There are always two parts inside a slaughterhouse. There is a clean side and a dirty side. Animals must go through the dirty side before they go to where they are going to be prepared for human consumption. The dirty side housed the dirt. It is a proper production line. If you have visited the slaughter slab, you would know. It is bloody. The lack of access to bank loans has lured many business owners into a slaughterhouse.
On The One Hand
A lack of adequate funding is a challenge confronting SMEs in Nigeria. And some loan sharks are taking advantage of this loophole. For instance, to qualify for credit in any of the loan companies I visited recently, you need an identity card, one passport photograph, postdated cheques from your guarantor, a bank statement showing six months’ transactions and a valid utility bill. The other requisites you must have is the processing fee, a guarantor’s confirmation letter, an application letter to be filled, signed and sealed by your guarantor, an offer letter and collateral.
The collateral must be a car that is not less than ten years old. You would park the car on the premises of the credit company and submit the valid documents to the management. There are many rivers to cross before you can secure the loan. Having listened to the litany of prerequisite credentials needed before an applicant can smell the cash I wondered why an applicant must supply all of the above information before getting a loan facility. The managing director said many customers have duped the company.
He explained that one of the applicants in the past had sold the car he presented as collateral before handing it over to the company. The buyer sued the company. The buyer won. Another applicant fled the country after having gained access to the credit. He said efforts to recover the loan failed. Another applicant collected the credit and relocated to his village, changed his SIM pack and name, and destroyed evidence linking him with the credit company. The company lost its investment.
He shared another sad experience and another and another. This credit company is thriving because the banks, microfinance banks and some online lenders are not playing their professional roles adequately. If these financial institutions perform at an optimal level this slaughterhouse would not thrive. For instance, I visited another popular credit company that promises to give as much as N5 million to business owners. Having fulfilled all the paperwork, my application did not scale through because my bank statement, which met all the conditions, does not have a “monthly inflow.”
It is quite obvious that credit companies are searching for mom-and-pop shop owners and salary earners who have a steady monthly income flow. The operators of this popular loan company forget that every business at some point in its operating cycle requires some form of finance to pay its short-term indebtedness, fund new projects, execute business plans and acquire operating assets. Likewise, individuals at some point may need bank loans to help fund car purchases, real estate mortgages or buy house home appliances.
The management of these credit companies and the banks should know that not all businesses generate monthly inflow. Some companies have a 45-day financial inflow and other businesses get a 90-day inflow. This fact means that some businesses would not find banks or loan companies attractive. That is why many of them keep running back to the slaughterhouse where they are treated like animals.
On The Other Hand
Online mobile lenders such as Branch, Kudi, Zedvance, Social Lenders, and Palm Credit etc are on the increase and these lenders are using machine learning to analyse the ability of the applicants to repay. Many business owners are getting loans, too. The Central Bank of Nigeria’s Credit Condition Survey Report showed that there was an increase in the availability of secured credit to households and corporates in the first quarter of 2018. But why do other individuals and business owners keep patronising these slaughterhouses?
One of the operators said many of the borrowers cannot fulfil their requirements of the loan agreement and repays the principal, they can renegotiate and this has worked very well. Aside, they still pay the interest and all charges on the loan. Some of them have found it easier than taking a bank loan. Another option is to get an unsecured loan and pay a higher rate. This flexible and smooth transaction has made it attractive to many Nigerians. That is the tradition of the slaughterhouse. Bring in the animal and prepare it for slaughter.
From The Sideline
Have you encountered a loan shark?
Yes, I was threatened, harassed, and assaulted until I paid my loan.
Will you do it again?
If you mean visiting a loan shark again? Yes, I will.
Why will you do that?
I am wiser now. I will handle it better now.
What will you do differently?
I will lay down the rules.
