 Welcome back now. The Small and Medium Enterprises Directorate of the BOI has a focus on developing sustainable business models that will assist to unlock the inherent potential of the sector to improve their contribution to national economic growth, job creation, resource endowment, value chain development, skills and entrepreneurial development, poverty alleviation, export expansion, import substitution and overall GDP growth. I have a Development Bank and Creative Sector Specialist Promise, Ike Chukwu-George, joining me now to discuss further. Many thanks for joining me, Promise, on Business Insights. Thank you for having me. In my intro, I said MS and MISA play a critical role in the GDP and the development of the country. Just about over 80% of them are really growing in the sector but over time it has been discovered that one of the issues they have is access to finance, access to fund and the complaints I usually get when I talk to some of them, they say they usually can get the required finance to get from the traditional banks or even sometimes the microfinance bank, but what exactly is the challenge? You like the banks are not really ready to loan to MS and MISA, they don't really have what it takes to get these financing from banks or even from the bank of industry. Thank you for that question, but I want to start by saying that it's actually a hybrid of factors, right? It's not just a one-state jacket, you know, factor. Now, what I meant by hybrid of factors is that first of all, access to fund, the fund has to be there and then what are the times and conditions for access in this fund? So when you say access to funding, what it means is that every financial institution has got it risk acceptance criteria, okay? So the ability of SMEs in meeting the risk acceptance criteria of their financial institution matters a lot. So if you're not meeting it, it will be difficult for you to access the finance even when the funding is there. Let me bottom, if they are not meeting the risk that you talked about, is it that they are so risky to the extent that banks cannot really give them these loans or they don't, have not been able to structure their business to the extent that they can actually scale it up? Okay, so it's not a one-size-fits-all, right? Now, what we say access to financing, right? There are certain requirements that they have to meet, okay? And this requirement is not standard across, you know, some banks too are concessional, you know, in certain these times and conditions, all right? Why some are also tough, okay? But it's for the purpose of risk mining, because you see, when you talk about access to funding, the most important thing that the bank also has to take into consideration is if the money is going to come back, okay? Because it's a revolving form. So when these funds are lent out, this fund has to come in to be able to continue the cycle of lending, okay? So what the banks do is to try to tighten their risk management, you know, structure. But I haven't said that, okay? There are also the sides of the MSME that has not also been strengthened. And that's what it has to do with structure, all right? And that's why you see most commercial banks or traditional, let me use the traditional banks, avoid greenfield. Now, the greenfield that those who are just starting, you know, their businesses, okay? Because they feel the banks feel or the traditional banks feel that they have to lend the role. And that's why sometimes the proof of concern that you give to your bankers or you show to your bankers is how much you've actually started or you've been able to take off the ground, I mean, go off the ground, okay? And then you get to a point where it's okay, our need, I mean, leading capital to be able to scale, right? But now the question is, if you don't support greenfield or startups, right? How are you going to have the existing businesses that you're going to fund, okay? So that's why you have different levels of financing. There are those you call the venture capital. The venture capital can actually take risk with the startups, okay? But we don't have, you know, we just have a few of them in the country, okay? We don't have a well-structured, you know, venture capital system in the country, just the way we have abroad. And that's why today the likes of the Google, the likes of the big companies or corporations you see today actually started as startups, because they have a strong venture capital system overseas. But the gap that has been filled, the institution that's filling the gap right now is the Bank of Industry, because they're bringing development finance into their picture, they're bringing business support into their picture, and their terms of condition are quite concessional, right? So they address banking from the developmental perspective. Let's talk about terms of conditions, because that's what most people ask kind of when they look at or think of, I'm getting some of these facilities, be they the traditional bank or even microfinance bank and some loan sharks that we see around these days. You know, mainly for the traditional bank, they tend to ask for a whole lot in terms of their collateralized loans that for the Bank of Industry, when you say your conditions are not really so stringent, can you just break it down? Okay, let me look, I want to address that from the aspect of the what we call concessional funding in terms of the cost of funding. Now cost of funding has to do with interest rates, that is associated with that particular funding. The Bank of Industry suffers the lowest, single-digit, double-digit, like 10% maximum, highest cost of funding. So it's cheaper for the entrepreneurs compared to what you have in a conventional banking system, the averages are maybe 27%, 28%, 29%. So that seems to be quite high for the SMAs who are also faced with the challenges of cost factors in the