BOI to MSMEs: No loan relief for poorly run businesses

•Insists every dime must be repaid

The Bank of Industry (BOI) has ruled out loan relief for micro, small and medium enterprises (MSMEs) whose repayment difficulties stem from poor business management, insisting that borrowers must repay every dime obtained.

The bank said business owners must take responsibility for their decisions and ensure proper use of borrowed funds and warned that poor management would not be accepted as a reason to restructure loans or escape repayment obligations.

The bank, however, said it could restructure loans for struggling businesses challenged by harsh economic conditions, rising inflation and changes in monetary policy to prevent avoidable business failures and closures.

The Managing Director and Chief Executive Officer of BOI, Dr. Olasupo Olusi, made the disclosure in Lagos at a media parley over the weekend.

According to him, BOI closely works with sincerely struggling customers to realign their repayment schedules with their cash flows, allowing viable businesses to continue operating while meeting their obligations to the bank.

“We face repayment challenges a lot, because the truth is that with policy changes, we have that challenge.

“However, what we do is to sit down with the customer and see how we can realign his cash flow to ensure that he is able to meet our obligation,” he said.

He explained that the bank could adjust repayment terms to reduce the immediate burden on struggling businesses, noting that some customers had undergone second or third loan restructurings to help them remain operational.

However, the BOI chief executive cautioned that restructuring was not automatic, stressing that the bank would examine the circumstances surrounding each customer’s repayment difficulties before deciding on the appropriate intervention.

He said where the challenges could be attributed to factors that did not justify restructuring, the bank would insist that borrowers meet their repayment obligations.

He warned that borrowers should not assume that every repayment default would qualify for a revised repayment plan, as the bank also had a responsibility to protect its funds and ensure the sustainability of its lending operations.

“If we’re able to determine the other, then we will not restructure. We will put the pressure on the customer to repay,” he said.

Olusi explained that BOI’s capital was not free, as the funds it lends to businesses must be recovered to enable the institution to sustain its operations and continue providing financing to other enterprises.

He noted that persistent loan defaults could undermine the bank’s capacity to meet its own financial obligations and provide further support to businesses seeking credit.

On the impact of the Central Bank of Nigeria’s (CBN) monetary policy rate increases on BOI borrowers, Olusi clarified that the bank’s lending rates were not directly linked to the benchmark rate.

He said BOI’s development finance lending rates remained independent of changes in the CBN’s monetary policy rate, adding that the bank had maintained its concessionary pricing despite recent increases in the benchmark rate.

“Our own rates are delinked. Their development finance rates are totally delinked,” he said.

According to him, BOI’s lending rates currently range between 13 and 15 per cent, depending on the applicable financing arrangement, offering borrowers relief compared with the prevailing cost of commercial credit.

He added that some customers also benefited from special financing arrangements, including matching-fund schemes, which further enhanced access to affordable credit.

Olusi said the bank would continue to explore cheaper sources of funding to sustain its concessionary lending rates and pass the benefits of lower funding costs to customers.

He expressed optimism that BOI could secure funding at more favourable rates if it returned to the domestic bond market, noting that any resulting savings could translate into better financing conditions for businesses.

“If BOI is to go back into the local bond market, we’re probably going to do better and we’re going to raise money at a lower rate than we did in August. And the benefits of this will again be passed on to our customers,” he said.

He reiterated that BOI remained committed to supporting businesses through difficult economic conditions while ensuring that borrowers honoured their obligations to preserve the institution’s capacity to finance other enterprises.