursed over N80 million in loans. The income generated from these disbursements, coupled with the fact that they constitute a healthy portfolio, mitigates any risk associated with our portfolio. Therefore, the revenue derived from fees and charges enables us to generate income without exposing our portfolio to risk. The robust health of these portfolios significantly contributes to the achievement of our income targets. How did you manage costs and operational efficiency to achieve profitability within seven months? To achieve profitability within seven months, we implemented several strategies. Firstly, we focused on securing cheaper funds, as lower financing costs enhance operational efficiency significantly. Secondly, while maintaining competitive pricing, we ensured that our rates were adequate to cover our cost of funds and other operational expenses. Moreover, we kept our management expenses minimal, contributing to overall cost reduction. Leveraging technology was another key aspect of our approach. By deploying advanced technological solutions, we streamlined various business processes. For instance, our electronic collection system eliminated the need for manual cash transactions, enhancing efficiency and reducing the need for field officers. Through these measures, we optimized operational efficiency and effectively managed costs, resulting in positive outcomes within the initial six months of operation. You mentioned disbursing approximately N80 million; how many individuals or businesses were beneficiaries of this loan? We exclusively focus on SME lending. To date, we have successfully disbursed loans to over 1,000 SMEs. This achievement underscores our deliberate commitment to positively impact the Nigerian economy through targeted support for SMEs. Since our inception, every loan disbursed has been directed towards SMEs, reaching a total of over 1,000 beneficiaries. How do you ensure that the beneficiaries are utilizing the loans provided to them for business growth and to contribute to the economy? The primary way we ascertain the proper utilization of the funds we disburse is through their repayment behavior. If beneficiaries have diverted the funds and not invested them in their businesses, it would reflect in their repayment patterns. Additionally, we implement rigorous monitoring mechanisms once the loan is disbursed. This ongoing monitoring allows us to assess the impact of the funds on their businesses and on the economy as a whole. Furthermore, maintaining a positive credit appraisal is crucial. A strong credit record not only facilitates future loan requests but also enables beneficiaries to potentially access larger loan amounts. Therefore, we emphasize the importance of maintaining a favorable credit history. When you mention that your portfolio at risk is below 1 percent, does that imply that you do not encounter other challenges? The strategy we’ve employed acknowledges that some clients may face difficulties in repayment, particularly during certain business cycles such as festive or fasting periods. For instance, clients in the fast-moving consumer goods (FMCG) sector may experience reduced returns during fasting periods due to decreased consumption levels. Our proactive monitoring of these clients helps mitigate potential challenges and aids in the recovery of funds. As previously mentioned, we exclusively provide loans to SMEs with a minimum of 12 months of consistent business operation and cash flow. This ensures that our borrowers have a track record of financial stability, as evidenced by their bank records. We do not extend loans to startups but rather focus on established businesses with a proven track record. Our credit analysis process is thorough and detailed, assessing the borrower’s financial history and ability to repay. For instance, if a borrower has transacted less than N500 million in the past 12 months and seeks a N5 million loan, we evaluate their monthly turnover to ascertain their repayment capacity. This rigorous process ensures that loans are utilized effectively and that borrowers can comfortably meet repayment obligations. Additionally, we implement regular monitoring to ensure that funds are used appropriately and not diverted for non-business purposes. We are mindful of seasonal factors, such as festive periods, to prevent misallocation of funds. Our commitment to responsible lending practices and diligent monitoring safeguards against potential diversions and ensures that our support truly benefits the MSMEs we serve. What are some of the other challenges your business faces? In the current macroeconomic landscape, businesses encounter various hurdles. The high cost of operation is a prominent issue, compounded by volatile market conditions. Fluctuations in prices, especially due to foreign exchange (FX) challenges, pose significant obstacles. Even after procuring goods, market dynamics can swiftly impact prices, leading to uncertainties. Moreover, macroeconomic indicators like inflation rates, currently at 33.2 percent, further complicate business operations. Elevated inflation affects purchasing power and overall business viability. Additionally, the cost of funds presents a considerable challenge. While securing financing is crucial, prevailing market conditions have increased the cost of capital, with investors demanding higher returns on their investments. Despite these challenges, we actively seek solutions to mitigate risks. This includes sourcing affordable and stable funding options while prioritizing long-term relationships with fund providers. We also recognize the importance of stable economic policies in fostering a conducive business environment. Efforts by the federal government and the Central Bank of Nigeria to stabilize the economy, particularly in areas like FX markets, are crucial for SMEs to plan and navigate business operations effectively.