environment, because you see we have to also take into consideration the cost of the environment and that's why we talk about the ease of doing business, it's quite critical. So now if somebody is contending or an entrepreneur is contending with 27% interest rate as cost of funding and is still challenging with energy price, energy high, energy cost, that entrepreneur may not survive that environment. So looking at the external factors, the government has to take care of that, then looking at even the access to funding, the present dispensation now is getting seriously involved in that aspect, because of high cost of funding. So what you're doing right now is to bring in funding, maybe intervention funding, to see how they can cushion the fact. But I want to also make a point here is that when you're bringing the funding, the terms and conditions, which is the bane of what the SMAs are facing, like you mentioned the collateral, that collateral aspect, the security aspect has to be relaxed, but to some extent. So this is the time that bankers or traditional bankers or the system will begin to look at a creative financing method. And that is where BOR has actually fared so well. If you recall in the creative industry, I don't know if you heard about the NOLI fund that was actually designed by BOR, the NOLI fund was an interventionist measure within the creative industry space for those who produce a movie, for those who actually require equipment, production and post-production equipment, and even the distribution platforms, they were actually refenced and given loans without collateral. So it was a special fund and it did a lot of impacts, a lot of impacts that we found in the system. I mean, this is a system, this is what's called a fund them program that sorted the production of 25 films. And most of those films today are on Netflix, Amazon and so on and so forth. So it's actually activated some kind of ecosystem that we're actually hearing about today. When you talk about the Nigeria movie industry, that program was actually an activator to that impact that we are seeing today. So when you begin to look at that kind of creative funding system, it will go a long way. Again, the venture capital scheme is another aspect that government should begin to look into, right? And then you can power private investors or private sector to also begin to look at coming up with venture capital. But all in all, there has to be incentives, okay? There has to be incentive. Because when you incentivize the volume, the players there tend to be a bit relaxed, right? Tend to be relaxed in terms of the terms of conditions that they put out. You understand? And that is why overseas, like I mentioned earlier, there are levels of banks. There are conventional banks that MSME they're just starting to not go to, because they don't fit into the bill. There are also financing that MSME can also approach. So when you have hybrid financial systems, they can cater to different levels of enterprise. Let's talk about them structures now of MSMEs because that is similarly one of the barriers that they usually have. What can you really advise them to do? Some of them, they have issues of maintaining proper bookkeeping, proper records and all of that. And over time, because of all of these one or two issues, they cannot really get the right funding that they deserve. I just want you to address that. Yes, sir. That's quite critical, right? Because you see, a funder with a financial institution, with a venture capital used, with a private fund is what they also look at. What they look at is your profile. You understand? They look at your business plan. In fact, they want a situation whereby they can put in money in a highly risked enterprise. And how do they risk your enterprise is by bringing a structure. What are the structures we're talking about? Bookkeeping system. Somebody called me there for yesterday to say, I've been getting a lot of patronage, but I can't reconcile my profit and my expense. So I know he needed help in cost accounting structure. So what I did was advise, I had to say, you know what? You have to get a cost accounting advisor to put you to. So you would understand the difference between the profit and loss. So that perspective is what the MSME is. We're just starting to be looking at. Now, the first structure you have to put in place is the accounting structure, because business is about cost and income. If you're not able to reconcile those two elements, right, you might begin to lose from day one. And so when you have statistics studies telling us that the MSMEs dies within the first three years of the operation, it's simple because they cannot give account of their processes. Now, even at that MSMEs should be able to have procedures, processes. Now, should be able to have system. Of course, you may not be able to employ all the professionals within, but there are circumstances where you can actually outsource. Okay. That is where capacity building comes in. You can also begin to expose yourself to some capacity building, to begin to build some, you know, knowledge around how system, how businesses can be managed. But most importantly, the human begin with accounting structure. Once you have accounting structure, you'll be able to account for your expense, you'll be able to account for your profit. In fact, even starting from the cost, you'll be able to arise at the price and strategy. Some or most of them can even get a price of rights. You might be on the selling. Okay. You may be on the price of your product. And the moment you start doing that, you actually lose an income and then you can, you know, you can frustrate the debt of your business. All right. You talked about the intervention that the BOI did for the creative industry, which is actually something that is very laudable. Now, but let's talk about other plants that you have for small businesses. Let