Can the Banks Fight Poverty?

Tuesday, August 14, 2007

Recently, I was at a friend’s office in Lagos and we were discussing issues bordering on the economy and business. We were analysing the business climate in Nigeria vis-?-vis the prevailing government policies, especially with regard to banks. My friend is managing a medium sized private business in the aviation sector, which is apparently doing well with prospects for growth. He is looking forward to expanding and making the business bigger. We were also discussing the prospects of one starting off new business and the possibility of getting loan from the bank. The experience in this country is that banks hardly give financial support for people to start new business yet this remains the most critical stage in any business.
Recently, I was at a friend’s office in Lagos and we were discussing issues bordering on the economy and business. We were analysing the business climate in Nigeria vis-?-vis the prevailing government policies, especially with regard to banks. My friend is managing a medium sized private business in the aviation sector, which is apparently doing well with prospects for growth. He is looking forward to expanding and making the business bigger. We were also discussing the prospects of one starting off new business and the possibility of getting loan from the bank. The experience in this country is that banks hardly give financial support for people to start new business yet this remains the most critical stage in any business.

While we were discussing generally on these issues, two elegantly ladies knocked at the door and were ushered in. My friend, who is also the Managing Director of the company, had earlier been informed that the ladies were at the reception waiting to see him. The ladies entered and resumed their seats. They introduced themselves as marketers from one of the newly consolidated banks, which is clearly high in the league.

What is their mission? They had come to solicit for clientele from my friend. According to them, they were well informed to meet him and convince him to open an account with their branch of the bank, and so forth. In essence, they want my friend to operate one of his subsidiary company accounts with them. Good enough and well spoken.

My friend in response commended their bank for maintaining top position in the league of Nigerian banks. Going further, he told the ladies that he is planning to expand his business and asked whether their bank could give him some loan to back up his proposal?

The ladies responded that it is not possible at this stage. What he should do is to open an account with them, start the banking transaction and maintain a track record. Some where along the line, after the bank has assessed his corporate banking profile and found it satisfactory, he could then be in a position to seek for loan.

The question I asked is, if my friend, a Managing Director of a thriving business can’t easily walk into his bank and source for funds to boost his business without mounting obstacles, what is the fate of the masses of Nigerians who have nothing to offer? What hope is there for the millions of Nigerians who are economically active but have no collateral? This partly accounts for the mass poverty in the land.

The encounter reminded me of my experience in Japan, which is totally in contrast to what is playing out here. I lived and worked in Japan for some years and had insight into the working of some aspects of the Japanese economy. What the banks are doing here in terms of entrepreneurial support is the reverse of what I saw in Japan. I lived with a Japanese friend who had a company that deals on import and export of fashion goods. He educated me much on how banks in Japan scout for ideas that could be developed.

The Japanese banks look for business ideas or scientific breakthrough that could be developed. In that scenario, instead of the banks sending elegant ladies to perceived rich men to bring their money to lodge in their bank, the ladies ought to have been asking for new business proposal that could be supported? The proposals would boost the economy, give more employment and boost the economy. Our banks are not doing that.

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Source: The Guardian (link opens in a new window)