Business-friendly loans will make SMEs thrive – NICA
By Taiwo Osho
The availability of loans with low interest rates and flexible repayment terms will boost profitability of small and medium enterprises in Nigeria.
The above pronouncement was made by the country’s statutory body for the control, supervision, and regulation of the credit management profession, the National Institute of Credit Administration (NICA).
Prof. Chris Onalo, the Chief Executive Officer of the institute, said in statement that such loan will encourage intending and existing business owners to borrow to start new businesses, and expand existing ones.
According to the institute, businesses in advanced countries are well positioned to compete better because of access to low interest rate loans which are usually lower single digits.
The statement said, “It is difficult for businesses to break even with high interest rate loans because the SMEs have other high operating costs which will make repayment a challenge to them. To be better competitors and be empowered to expand their trades, businesses should have access to single digit interest rate loans with flexible repayment option. This is the ideal situation that will boost a business friendly environment.”
The institute canvassed support that will enable businesses to thrive better in the country because they provide livelihood to a large proportion of the population.
According to NICA, access to cheap loans will provide more finance to SMEs because they will have more money to save, reduce their debt repayment burden, and increase capital for expansion as they will pay less over the life span of the loan.
While observing that lending institutions may not want to offer long term loans in some cases, NICA advocated that flexible loan solutions will help to reduce repayment strain on the business owners’ finances.
With access to flexible repayment terms, NICA argued that entrepreneurs will avoid patronizing loan sharks, and choose from a variety of loan durations that suit their repayment plans to fit their budget and financial goals.
It added that cheap loans with flexible repayment terms allow borrowers to choose from a variety of loan durations, and plan for their financial goals.
The institute noted that it advocates good credit access because it helps to reduce the cost of debt and default rates among the SMEs.
NICA specifically pointed out that increase in the success rate of SMEs in Nigeria will help to boost the country’s Gross Domestic Product.
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