me just paint a scenario here. I have a business that's, that's, that's was about five million there. And I'm thinking of scaling of the year is ended. I'm thinking of scaling up. I'm thinking of maybe expanding. And I hear that the BOI can assist me in terms of scaling up my business. And so for a business such as myself, how do I approach the BOI? Well, the BOI to also as has in place hybrid financing structure will have for the micro and for the small, the small, medium enterprise, you have for the large enterprises. These are the big players, actually. Of course, you need these three factors or these three segments to be able to keep the cycle of economy, you know, sustainable, okay? Because the large enterprise produces those that constitute the value chain and MSMEs or SMEs because they are the distributors. And then you see the micro to also the retailers, you know, who are out there on the street to ensure that what is produced by the large enterprise or the SMEs actually get to the final consumer. So it's a chain. Okay, all right. So, so what happens is that depending on where you are, on the point of the value chain, where you are as a micro, right, you're already doing five, you're turned over a five million narrow beans, and then you want to scale. You want to scale because the demand is actually coming. There's a sustained level of demand or increase in demand for your product, right? With your books, you can actually convince a DOI to say, please, if you're able to give me a one, two, three, I'll be able to increase my capacity utilization, okay? Or my production capacity to be able to meet the demands, right? Then I'm not feeling. So in that circumstances, because of the level of the loan that you mentioned, if I use the example of five million, you don't need any collateral, right? What you want to see is your books. Probably a guarantor, right, who can stand by you. So any loan that's less than 10 million there, you can actually access from the DOI without collateral. Oh, that's cool. All right. So the year is ending and they've been so much talk about collaboration between the federal government and the DOI. I know there are several interventions that you have done over time. Can you share very quickly, as we wrap up, the ones that you have done and what you're looking at for the year 2024? Okay, really, we've done a number of, you know, intervention program that cuts across youths, right? We had one called the youth empowerment program, or youth empowerment scheme called Yes, right? We have a number of them. We also have for the gender businesses, right? So it's more to value natural science, all right? And that's why the federal government recognizes DOI as an interventionist institution, okay? So most of the interventions are going to be actually, you know, rolling into the system. We have to come through BOR because of our, you know, our expertise in fund management, right? And it takes an institution, there's a countable, an institution that understands, you know, what it takes, you know, to spearhead impact to be able, you know, to do what we're going to be doing. So there are a number of programs that are actually coming in, talking about the 75 billionaire, you know, federal government fund, right? Then in the aspect of the creative industry segment, we have what are called IDIS, investment in, you know, digital and, you know, creative enterprises. It's called IDIS, okay? It's been, it's at the, at advanced stage, so it's going to be fully launched out anytime in terms of operation. So all the documentations are ongoing because it's a multi-collaboration, you know, a study, a multi-collaboration program that's been driven by federal government in the two bank of industry and other international financial institutions, the ADB and other, you know, international institutions, right? It's a $260 million fund. So one that takes off is going to be impacting, you know, youths, right, who are within the creative and the digital space. And of course, that's the new world business order. So we need to empower the sector to be able to move us to the next stage, you know. Okay, yeah, in 30 seconds, one last word, one last advice for a struggling small business and who has been hit by, you know, the economic situation in the Basics Moon to them, a fuel subsidy removal and inflation and all of that. What would your advice to that business be? Yes, as a small business, right? Whether you're small, whether you're in the medium space, you need to watch your cost, right? Because the only way you can actually make some margin is to have control over your cost. You may not have absolute control, but this cost you can actually have control over, you try to manage it. And then you also, you have to be accountable, right? Hold yourself accountable, treat yourself as one of your staff. Yes, you're the business owner, but when you begin to also see yourself as a staff of that organization, right, it's also fine. But most importantly, you have to have a vision, right, because vision drives everything. So once you have that vision, right, it informs the decision you're going to be taken at the bottom level, right? But most importantly, look at your cost, look at your income. All right. And then you understand that sustainability is a factor of accountability. Thank you so much. I promise we do appreciate your time, ma'am, and all of course, all of the useful insights that you have shared on the show today. You're welcome. Thank you very much. Yeah, it is indeed a pleasure. My guest has been promised, and Ike Chikou, Ike Chikou Jordan, we have been looking at small businesses, finance, and funding, and of course, access to capital. But that's the size of the show for today. We'll say a very big thank you to all of you who've sat back to watch. My name is Justin Akademi, business insight returns to your screen, same time. Again, bye for now.