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Banks must do more to finance SMEs, says Rufai-Lariba

Banks must do more to finance SMEs, says Rufai-Lariba

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The Managing Director/Chief Executive Officer of Crownrise Finance Plc, Mr. Babatunde Rufai-Lariba, says financial institutions must provide more funds for the small business segment to enhance economic growth in this interview with Oyetunji Abioye

How would you assess the finance company subsector of the financial services industry?

The finance company subsector is different from commercial banking because of foreign exchange transactions and deposit-taking. The latter can engage in both while the former cannot. As a finance company, we can only go out there and ask people to give us money; and when they do, it will be recorded that they have lent us money. But in commercial banks, it is recorded as deposits. Apart from this, we do virtually everything the commercial banks are doing: we do lending, syndicate loans, project financing, lease finance and operating lease. Of all the several things we can do, Crownrise Finance has carefully selected our focus areas: we are focusing on lease finance and operating lease, project financing and investment advisory. We are now going fully into operating lease and loan syndication.  We have seen the gap in operating lease and we want to tap into it. We will focus on operating lease in various sectors including maritime, construction, manufacturing, aviation etc. In aviation, we can syndicate with others because the requirement may be enormous. This is why we are issuing the N1bn bond. About 40 per cent of that fund will be channelled into leasing and particularly operating lease.

What are the challenges facing the subsector?

There are so many challenges facing the sector. It is one of the challenges that has made us to decide to raise the N1bn bond. We don’t have several windows the Central Bank of Nigeria has given the commercial banks. For instance, the sector does not have a body like Nigeria Deposit Insurance Corporation to cover our activities. The finance company is an idea that came up as far back as 1985. That time we had over 3,000 finance companies because everyone came into it. Later, many of them collapsed. It is those of us who are professionals and understand the business that have remained. Now, we don’t have more than 71 finance companies. The CBN has pruned it down. But the mindset that many finance houses collapsed is making many people to still nurse fear regarding finance companies.

Why are many start-ups complaining of lack of access to credit from banks, microfinance banks and finance companies?

When start-ups approach financial institutions for credit, they often hide many things. They forget that the institutions are not stupid; they have to analyse and check their books. There are so many ways to assess prospective lenders to know whether you have the capacity to pay back or not.  Once we (financial institutions) see any threat, we may decide not to tell you before taking a decision on your application. That is what is causing the major problem of lack of access to credit by many start-ups. If you choose to ask them how they intend to run the business, they think you want to steal their idea. And when you give them funds to go and do certain things,  you begin to see problems. Start-ups must be open to tell the other parties, especially the financial institution, that this and this is what is wrong with the business. A problem shared is already solved. Have you seen a situation where someone is given money and about two weeks later, the man is dead? What happens to the family? But if at all anything should happen, there must be a structure on ground. When I left this place in 2010 when some people invited me to come and run their mortgage bank for them, I started with them and ran it for some years. While I was away, there was a structure in place in the system. It was not difficult for someone to step into my shoes. This is the major problem with the MSMEs – lack of a structure in place. This is why the CBN gave us a condition for the special intervention fund; they wanted us to use it as a special purpose vehicle

What are your short, medium and long-term goals as a finance company?

My short-term goal is to get funding. Crownrise also wants to be financing small and medium-scale entrepreneurs in long-term projects. If you understand project financing, you will know that short-term funding cannot get you anywhere; that is why we say six years is appropriate to fund certain projects. If I know that i am financing an entrepreneur for two years, I will know how to do my calculation. My long-term goal is to get more funding and finance some of these projects and have good income from it. We seek to transform Crownrise Plc to a merchant bank. My personal dream is to have a bank in this country. I have done it for people and there is no licence that i have not gotten for them. I got licence for the then Equity Bank, Brent Mortgage Bank, I got licences for several bureau de change firms.

What advice do you have for the financial services industry in Nigeria?

To remain focused and be honest with what they are doing. Let us find a way to see that what CBN is doing to alleviate the suffering of the people in terms of capital needs we avail them. It takes processes and you have to follow the process.

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