CIBN partners LBS to introduce Master of Business Administration programme, others

Hope Moses-Ashike Nov 12, 2022

Chartered Institute of Bankers of Nigeria (CIBN) and Lagos Business School (LBS), have collaborated to introduce Master of Business Administration...

Pharez Obioha is United Capital's one-day CEO

Charles Ogwo Nov 11, 2022

United Capital Plc, one of Africa’s foremost investment banks and financial services institutions announced Pharez Obioha, an 11-year-old boy as...

Cutix says stock a must have in every investment portfolio

Iheanyi Nwachukwu Nov 11, 2022

Ijeoma Oduonye, Managing Director and Chief Executive Officer (MD/CEO) of Cutix Plc has said the company has proven to be...

Agusto & Co affirms Bbb+ rating to Baobab Nigeria

Baobab Nigeria wins BAFI award for MSME Microfinance Bank of the year

Hope Moses-Ashike Nov 11, 2022

Baobab Microfinance Bank has for the second year running emerged as the winner of the Micro, Small and Medium Enterprises...

€1.87bn syndication driven by rising investor confidence– BOI

BoI wins four international banking, sustainability awards

Folake Balogun Nov 10, 2022

The Bank of Industry (BoI) has bagged four international awards in recognition of its developmental impact, commitment to sustainable banking...

Africa Data Centres to start construction on new facility in Accra

Africa Data Centres extends edge cloud capability through Unitellas partnership at Lagos facility

Iheanyi Nwachukwu Nov 10, 2022

Africa Data Centres, a business of Cassava Technologies, a pan-African technology group, is pleased to announce that enterprise cloud services...

UBA’s after-tax profit improves amid rising costs

Folake Balogun Nov 10, 2022

United Bank for Africa recorded a surge in after-tax profit to N116 billion in the third quarter of 2022, up...

‘Procold partnership with PSN to curb drug abuse, self-medication’

Seyi John Salau Nov 10, 2022

Marvin Lucky is the head of Procold Brand in West Africa. In this interview, he speaks on the need for...

Medplus opens new branch to expand Nigeria’s footprint

Josephine Okojie-Okeiyi Nov 10, 2022

In a move to expand its operations and ensure that Nigerians have access to quality and affordable drugs, Medplus –...

InfraCredit’s Guarantee mobilises local currency debt for CEESOLAR’s energy project

InfraCredit says enhances credit of Darway Coast green debt issue

Iheanyi Nwachukwu Nov 10, 2022

InfraCredit, a ‘AAA’-rated specialised infrastructure credit guarantee institution has announced the credit enhancement of Darway Coast Nigeria Limited’s green debt...

BUA Foods posts double-digit growth amid macroeconomic concerns

Favour Ashinze Nov 10, 2022

Amid a tight economic environment that has negatively put a strain on the profitability of some of its peers in...

Phillips Consulting unveils report on Nigeria’s aviation industry

Daniel Obi Nov 10, 2022

In a bid to contribute positively to the aviation industry in Nigeria, Phillips Consulting Limited (pcl.), has launched a customer...

NDIC, Wema Bank bicker over Banana Island properties

NDIC takes savings campaign to Kwara secondary schools

Sikirat Shehu Nov 09, 2022

The Nigeria Deposit Insurance Corporation (NDIC) on Wednesday sensitised six Secondary Schools in Kwara State on the importance of financial...

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